TaxTMI 
TaxTMI 
2007 (1) TMI 619
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the petitioner companies claiming to hold 58% shares in HPL, has filed this petition under Sections 397/398 of the Companies Act alleging oppression and mismanagement. 2. Before I proceed further, it is necessary to note that the pleadings in the proceeding ran to a number of volumes and the documents referred to by the counsel were scattered in various volumes and a number of documents were also tendered across the Bar. The petition was heard for nearly 25 days spreading over 15 months. In view of this, when the counsel expressed their desire to file written submissions, I requested them to annex all the documents relied on by them with the written submissions and accordingly they have done so. Therefore, in this order, where ever relevant, I have referred to various documents as per the annexures to the written submissions. Since a large number of cases were also cited, I have referred to only important of those cases. 3. The facts of the case, in brief, are: M/S Haldia Petrochemicals Limited (HPL) was incorporated in the year 1985 for setting up of a green field petrochemical complex in Haldia ( West Bengal). It was envisaged to be implemented by West Bengal Industrial De....
X X X X Extracts X X X X
X X X X Extracts X X X X
....DC of Rs. 17.5 crores and of Tatas of Rs. 11.9 crores in relation to the project cost so far would be treated as interest free loans to the company. 7. Disputes in relation to the agreement to be resolved through arbitration before ICC. 8. The parties be entitled to seek for specific performance in terms of Specific Relief Act. 9. The JVA was to remain in force as long as the parties held the prescribed percentage of shares. 5. Thereafter, four side letters were exchanged dated 30th Sept. 1994, 6th Oct. 1994, 30th Sept. 1994 and 5th Jan. 1995. In terms of these letters, within 24 moths of commencement of commercial production or within 60 months from the date of JVA, whichever was later, at least 60% of the shareholding of WBIDC would be offered to CPMC at Rs. 14/- per share. The Government had agreed to grant several exemptions to the company as also to provide contingent financial support to the company on occurring of certain events. It was also provided that the role of the Government in the company would be limited to promotion and guidance during the initial phases of the project and that the nominee of CPMC would be Managing Director. The Articles of Association ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ey executives. 11. The composition of the board would be changed to reflect revised share structure and WBIDC would vote along with CPMC on all issues in the shareholders meeting and its nominee directors would vote along with the nominee directors of CPMC; 12. All the rights and obligations of CPMC in terms of the earlier agreement would remain till CPMC acquired majority shares in the company. 13. With this agreement, GOWB would be absolved of any responsibility for providing any further funds. 14. The terms of the agreement were to be implemented in entirety in sequential steps. Any failure on the part of either of the parties would give the right to the other party to terminate this agreement. 15. In case of failure on the part of WBIDC/GOWB, they will refund the entire money invested by CPMC. 16. CPMC will have the right to induct a strategic partner. 8. The main recitals of another agreement among the 1st, 4th petitioners and WBIDC on 8th March, 2002 are: (Annexure WS 3) 1. In terms of the agreement dated 12th January, 2002, 15,50,99,998 equity shares of WBIDC had been transferred and delivered to the 4th petitioner on 8th March, 2002. 2. WBIDC had ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ontemplated in this agreement. After allotment of shares to the 2nd petitioner, the collective shareholding of the petitioners is shown as 58.62% with a note that 155 million shares transferred by WBIDC to CPMC was subject to registration and lenders approval. 11. Another Agreement between Dr.PC and GoWB represented by the 8th respondent, on 14th January 2005 provided for: (Annexure WS-5) 1. Government of West Bengal shall sell its entire shareholding in HPL to CPMC. 2. The price of the shares shall be determined by an independent valuer selected by GOWB from amongst a panel of firms prepared by CPMC. 3. The recommendation of the valuer shall be binding on the GOWB and CPMC. 4. Both the parties shall endeavor to complete the process expeditiously. 12. In Janauary/February 2005, HPL had approved the issue and allotment of equity shares for Rs. 150 crores at par to Indian Oil Corporation Ltd-the 6th respondent (IOC). Making various grievances on the proposed allotment of shares to IOC and also on the ground that WBIDC/GoWB had failed to comply with their commitment to transfer their balance 36% shares to the petitioners, the petitioners filed this petition seeking f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ompany did not become a Government company. In the JVA entered into on 20th August, 1994, pre-emption right was given to the petitioners to acquire the shares of WBIDC in the event of its disinvesting the shares. Therefore, when the petitioners entered the company, there was a clear understanding that the company would remain in the private sector. In addition to the JVA, 4 side letters were exchanged between the petitioners and WBIDC/GoWB providing for the petitioners acquiring at least 60% of the shares held by the shares held by WBIDC at Rs. 14/- per share on occurrence of certain events within a particular time frame. Rs. 14/- per share was agreed to only because of the risk that was being taken by the petitioners in implementing the project. In one of the side letters sent by the petitioners, it was indicated that the role of the Government would be limited to promotion and guidance during the initial stages where after the control of management would be in the private sector and that the nominee of the petitioners would be the MD of the company. This was accepted by the Government. Thus, the management control of the company was agreed to be vested in the petitioners. Even th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....right from the time when the petitioners joined the company by entering into an MOU on 3rd May, 1994 and JVA dated 20.9.1994 an thereafter in terms of the other agreements, that the petitioners had some definite legitimate expectations in joining and continuing with the company. The petitioners are not referring to these agreements with the view to seek specific performance in the present proceeding but they rely on these agreements only to show the intention of the parties giving raise to legitimate expectations. A combined reading of the MOU, JVA, Agreement dated 12.1.2002, 8.3.2002, supplemental agreement dated 30.7.2004, share subscription agreement dated 30.7.2004 and agreements dated 14th January, 2005 would reveal that the petitioners had/have the following legitimate expectations: 1. The company would be controlled by private sector and it would not become a government company 2. The WBIDC would be a minority shareholder 3. The petitioners were to hold majority shares and management control. 4. The WoGBwould make available to the company exemptions and concessions and also contingent financial support 5. The WBIDC would divest its entire shareholding in the c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n of 155 million shares already transferred by WBIDC to the petitioners 3. Refusal of the WBIDC/GoWB to transfer the balance shares to the petitioners. 4. Non handing over of the management to the petitioners and 5. Appointment and continuance of the 16th respondent as the managing director 19. Allotment of Shares to IOC: The allotment of shares to IOC is vitiated on various grounds. First is the non disclosure to the petitioners and/or to the Board of HPL, of certain understandings between IOC and WBIDC/GoWb behind the back of the petitioners, the second is that the petitioners were induced to support allotment of shares to IOC on certain promises by GoWB without the intention of fulfilling the promise and the third is that the allotment is void as being in violation of the provisions of Article 47 of AoA of HPL and the fourth is the manner and mode of allotting the shares by a circular resolution. Right from the beginning, the petitioners had reservation about induction of IOC as a portfolio investor. As a matter of fact, by a letter 20th September, 2004 addressed to GoWB, the petitioners had indicated that even though there was no need to have an industrial portfolio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....umber of occasions between April, 2005 and 25th July, 2005, during which period he submitted 8 draft share purchase agreements to WBIDC/GoWB in terms of the discussions that took place during that period. By a letter dated 5th July, 2005 addressed to the GoWB, the petitioners expressed their readiness and willingness to purchase all the shares held by WBIDC provided the proposal to allot shares to IOC was abandoned. Similar letter was written on 15th July, 2005. During the discussion on 22nd July, 2005, WoGB indicated its desire to conclude share transfer transaction as soon as possible preferably by 25th July, 2005. Accordingly, by a letter dated 25th July, 2005 addressed to the 3rd respondent, the petitioners forwarded a confirmation letter from Deutsche Bank indicating their willingness to make available to the petitioners a sum of Rs. 11.10 Billion for purchase of the shares held by WBIDC. However, by a letter dated 27.7.2005, WoGB informed Dr.PC that GoWB had decided not to divest the shares in favour of the petitioners on the ground that to the Government, the petitioner did not appear to be in a position to conclude the matter. A copy of this letter was endorsed to the 7th r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....les. It was also indicated that in case IOC could not get control of the company, the shares worth Rs. 150 crores proposed to be allotted to IOC would be purchased by the WBIDC at par. When IOC was informed of the pre-emption rights vested with the petitioners, by a letter dated 19th October, 2004 (Annex P-20) addressed to the 8th respondent, IOC desired that WBIDC should try to get the pre-emption rights vacated by the petitioners. This would indicate that the idea of IOC was not that of a portfolio investor but with a view to take full control of the shareholding in and management of HPL. In reply, by a letter dated 19th October, 2004, (Annex P-21) the 8th respondent informed IOC that even though the pre-emption rights cannot be vacated, yet, on going through the established procedure, the WBIDC would be willing to transfer all its shares to IOC. This letter would indicate that even GoWB/WBIDC were in favour of handing over the entire shareholding and management of the company to IOC, even though, right from the beginning, the intention was that the company would remain in the private sector. Thereafter, by another letter dated 25.10.2004 (Annex P-22) addressed to the 8th respond....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mpany, they should act with utmost care with regard to the affairs of the JV company as they owe fiduciary duty to the same. In the present case, 8th and 9th respondents had failed to comply with this requirement by their non disclosure on the clandestine agreement with IOC. When the Chairman of HPL - the 7th respondent wrote to IOC on 2.11.2004 inviting it to subscribe to the shares for Rs. 150 crores, the 9th respondent wrote to IOC on 5th November, 2004 (Annex P-25) advising IOC to accept the offer as per the terms given by HPL without any modification giving an assurance that the shares held by WBIDC would be offered to the petitioners within two months (which was modified to 30 days by a subsequent letter) on a price to be determined by an internationally reputed accounting firm selected by IOC on the price mutually agreed by IOC and WBIDC on the basis of valuation and in case the petitioners did not accept to acquire the shares at that price, the same would be offered to IOC. The grievance of the petitioners is that IOC carried out due diligence in the guise of investing Rs. 150 crores but with the ulterior object of acquiring the entire shares. None of the letters exchanged ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rs had given their consent for allotment to IOC, yet, the consent being not a valid consent, the petitioners cannot be bound by the said consent. Once it is found that the consent was obtained by concealment of material facts, the meeting held could be declared as invalid and the allotment made pursuant to the decision in that meeting could be cancelled. This was done in Jadabpore Tea Co Ltd v. Bengal Dooars National Tea Co Ltd. 55 CC 160. Further, In terms of Section 10 of the Contract Act, free consent is necessary to bind one to his agreement. Petitioners consent to the allotment to IOC was on the premises that IOC would be a portfolio investor limited to Rs. 150 crores and that WBIDC shares would be transferred to the petitioners. If either of the two is found to be flouted, there could be no free consent. It was only an inducement. When the basis of the consent is gone, the question of free consent does not exist. In equity and fairness , the petitioners should not be held to be bound by their consent as there is no legal consent in the eye of law. 22. The learned counsel further submitted: The arrangement between WBIDC/GOWB and IOC is also oppressive to the petitioners. IO....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of shares were placed before the board in its meeting on 28th May, 2005 and board opined that the issue should be resolved expeditiously. Therefore, in the normal course, the matter should have been placed before the board before the final allotment. As a matter of fact, a board meeting had been fixed on 29th July, 2005 but the same was postponed on the ground of non availability of many board members. The legal opinion from the former ASG was obtained on 27th July, 2005 and on 28th July, 2005, the Chairman issued the circular resolution by fax to all directors. The resolution by circulation was initiated by the Chairman which is contrary to the practice in the company as, all through, circular resolutions were initiated by the company Secretary and from the registered office. However, in the present case, it was the Chairman, who sitting in Gurgaon, initiated the circular resolution under his own signature which is highly unusual. No satisfactory explanation has been given for doing so. The Chairman being non executive, his role is limited to chair board and general meetings and not to take decisions which have adverse effect on the shareholders interest especially when he was ful....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he shares were to be allotted on encashment of the cheque. The admitted fact is that the cheque was encashed only on 3.8.2005. The return of allotment was filed on 2.8.2005 showing as if the allotment had been made as fully paid up. In terms of proviso to Section 75(l)(a). no company can show in the return of allotment that shares had been allotted for cash if cash had not been actually received. In this case obviously, cash had not been received on the date of allotment and therefore the return of allotment showing as if cash had been received is invalid. The cases cited by the counsel for the respondents that receipt of cheque is equivalent to receipt of cash cannot be sustained in view of the provision of Section 75 according to which shares could be allotted only on receipt of actual cash. (Re Calcutta Stock Exchange AIR 1957 Cal 438). On this ground alone, the allotment made to IOC on 2.8.2005 has to be declared as invalid. Further, when the circular resolution was specific that the shares were to be allotted on encashment of the cheque, , even the allotment, before the cheque was encashed was contradictory to the mandate given by the board in the circular resolution. The reli....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sfer of shares, the petitioners have sought a relief for a declaration that the shares stood transferred in the name of the 4th petitioner. Therefore the respondents cannot contend that without a prayer having been made in the petition, the same cannot be sought thereafter especially when in terms of Sections 397/398 of the Act, the CLB has powers to mould the relief taking all circumstances into consideration. Approving the judgment of Madras High Court in Syed Mohamad Ali v. R Sundaramurthy AIR 1958 Mad 587, in Gaekwad case , in paragraph 186, the Supreme Court has held " The jurisdiction of the Court to grant appropriate relief under Section 397 of the Act indisputably is of wide amplitude. It is also beyond any controversy that the court while exercising it discretion is not bound by the terms contained in Section 402, if in a particular act situation a futher reliefer reliefs as the court may seem fit and proper". After the petitioners had invested Rs. 107 crores in pursuant to the agreement dated 12.1.2004, , another agreement was entered into on 8th March, 2002 between the petitioners and the 2nd respondent. In terms of this agreement, the WBIDC was to transfer 155 million s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ve acquired indefeasible rights over the shares. In Vasudev v. Pranalal the Supreme Court has held that once share certificates with blank transfer forms is given to the transferee with the intention to confer upon him a right or title to become a shareholder, this right is enforceable. In Maneckji Pestonji Bhamcha v. Wadilal Sarabhai AIR 1926 PC 28 it has been held: "In cases of sale of shares, sale of share contract, as soon as the seller hands over the certificates and blank transfers and the buyer accepts them and gives the seller the cheque, the goods become ascertained good, the sale is complete and the property passes. From that time onwards, the seller can only sue the buyer on the cheque or the price of the shares unpaid in respect that the cheque had not been honoured". Therefore, on no account, WBIDC/GoWB could claim that they are the owners of the shares on the ground that they have repudiated the contracts. 28. The respondents have contended that the matter of transfer of shares is not in the affairs of the company and is between two shareholders. This contention cannot be accepted as the company was actually involved not only in seeking approval from IDBI but also ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eholders agreement to give rise to expectations on the parties to it so that where the expectations are thwarted, this could constitute conduct relating to affairs of the company 2. In Re: The Gread Outdoors Co. Ltd. ( Law Reports of the Commonwealth 1986 549): While considering the allegations of oppression, it is appropriate that a dispute over the contractual rights should be dealt with in the context of the relevant section relating to oppression. 3. Dilip Kumar Chandra v. Chandra & Sons Pvt. Ltd. CP 32 of 2001 CLB: Non registration of transfer of shares is an act of oppression. 30. Appointment of R-16 as the Managing Director: He was allegedly appointed as the MD in the board meeting held on 29th March, 2005. In terms of Article 73 of AOA, there cannot be more than 15 directors. On 29.3.2005, the company already had 15 directors and therefore there was no vacancy to appoint the 6th respondent as the managing director who has to be necessarily a member of the board. As a matter of fact, the company had applied to the Central Government for increasing the number of directors to 20 and the approval was still awaited. Even though the respondents have contended that 16th r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ares of WBIDC to the petitioners, IDBI withdrew the same during the pendency of the present proceeding by a letter dated 10.1.2006. Thus, it is evident that IDBI has played an active role in the affairs of a company concerning promoter issues and has sided with GOWB notwithstanding the fact that it was the petitioners who effectuated the CDR package by investing Rs. 127 crores. Having denied the rights of a petitioner, IDBI is seeking to have shares worth Rs. 135 crores allotted to the lenders which allotment would alter the status of the company from private sector to public sector and would also concert the petitioners from majority into a minority. It is evident therefore that IDBI has over stepped its role as a lender and has sought to create a rift between the main promoters of the company instead of finding out a solution which would be not only in the interest of the company, shareholders but more particularly to the lenders. In Dr. Kamal Kumar Dutta v. Ruby General Hospital 108 CC 312, the CLB has observed that financial institutions should not normally take sides with any shareholder and should act only in the overall interest of the company with a view to protect the lend....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ght for the following reliefs: 1. the EOGM held on 14.1.2005 should be declared as invalid and and the resolution passed thereat should be set aside. 2. The resolution passed by circulation dated 28.7.2005 should be set aside. 3. The allotment of shares worth Rs. 150 crores to IOC should be cancelled and the company should be directed to refund the money. 4. 155 million shares transferred by WBIDC to the 4th petitioner in terms of the agreement dated 8.3.2002 should be dematerialized and registered in favour of the 4th petitioner. 5. The 7th and 16th respondents should be removed from the board and the expenditure incurred by the company in the present proceedings should be recovered from them. 6. The Articles of Association should be amended to reflect the terms of the various agreements. 7. The lenders be allotted shares worth Rs. 128 crores ( reduced from original Rs. 135 crores) as per the CDR package. 8. The balance shares held by GOWB/WBIDC should be directed to be sold to the petitioners on the basis of the valuation carried out by an independent valuer. as the petitioners are ready and willing to purchase those shares. 34. Dr. Singhvi. Sr. Advocat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ary duties in allotment of shares to IOC without disclosing material particulars. Even though the petitioners are in the majority, WBIDC/GOWB is trying to gain control over the company with the help of IOC. When two groups of shareholders have some disputes, the company cannot be used to settle scores and the company should not be used by one against the other and therefore, the expenses incurred by the company should be recovered from the 7th and 16th respondents. The learned counsel relied on the following cases: Re: A Company 1992 BCLC 701: In a petition under Section 459, the company is purely a nominal party since the substantive dispute is normally between the shareholders. Therefore, it would be misfeasance on the part of the directors to use the company's money to pay the legal expenses in connection with such proceeding. Re: Crossmore Electrical & Civil Engineering Ltd. 1989 BCLC 137 ChD: It is a general principle of law that company's money should not be expended on disputes between shareholders and accordingly the costs in the Section 459 petition would not be in the ordinary course of business. Re: Kenyan Fwansea Ltd. 1987 BCLC 514 ChD: It is improper t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t of their claim for shares worth Rs. 155 crores allegedly transferred by WBIDC. The transfer has not been registered by the company and the very fact that they are seeking relief in this regard, would indicate that the petitioners are obviously are not owners of these shares. By seeking the prayers to cancel the allotment of shares to IOC, and to direct the company to register the transfer of 155 million shares and to direct WBIDC to disinvest 36% shares in favour of the petitioners, they are trying to take complete control of the company, which cannot be permitted. 37. The learned counsel further submitted: Since, through the petition, the petitioners are seeking to enforce specific performance of various agreements, the petition itself is not maintainable. It is a settled law that only when the statutory rights of a shareholder are affected, he can allege oppression. Even in a suit for specific performance, the grant of relief is discretionary and order for specific performance need not necessarily be made and the court could award damages. Further in such cases, the claimant has to. prove that he is ready and willing to perform his obligations under the Contract. In the pres....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in which the obligations under a contract are to be performed must be taken into account and if there is a failure in performance of the contract, the same cannot be enforced. 38. The learned counsel further submitted: The main complaint of the petitioners in the petition relate to the refusal of WBIDC to transfer 36% shares to the petitioners and that the allotment of shares to IOC is bad. It is a settled law that the alleged acts of oppression should be in the conduct of the affairs of the company and not in relation to interse disputes between two groups of shareholders. The entire petition deals only with the alleged default/failure of WBIDC/GoWB in discharging their obligations in terms of various agreements and not in the conduct of the affairs of the company. There is not even an averment as to how the company is concerned with these disputes. In other words, private disputes between shareholders cannot be a ground for filing a petition under Sections 397/398 of the Act. There is no averment in the petition as to how denial by WBIDC to transfer its shares could be considered to be in the affairs of the company. In Hillerest Reality Sdn. Bbhd v. Hotel Queen Pvt. Ltd. , thi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r Sections 397 and 402 of the Act, the court is considering not only the reliefs that is sought for but also considers as to what is the nature of the complaint and how the same has to be rectified. It is the interest of the company that is being considered and not the individual disputes between the petitioner and the respondent. 7. Hungerford Investment Trust Ltd. v. Turner Morrison Co. Ltd. ILR 1972 1 Cal. 286: (This judgment has been set aside by the Division Bench): Section 397 of the Companies Act is not intended to feed every private grudge or differences between shareholders and is not intended to be exploited for any difference of views between members which could be largely and substantially redressed by invoking specific provisions of the Companies Act dealing with such claim. The proceedings under Sections 398/398 of the Companies are intended to be in public interest largely or in the commercial interest of the company concerned and not a kind of provision to feed the private grudge between the warring groups of directors or individual shareholders. 8. R. Balakrishnan v. Vijaya Dairy & Farms Products Pvt. Ltd. 125 CC 661 CLB: When grievances and reliefs flow from....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... v. Kishore Kundan Sippy 131 CC 690 Bom the Division Bench of Bombay High Court has held that the term "unfairly prejudicial" as in Section 459 of English Companies Act, is different from "oppression" in Section 397 of the Indian companies Act and has held that unless there is illegality in the conduct of the affairs of the company Section 397 can not be invoked. Therefore the question of legitimate expectation, which concept is applied under English Act. cannot be imported in a petition under Section 397. Therefore, no relief can be granted on the basis of legitimate expectations. 41. On merits, the learned counsel submitted: All the agreements relied on by the petitioners are linked to one and another and they all form a composite transaction arising out of the agreement dated 12th January, 2002. Due to changes in circumstances, the same was modified by other agreements dated 8th March, 2002, 30th 2004 and 14th January, 2005. The intention of the parties has to be gathered from the agreements and not from the pleadings or arguments. In Chitty on Contracts it is stated Every deed must be read as a whole in order to ascertain the true meaning of its several clauses and the words....
X X X X Extracts X X X X
X X X X Extracts X X X X
....be paid within 5 working days and thereafter they were to bring in further Rs. 393 crores. Instead, the petitioners only arranged a loan of Rs. 107 crores from HSBC over a period of one year from March, 2001 to Feb. 2002 in the name of the company and the interest of about Rs. 3.5 crores had to be borne by the company. Only in the month of Jan. 2004, the petitioners cleared the loan and in lieu thereof shares worth Rs. 107 crores were allotted to the 3rd petitioner. In terms of clause 2 of the agreement, the petitioners were to produce a letter of comfort within 30 days which was not produced at all. In terms of clause 5, WBIDC was to transfer further, shares up to Rs. 360 crores to make the petitioners as 51% shareholders only on production of the letter of comfort. In spite of the failure of the petitioners to comply with the terms of agreement, WBIDC transferred shares worth Rs. 155 crores in good faith. It would be highly inequitable on the part of the petitioners now to seek registration of the transfer of shares when the petitioners have failed to comply with their obligations. WBIDC transferred the shares without any consideration only on the understanding that the petitione....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r with Government of India ( Annexure W-36). Dr. PC confirmed in writing by a letter dated 24.9.2004. ( Annexure WS-37) that there was urgency in concluding the induction of funds. Thereafter, GoWB/WBIDC held discussions with IOC which according to the petitioners led to a clandestine agreement. In a board meeting held on 2nd November, 2004 (Annexure WS-43), it was decided to invite IOC to participate in the equity investment of Rs. 150 crores and it was also decided to convene an EOGM to pass a resolution in terms of Section 81(1)(A) of the Act. Accordingly, the Chairman issued a letter of invitation to IOC on 2nd November, 2004 (Annexure WS-44) and by a letter dated 10th November, 2004 ( Annexure WS-45), IOC agreed to invest Rs. 150 crores. In the EOGM held on 14.1.2005, with the participation of the petitioners, a unanimous resolution was passed for offering, issuing, and allotting 150 million shares of Rs. 10/- each at par to IOC (Annexure WS-49). In an Empowered Committee Meeting on 20.1.2005 (WS-50) chaired by Dr.PC, the committee resolved to allot shares worth Rs. 150 crores, at par, on receipt of payment from IOC. It was also resolved that on receipt of payment, shares coul....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he general body resolution to allot shares to IOC has no basis. Even assuming that there was a secret agreement, it was a private agreement and it has nothing to do with the affairs of the company. In view of this, IOC allotment cannot be set aside on the basis of this allegation. The petitioners' allegation that the discussion/correspondence with IOC should have been disclosed either to the board or to the petitioners concerned, as a shareholder, WBIDC did not owe any fiduciary duty to them nor there is any such stipulation in any of the agreements with the petitioners or in the Articles of Association. Section 173(2) of the Act does not require a shareholder to disclose reasons for either supporting or opposing or moving a resolution. (LIC v. Escorts Ltd. 1861 SCC 264 Therefore, everything ended at this stage and IOC subscribed to the shares only on the terms and conditions proposed by HPL with the active participation of Dr.PC. Therefore, the allegation of the petitioners that their consent was obtained by suppression of material facts has no basis. 45. In so far as the circular resolution is concerned, it is on record that even after IOC had remitted the consideration fo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erms of Clause 6 of the Agreement dated 12.1.2002. In view of the fact that there is no such provision in the articles and since in terms of the judgment of Supreme Court in V.B. Rangaraj case AIR 1992 SC 453, the terms of private agreement nor incorporated in the Articles has no validity. In Rotla case 2002 2 Bom. Cr. 241, the Bombay High Court has held that directors in discharge of their fiduciary duties have to vote for the benefit of the company and are not bound by private agreements. The other contention that 10 days notice had not been given is also not sustainable as this requirement is only in respect of regular board meetings and not in case of circular resolutions which has been specifically permitted by Article 102. The petitioners have also claimed that shares could not have been allotted without amendment to Article 47 especially when the company itself had informed the ROC by a letter 11.7.2005. The said letter only referred to the allotment made to the 2nd petitioner in terms of the share - purchase agreement dated 30.7.2004 and not of allotment to IOC. Allotment to IOC was made in terms of Article 3 (A) as was done in earlier allotments. Therefore, none of the all....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t arise. There are two parts in regard to the impugned Rs. 155 crores shares - one is the agreement to sell and the other is actual sale. Even though, the company was aware of the agreement to sell dated 30.7.2004, it was not aware of the actual sale as no transfer instruments had been lodged with the company. What the petitioner seeks through the petition is that WBIDC had promised to make the petitioner a majority and therefore direct WBIDC to comply with its commitment. Thus, on their own showing, the company is not concerned with the issue. Further, the petitioners have not paid any consideration for the shares. They have so far paid only Rs. 30 crores as against Rs. 155 crores and therefore even if it is assumed that CLB has the power to direct registration of transfer of shares, it could be only with reference to Rs. 30 crores and nothing beyond that. Even otherwise, the transfer of the said shares was an integral part of the earlier agreements dated 12.1.2002 and 8.3.2002 and therefore when the petitioners had breached the terms of this agreements, they cannot, claim that they are the owners of these shares. It has been held in a number of cases that even though transfer may....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ance of WBIDC's obligation as they have not fulfilled their obligation. In view of this, even in a civil suit, they would not get any relief which definitely they cannot get under the equitable jurisdiction of this Board. Since in terms of the agreement between the lenders and the company, without their approval, company cannot register the transfer, even CLB cannot direct the company to register the transfer, as it would place the company to act in breach of its agreement with a third party viz;, the lenders. In terms of Section 39 of the Contract Act, when a party refuses to perform its/his obligations under the contract, the other party can rescind the contract as such a contract has become voidable. In such cases, the only course available is either to claim damages or seek for restitution in terms of Section 64 and 65 of the Contract Act. Since in the present case, due to the failure of the petitioners to comply with the terms of contracts dated 12.1.2005 and 8.3.2002, WBIDC and GOWB have effectively avoided the contract and therefore the parties should be restituted to their pre-contractual status as held in Murlidhar Chatterjee v. International Film Company Ltd. AIR 1943....
X X X X Extracts X X X X
X X X X Extracts X X X X
....romise of disinvesting the shares of WBIDC in favour of the petitioners is wrong. It is evident from the letter of Dr.PC dated 6.7.2005 (Annexure WS-32) wherein he has specifically mentioned that as a pre condition for acquiring the shares of WBIDC, a confirmation should be obtained from IOC that it would not subscribe to the shares worth Rs. 150 crores. This stand, he has reiterated in subsequent letters also and also in the various draft agreements that Dr.PC had sent to GOWB/WBIDC and the Chief Minister. It would mean that if IOC were to continue, the petitioners are not willing to acquire the shares of WBIDC. Therefore it is crystal clear that induction of IOC and disinvestment by WBIDC are independent of each other. In view of this contradictory stand taken by Dr.PC , GoWB decided not to go in for disinvestment. A perusal of various agreements would indicate that WBIDC/GOWB agreed to transfer their shares to the petitioners on fulfillment of various obligations by the petitioners which they had failed to discharge. In so far as the demand of the petitioners for a direction to WBIDC to sell the balance shares to the petitioners is concerned, they cannot make such a claim under ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t it was an agreement, by his own conduct of stipulating various pre conditions thereafter, Dr. PC has repudiated the said agreement which has also been accepted by GOWB/WBIDC by a letter dated 27.7.2005 in terms of Section 39 of the Contract Act (Annexure WS-28). Thus, as of date, the petitioners have no right or legitimate expectations to require GoWB/WBIDC to divest their shares in the company. The leaned counsel relied on the following cases: Sikkim Subba Associates v. State of Sikkim : He who seeks equity must do equity and when the condonation or acceptance of belated performance was conditional upon the future could conduct and adherence to the promises of the defaulter, the so called waiver cannot be considered to be for ever and complete in itself so as to deprive the State in this case, of its power to legitimately repudiate and refuse to perform its part on the admitted fact that the default of the appellants continued till even the passing of the award in this case. Universal Cargo Carriers Corporation v. Citati 1957 2 AER 70: A renunciation of contract can be made either by words or by conduct provided it is clearly made. The test of whether an intention is effic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o IOC at the earliest, to avoid impending legal action the allotment of shares to IOC was move through a circular resolution as a matter of abundant caution. As a matter of fact when the board had resolved to allot shares in 2004, even the circular resolution was unnecessary. The claim of the petitioners that the company could not have allotted the shares before encashment of cheque is not correct. It has been held that receipt of cheque is equivalent is receipt of cash and therefore time and date of encashment is irrelevant. The petitioners have alleged that prior to the encashment of the cheque, shares should not have been allotted as the same is in violation of Section 75. It has been judicially held that payment by cheque is equal to payment by cash. In K. Saraswati v. P.S.S. Somasundaram : it is held that unless it is specifically mentioned that payment must be in cash, there is no reason why payment by cheque should not be taken to be due payment if the cheque is subsequently encashed in the ordinary course. Similar decisions can be found in CIT v. Ogale Glass Works Ltd. 25 ITR 529; and Turkey Red Dye Works Co. Ltd. v. CIT 55 ITR 532. The Department of Company Affairs have al....
X X X X Extracts X X X X
X X X X Extracts X X X X
....greement dated 16.12.2004 signed by Dr. PC himself provides for allotment and issuance of shares worth Rs. 135 crores to the lenders and as such contractual right has been created in the lenders and as such the petitioners cannot oppose allotment to them. The CDR package has already been implemented by the lenders by sacrificing an amount of Rs. 289 crores and the rate of interest has been reduced from 14% to 10.5%, thus, resulting in enormous saving to the company. If the allotment of Rs. 135 crores is made to the lenders, the company would save about Rs. 15 crores per annum by way of interest. In addition, the lenders have also agreed to reduce the rate of interest from 10.5% to 8.75% once the shares are allotted and refinancing proposal submitted by the company to the lenders is approved. Therefore, it would be in the interest of the company that the earlier restraint order is vacated to enable the company to allot shares to IDBI. 53. In so far as the appointment of the 16th respondent as the MD is concerned, Shri Ganesh submitted that there is no pleading in the petition challenging his appointment. They challenged the appointment only in the reply filed to an application ma....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e WoGB submitted: Private rights cannot be sought to be enforced through a petition under Sections 397/398 of the Act. The CLB is not concerned with manner of doing something but only to examine whether the act done is oppressive or detrimental. When Dr.PC had participated in the EOGM and voted for allotment of shares to IOC, he cannot impugn the resolution on the ground of misrepresentation for which the remedy by way of damages will have to be before a civil court. Misrepresentation of a private promise does not make the resolution of the General Meeting bad. A resolution can be set aside only if there is some infirmity in holding the meeting. The allotment to IOC and the sale of shares of WBIDC to the petitioners are two independent and unconnected actions. The challenge of the petitioners to allotment of shares to IOC is mainly on the ground that certain discussions that took place between WBIDC and IOC had not been disclosed to Dr.PC before the EOGM. Whatever might be the terms and conditions of discussions between WBIDC and IOC, ultimately IOC is bound by the terms of allotment. Even in the alleged clandestine agreement between IOC and WBIDC, the first right of refusal has be....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ste in the particular circumstances of the case in allotment of shares cannot therefore lead to any inference of oppression but arose out of the circumstances brought about by the appellant's conduct; When the real basis of the petition is not a case of oppression as a minority shareholder but on the feeling that the hope of getting control of the company on the basis of agreement had been thawarted, there is no cause of oppression. Needle Industries case 1981 3 SCC 333; As isolated act cannot lead to a presumption of oppression and even a resolution in contravention of law may be in the, interest of shareholders and the company. 56. Shri Anil Diwan, Senior Advocate, appearing for the 7th respondent submitted: The main allegation against the 7th respondent is that even though he was in the knowledge of the alleged clandestine agreement with IOC, he had not disclosed the same to the petitioners/board of directors and that he had acted malafide in getting the circular resolution passed. The allegation of the petitioners that the 7th respondent had not acted is unfortunate. The Chairman has no financial stake in the company and he came into the company at the invitation both....
X X X X Extracts X X X X
X X X X Extracts X X X X
....otment of shares to IOC on 14.1.2005. In the Empowered Committee meeting on 20.1.2005 chaired by CPMC, a resolution was passed to issue 15 crores shares to IOC and to allot the same on receipt of full payment from IOC. The resolution further authorized the company management to do all acts, deeds and other things necessary and incidental including filing of returns with ROC. Along with the letter of acceptance, IOC sent a cheque for Rs. 150 crores which was received on 18.2.2005. However, the company could not encash the cheque as CPMC somehow stalled the allotment of shares to IOC. Various reminders received from IOC including legal notices were placed before the board in its meeting on 20.8.2005 which was attended by Dr. PC wherein the board expressed its desire that the issue should be resolved expeditiously. Since no shares had been allotted by CPMC, IOC complained to ROC in response to which ROC issued a notice to the company dated 30.5.2005 seeking for the reasons for non issuance of shares to IOC. On receipt of this notice, the same was circulated to all the directors including CPMC. Upon receipt of the said notice, one of the directors representing WBIDC urged the company t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....through circular resolutions. As far as the argument that necessary documents did not accompany the circular resolution is concerned, all the connected documents were sent to the members of the board even before the circular resolution was sent and therefore every board members is aware of the circumstances in which the circular resolution was proposed. On receipt of approval from all the directors except 4 from the petitioners' group, the 7th respondent by a letter dated 2.8.2005. directed the Deputy Company Secretary to take requisite action to implement the decision including encashing the IOC cheque by 3.8.2005 since 10 days time stipulated in the legal notice dated 19.7.2005 by IOC had expired on 29.7.2005. Thus, it will be evident that the 7th respondent had acted bonafide and in the interest of the company. Even otherwise, in view of the earlier resolutions of the board and the Empowered Committee dated 2.11.2004 and 21.2.2005 approving allotment of shares to IOC, even getting the approval through the special resolution was unnecessary but was done as a measure of abundant caution. It is to be noted that none of the directors from the petitioners' group raised any ob....
X X X X Extracts X X X X
X X X X Extracts X X X X
....a Committee including CPMC was authorized to do the needful. Accordingly, the Chairman issued a letter on 2.11.2002 to IOC inviting it to subscribe to shares worth Rs. 150 crores. The fact of issue of letter by the Chairman was to the knowledge of Dr PC as is evident from his letter dated 10.12.2004 wherein he has referred to the said letter. In the same resolution it was also proposed to call for an EOGM to approve the allotment of shares to IOC. The minutes of the meeting was circulated on 17th December, 2004. Even then, petitioners did not protest against the contents of the minutes. On 21st Dec. 2004, notices convening the EOGM on 14th January, 2005 were issued along with an Explanatory Statement as also a copy of letter of IOC dated 10.11.2004. Only by a letter dated 30th Dec. 2004, for the first time, Dr.PC contended that the minutes of the Board meeting on 2.11.2004 relating to allotment of shares to IOC did not reflect the various reservations expressed by the nominees of the petitioners in that meeting. The 7th respondent sent a detailed reply on 10th January, 2005 which has been suppressed by the petitioners in the petition. Thereafter, in the EOGM held on 14.1.2005, the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....being malafide etc. It is to be noted that in the Empowered Committee Meeting held on 20.1.2005, it was specifically resolved that on receipt of full consideration for the shares from IOC, shares could be issued either in physical form or dematerialised form. Therefore, there was no need to have followed the circular resolution route for issuance of shares as the same was unnecessary in view of the resolution passed in the Empowered Committee meeting. 58. The leaned counsel further submitted: The petitioners have raised another argument that in terms of Article 47 of AOA, the allotment to IOC was bad as it would alter the ratio of shareholding provided in the Articles. In this Article, it is specifically provided that the shares are to be issued in accordance with general body resolution. In the present case, in the EOGM held on 14.1.2005 the general body passed a resolution to allot shares to IOC and therefore it was in compliance with the provisions of Article 47 read with Article (3 A). The contention of the petitioners that allotment being in contravention to the provisions of Article 47 is ultravires and therefore even the shareholders cannot pass a resolution contrary to t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he plaint, the plaintiff is not entitled to grant any relief not asked for. In Deisein Pvt. Ltd. v. Elektrim India Ltd. 2001 3 CLJ 459- CLB, it has been held that in the exercise of the equitable jurisdiction, the CLB has to take into consideration the conduct of the parties and if a person who has been a party to the decisions, he cannot impugn those decisions later on, on the ground that such decisions amount to act of oppression. Finally, since IOC is a bonafide allottee of the shares for valuable consideration, without the knowledge of any alleged breach of terms of agreements between the petitioners and WDIDC/GoWB, the allotment made to it cannot be cancelled. 59. Shri Dave, Sr. Advocate appearing for IDBI submitted: In the order dated 5.8.2005, this Board has restrained the company from allotting shares worth Rs. 135 crores which should not have been done without notice to IDBI. IDBI, being the lead bank with other banks and financial institutions had given substantial loan to HPL. They are also the members of corporate debt restructuring system. Due to difficulties being faced by HPL in payment of its debts to the financial institutions/banks, a scheme for restructuring w....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... by suppression of the alleged material documents. In Binod Kumar Aganval v. Ringtong Tea Co P Ltd. CLB has held that as long as no favourable order had been obtained by non disclosure of material documents, no fraud can be alleged. Now that all the documents, which according to the respondents are relevant, are available on record, the Board could consider all of them in deciding the issues raised in the proceeding. It has also been contended by the respondents that many of the allegations and the reliefs sought thereat do not form part of the petition and as such the same cannot be considered. In Ramashankar Prosad v. Sindri Iron Foundry (P) Ltd. , it has been held " It is true that there are no proper averments appropriate to the relief asked. However, what was lacking in the petition has been filled up by subsequent affidavits and the court must guide itself by all the evidence before it. Once all the evidence is before the court and the case of oppression clearly emerges from the facts disclosed, it would not be proper to measure the rights of the parties only in terms of the assertion made in the petition". Every allegation raised in the petition, even though did not form par....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cussions were going on between the petitioners and GOWB in this regard. If according to GOWB, till 25.7.2005, the petitioners were trustworthy, then the sudden change of mind on 27.7.2005 is inexplicable. Shri Sundaram pointed out that the petitioners had not brought in Rs. 500 crores and had not produced a letter of comfort. Letter of comfort was not only produced and the same was accepted and thereafter only the transfer of 155 million shares was effected. At not time, the issue relating to Rs. 500 crores was raised. Shri Sundaram also contended that since the petitioners were insisting, as a pre condition, that no shares should be allotted to IOC, the sale of shares to the petitioners could not fructify. This contention is not based on facts as after series of discussions between the petitioners and GoWB, it was mutually agreed that IOC would not subscribe to the shares. (Annex P 33/34). That is the reason, why, as late as on 25.5.2005(Annexure P-35), GOWB sought permission from IDBI for transfer of its shares to the petitioners and IDBI also conveyed its approval by a letter dated 27.5.2005. The petitioners also forwarded to GOWB a letter from Deutsche Bank on 6th July, 2005 co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....BI and other lenders would be in the interest of the company and therefore on principle, they have no objection to the said allotment provided the shares of WBIDC are transferred to them including the registration of 155 million shares. 62. I have considered the pleadings, arguments and the written submissions of the parties. This petition was mentioned ex-parte at 10.30 AM on 3.8.2005 seeking for restraining the company from allotting shares worth Rs. 150 crores to IOC. I adjourned the matter to 4.00 PM with the direction to the petitioners to issue notices to the respondents to enable them to enter appearance. At 4.00 PM, the counsel appearing for the company submitted that shares had already been allotted to IOC and return of allotment had also been filed. In view of this, I directed the company to furnish details as to when the cheque from IOC was encashed and when the shares were allotted to IOC and adjourned the matter to 4.8.2005. After hearing the elaborate arguments of the parties on that day, keeping all the issues like whether the petitioners were seeking to enforce the contractual rights, whether the non disclosure of the alleged agreement with IOC would invalidate t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... view to explore the possibility of resolving the disputes amicably, I gave a suggestion to the to the learned counsel for the petitioners. Since the main bone of contention between the parties is the allotment of shares to IOC, I suggested that the petitioners should write to the Govt. of West Bengal that in case the WBIDC was willing to transfer its shares to the petitioners in terms of the various agreements, the petitioners would not have any objection to the allotment of shares to IDBI and IOC. In terms of the said suggestion, the petitioners have written to Government of West Bengal with a copy to this Board. In view of this, even though I fully agree with the contention of Shri Dave that any ex-parte order should be subject to review at the earliest, I am of the opinion that passing any order on this application either by granting or rejecting the prayer of the IDBI at this stage, is likely to hamper the process of negotiations. Therefore, in the interest of all the parties concerned, more particularly that of the company, I defer the decision on this application for the present. Should the present efforts of negotiations fail, since I have kept the final hearing on the peti....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... grant of relief is discretionary. Shri Sundaram vehemently contended that since the petitioners had breached many of the terms of the contracts and had/have never expressed their readiness and willingness to perform their obligations, they cannot seek any relief as sought for in the petition. He further contended that in view of the failure/default of the petitioners in performing their obligations, WBIDC/GOWB have already rescinded the contracts and therefore even the question of considering the terms of the contract does not arise now. His further contention is that the matters of breach of contracts/recision etc require evidence and therefore, cannot be decided in a summary proceeding. On the above propositions, a number of cases were cited as recorded as a part of his argument in the earlier paragraphs. However, Shri Sarkar repeatedly submitted that through this petition, the petitioners are not seeking for enforcement of their contractual rights but they are relying on these agreements only to point out the various legitimate expectations of the petitioners arising out of the terms of these contracts. 65. First, I would like to note that even though the petition has been f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o the conduct of the parties, only the issue whether the petitioners have established that they had and still have legitimate expectations while joining and continuing with the company. While doing so, inevitably, reference may have to be made to the terms of the agreements, not with the view to enforce the terms but only limited to see whether the terms have bearing on the claim of legitimate expectations. Even in Gaekwad case which was referred to by Shri Sundaram, in paragraph 162 of its judgment the Supreme Court while observing that in case of violation of contractual or statutory violation, one should approach a civil court, it also held that in extraordinary situation, the same can be considered in a petition under Section 397. Shri Sundaram vehemently argued that the doctrine of legitimate expectation has been applied only under English Law in terms of Section 459 of the English Companies Act, which deals with "unfairly prejudicial" conduct. On this contention, he relied on the Division Bench Judgment of Bombay High Court in Kundan Sippy case. In that case, the doctrine of "legitimate expectation " was not examined. The court only held that the concept of "unfairly prejudic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent company, the personal relationship and interaction of DR.PC with the Chief Minister and the officials of GoWB brought in their association with the company. These two collectively hold substantive shares viz of over 95% of the equity in the company (exclusive of IOC) and even though it was envisaged that 40% shares could be held by public, yet, as of date, there are the only two dominant groups of shareholders. Each has 4 nominees on the Board. All the major decisions are taken in consultation and with the consent of each other, and as a matter this is the main defense of GoWB/WBIDC in relation to various allegations made in the petition. Further, from the terms of the various agreements, it is apparent that these two groups of shareholders decide every aspect of the functioning of the company. Even though the company is a public company, yet, in Article 33 of the AOA, pre-emption rights have been vested in the three promoters and as a matter of fact, under this Article, WBIDC acquired the shares of Tatas. Therefore, in these circumstances, if HPL could not be considered to be a quasi partnership between the petitioners and WBIDC/GOWB, I do not think that any other company woul....
X X X X Extracts X X X X
X X X X Extracts X X X X
....basis of the agreements, I shall be only examining whether the conduct of the parties pursuant to the terms of the agreements, has caused creation of any legitimate expectation for the petitioners. 67. The next objection raised by the respondents is that the petitioners are guilty of suppression of material facts and as such they have played a fraud on the CLB and therefore they are not entitled for any equitable relief. On this proposition, certain cases have been relied on. The charge of commission of fraud by suppression of material facts can be made only when a person obtains certain benefits from a court of law by way of an award, judgment or decree and not otherwise as is evident from the cases cited by the counsel for the respondents. In S.P. Chengalvaraya Naidu 1994 1 SCC 1, the plaintiff therein obtained a decree in his favour by non disclosing relevant and material documents and therefore the Supreme Court held that he had obtained the decree by fraud. In United India Insurance Co. Ltd., the plaintiff therein got an award of compensation by misrepresentation of facts with a fraudulent intent and when the Insurance company came to know of it, it sought for recalling the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... million shares and the sale of rest of the shares by WBIDC/GOWB do not relate to the affairs of the company as they arise out of private agreements between two groups of shareholders. On this proposition, they relied on the decisions of this Board in Hotel Queen, Vijaya Dairy Farms, Regal Industries cases and also in Jermin Street Trukish Bath and Gaekwad cases. Whether, the matter of transfer of shares is in the affairs of the company or not, would again depend on facts of the case. I shall deal with this objection later on when I deal with the allegations connected with these issues, keeping in mind Buckley on Companies Act according to which when shareholders agreements give rise to expectations on the parties to it so that when the expectations are thwarted, this could constitute conduct relating to affairs of the company. 69. The next objection of the respondents is that many of the issues like violation of Article 47, appointment of the 16th respondent as the MD, issue relating to 155 million shares etc raised by the petitioners and reliefs sought thereat do not form part of the petition and as such they cannot be considered. On this proposition, they have relied on the d....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 70. Having given my findings on the preliminary issues, I shall now deal with the merits of this case. Allotment of shares to IOC: At the outset, I have to record, as is revealed from various documents, the petitioners cannot question the allotment of shares to IOC per-se. The allotment of shares to IOC, as rightly pointed out by the learned counsel for the respondents was not sudden, surreptitious or with any ulterior motive. The allotment of shares to IOC was under the contemplation of the shareholders right from 2000. As a matter of fact, it appears that the idea of inducting IOC was initiated by Dr. PC himself as is seen from his letter dated 24.3.2000 addressed to the Chief Minister wherein, while expressing that IOC had shown interest in participating in the project, he had sought for a meeting to discuss how best IOC could be inducted into the company. By a circular letter dated 26.5.2000 addressed to the board members, Dr. PC had expressed " The initiative to induct IOC as an equity partner, which I have long encouraged, could have come earlier than it did but is welcome nevertheless ". The participation of IOC was discussed in a board meeting held on 6.9.2000. IOC sent a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e. 71. However, according to the petitioners when the matter came up for discussion in the board meeting on 2nd November, 2004, many directors including their nominees had voiced their reservations on the IOC allotment but, even though the same were reflected in the draft minutes sent to the petitioners, they did not find a place in the final approved minutes. I do not propose to get into the controversy as to whether the approved minutes reflect the correct deliberations in the board in view of subsequent events. In the letter of Dr. PC dated 10.12.2004 to the Chairman wherein, after referring to the board meeting on 2nd November, 2004 and the letter of the Chairman to IOC on that date inviting IOC to join as a portfolio investor for Rs. 150 crores, he had expressed his apprehension "Newspaper reports of this investment has given cause for the articulation of issues and concerns which would have important bearing on the mode and manner in which further action should be chartered out in this regard'. The contents thereafter in the letter indicate that Dr. PC was apprehensive of the company becoming a Government company consequent on allotment of shares to IOC and as such he ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cussion by the 7th, 8th and 9th respondents, would affect the allotment. Shri Sundaram argued that a shareholder is not bound or expected to disclose discussions with a third party. I would have accepted this contention if the discussions were restricted only in relation to the shares of WBIDC. In terms of the agreement dated 30.7.2004, to which the company was a party, GoWB/WBIDC had been given the authority to induct a portfolio investor and the main discussion with IOC was in relation to participation in the equity of the company. Therefore, even as shareholders, when they have acted as per the authority vested in them, WBIDC/GoWB were bound to keep the Board of the company informed about the deliberations with IOC even assuming that the discussion on disinvestment by WBIDC in favour of IOC was only incidental or secondary. Further, those who participated in the discussion, even though they represented as shareholders, were the 8th and 9th respondents who were are the directors of the company. Therefore, it was incumbent upon them, when the issue relating to allotment of shares to IOC was discussed in the board meeting on 2.11.2004, to brief the board about their discussions wit....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to IOC etc. do not survive. Further, when in terms of Article 33 (b) of the AOA, it has been specifically provided that in case of exercising pre-emptive rights, the valuer would be appointed jointly by WBIDC and the petitioners, even WBIDC cannot insist on the petitioners to accept the valuation done by IOC. Therefore, on this account, the petitioners can have no grievance. Regarding the expectation of the petitioners that IOC would only remain as a portfolio investor is concerned, the fact is that, as of date it remains so and without the consent of the petitioners, no special resolution can be passed for allotting further shares to IOC nor it can acquire the shares of WBIDC till the petitioners either waive their pre-emption rights or they fail to acquire the shares when offered by WBIDC. Therefore, on this account also, the petitioners can have no grievance. Shri Sarkar referred to the note by Shri A. Bose dated 18.3.2005 to contend that the reluctance of IOC to confirm that there was no other agreement with WBIDC would indicate that there must be some agreement. Now that both WBIDC and IOC have confirmed before me that there is no such agreement, the matter ends. 74. In so....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e explanatory statement contains sufficient, true and correct information to enable the general body to intelligently appraise the proposal, then, the explanatory statement should be considered to be fulfilling the requirements of Section 173(2) of the Act". In that case, the proposal was for the sale of a unit of the company. Therefore, this Board held that, the material facts could comprise of the reasons for the sale, whether sale would affect the interest of the company, to whom the sale was being effected, the consideration for the sale, how and by whom the consideration was assessed, whether the directors had any interest in the sale, whether all statutory clearances had been obtained, etc. Finding that, these information were disclosed in the explanatory statement, this Board held that the same met with the requirements of Section 173. In the present case, the only issue was allotment of shares to IOC and therefore the shareholders were entitled to know the terms of the allotment, the price at which the shares were proposed to be allotted, what would be the shareholding pattern after the allotment and whether the allotment would result in change in management and control of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lution. In the present case, even though the respondents have taken the stand that all the documents like letters from IOC, legal notices by their advocates etc had already been circulated or placed before the Board in its earlier meetings, yet, the only document on which the circular resolution was based, was the legal opinion from the former ASG, which had been circulated on 27.7.2005 and all the directors were aware of the contents of the same. (I must note that only a portion of the opinion was circulated and not the full one, and this had been pointed out by one of the directors also by a letter dated 30.7.2005). As I have observed in relation to the explanatory statement, one has to look into the spirit of the statute and not rely only on the letter of the same. The spirit of Section 289 is that to enable the directors to take an informed decision, necessary papers connected with the proposal, should accompany the circular resolution. In the present case, the legal opinion was already available with the directors. Therefore, I do not consider that the circular resolution was vitiated on account absence of necessary papers along with the resolution. 77. Shri Sarkar voiced c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tors and refinancing of loans. Again in the board meeting held on 28.5.2005, the board considered further letters from IOC and notices from its advocates and noted "While taking note of the above letters from IOC and its advocates, the board felt that the issue should be resolved expeditiously". This is in spite of the fact that in the legal notice dated 21st April, 2005, IOC has threatened taking legal proceedings, and by a letter dated 5th May, 2005, again IOC threatened to file necessary suits in appropriate courts, by another legal notice dated 17.5.2005, there was a further threat that if allotment was not made within 7 days, IOC would be constrained to take such proceedings against the company and directors as considered appropriate and in its letter dated 25th May, 2005 IOC intimated that it had already initiated legal proceedings against the company and every officer of the company who was at fault. Thus, on the day when the Board considered the matter, all types of threats including initiation of legal proceeding within 7 days were before the Board, but the Board did not consider it necessary to take immediate action on the allotment. It is on record that during that perio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cribe to the shares, and the resolution of the Empowered Committee on 20.1.2005 was only to enable the company to make an offer. Therefore, neither of the resolutions could be considered to be a resolution allotting the shares, which was not legally possible without a formal application by IOC and also remittance of the consideration. In terms of Article 3(A)(4) of the AOA, the shares are under the control of the Board and it has the power to issue and allot shares. Therefore, since the power to allot shares is with the Board, it should have passed a resolution after IOC had applied for membership accepting the offer and remitted the consideration. Viewing in this context, shares were actually allotted only through the circular resolution as is evident from the wordings of the circular resolution itself which specifically mentioned that shares were being allotted by the said resolution. This resolution does not refer to the Empowered Committee meeting but refers only to the decision taken in the meeting held on 2nd November, 2004 which, actually, was prior to the approval obtained in the EOGM and the decision of the EOGM. In this connection I may also refer to the letter of the Cha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tioners Shri Vasudevan had written to the Chairman on 30.7.2005 suggesting that the matter should be considered in a Board meeting. Another nominee of the petitioners had also written to the Company Secretary on 31.7.2005 not to take any further action in regard to the allotment. One of the reasons adduced during the hearing for the speedy allotment was that the time given by IOC of 10 days had expired and therefore urgent action was necessary. As I have pointed out earlier, even the Board collectively did not recognize the 7 days notice given earlier. 80. Therefore, the speed with which the entire exercise was completed, leads me to the only inevitable conclusion that it was done only with the view to pre-empt any efforts of the petitioners to stall the allotment through a legal process. I must however add, such an act to pre-empt a legal restraint need not be considered to be illegal or malafide, but in the present case, for the reasons stated in the earlier paragraph, as a measure of good corporate governance, the matter of allotment should have been decided in a regular Board meeting. Therefore, even though I do not subscribe to the view of the petitioners that the Chairman ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng the object of the proviso, I do not find any fault in the allotment as the same was against cash, even though subsequently realized. However, I must also add that normally the allotment is complete once the Board approves the allotment and issuance of shares scripts is subsequent. But in the present case, the allotment would have become complete, in terms of the circular resolution itself, only when the cheque was realized as the resolution specifically states "Subject to encashment of cheque towards subscription, the board do hereby allot...". Further, in his letter to the Dy. Company Secretary dated 2.8.2005, while informing him of the approval of the circular resolution by the board, the Chairman greeted "You are therefore instructed to encash the IOC cheque and issue shares to them in keeping with the resolution. This should be done on 3rd August morning at the earliest". From this, even the Chairman had not considered that the allotment had been completed with the approval given by the directors but would be complete only after the encashment of the cheque and therefore, the earliest date of allotment could be only 3.8.2005. This being the case, the allotment of shares shou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at all times continue to hold 25%, 25% and 8.1/3% respectively of the share capital of the company". According to Shri Sarkar, since the allotment to IOC was out of new shares created by increasing the authorized capital, the existing shareholders should have been offered the shares first in terms of Article 47 and failure to do so amounts to ultravires. The respondents contended that in terms of Article 3 A of AOA, which is practically the reproduction of Section 81(1)(A) of the Act, shareholders approval had been obtained for allotment of shares to IOC and Article 47 is not applicable. Shri Sarkar relied on the decision of the CLB in Binod Kumar Aggarwal v. Rington Tea Co. Pvt. Ltd. 85 CC 289. In that case, Article 7 of AOA of the company vested with the directors the discretion to allot shares to any person as they deemed fit. However, in terms of Article 31, newly created shares have to be offered to existing shareholders. By a harmonious construction, this Board held that allotment of existing un-issued shares would be covered by Article 7 and allotment of newly created shares by increasing the authorized capital would be subject to Article 31. Similarly, in the present case a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....thout offering the same to the existing shareholders, the admitted fact in this case is that, allotment of shares to IOC was approved in the EOGM on 14.1.2005 wherein all the petitioners were, represented and voted in favour of the allotment of shares to IOC. In other words, prior approval of the shareholders was available to allot shares to IOC. I note that many allotments of sharers had taken place during the last 10 years. The allotments made in 1996,1997,2002 and 2003 were all only to the promoters viz WBIDC, the petitioners and Tatas. On 31.7.2004 shares were allotted to the 2nd and 3rd petitioners along with outsiders without any offer to WBIDC and Tatas. Again shares were allotted to the outsides on 11.10.2004, but without any offer to petitioners or WBIDC or Tatas. It is because, the shareholders had passed special resolutions in terms of Article 3(A) of the AoA as happened in relation to the allotment of shares to IOC. Since the petitioners were parties to the said resolution, they cannot now complain that the allotment violates Article 47 about which they must have had the knowledge at the time of the EOGM. Further, while interpreting an Article, its spirit should also be....
X X X X Extracts X X X X
X X X X Extracts X X X X
....petitioners would continue to hold majority of about 53% shares in the company". Having so observed, I also noted that if shares of Rs. 135 crores were to be allotted to the lenders, the petitioners would be reduced to a minority and accordingly I directed the company to defer allotment of further shares. If the position as of that date remains so today, the petitioners would have no justification in seeking for cancellation of allotment to IOC as it has not in any way prejudicially affected their legitimate expectations. 85. But with the stand now taken by WBIDC/GOWB and the company with regard to 155 million shares, the entire scenario has changed. If WBIDC/GOWB and the company were to challenge the transfer of these 155 million shares to the petitioners, whether they are right or not being examined hereinafter, petitioners could definitely allege oppression in regard to the allotment to IOC, since with the allotment of shares to IOC, the petitioners would be converted from a majority into a minority and the settled law is that such a conversion is an act of oppression, not withstanding the fact that the petitioners had given their consent for the allotment, as with the presen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted. More than these, during the arguments, Shri Sundaram contended, as noted by me in paragraph 47 ante that "Further, the registration of transfer was subject to lenders' approval, which no longer is available as of date. Since in terms of the agreement between the lenders and the company, without their approval, company cannot register the transfer even CLB cannot direct the company to register the transfer, as it would place the company to act in breach of its agreement with a third party viz, the lenders". This argument clearly shows that the company is concerned with the matter of transfer of the impugned shares in view of its agreement with the lenders and therefore it has to be held that the transfer of 155 million shares is in the affairs of the company. 87. Having held that the transfer of 155 million shares is in the affairs of the company, the next issue for consideration is whether the stand of the company, GOWB/WBIDC is sustainable. As far as the company is concerned, it is justified in claiming that since the shares have not been registered in the name of the 4th petitioner, the shares still remain in the name of WBIDC/GOWB. Shri Sundaram relevantly relied on ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rs have agreed to the cancellation of the contingency support assumed by GoWB to HPL, we as a minority shareholders of HPL now confirm that we have no objection to the cancellation of the said contingency support arrangement". This shows that WBIDC has recognized the petitioners as the majority shareholders and the petitioners also, in that capacity, waived the contingent support assumed by GoWB as per the earlier agreements. This matter was discussed in a number of board meetings when WBIDC/GOWB never questioned the factum of transfer. Further, WBIDC had also accepted three annual installments of Rs. 10 crores each towards the repayment of the loan, but without lodging for registration, 30 million shares in favour of the petitioners. As a matter of fact, as I have pointed out in an earlier paragraph, when the petition was mentioned, it was the stand of WBIDC/GOWB that the petitioners were the owners of 155 million shares and that is why they took a stand that even after the allotment of shares to IOC, the petitioners continued to be in the majority. Shri Sundaram argued that the instruments of transfer having become stale, WBIDC would not lodge with the company fresh instruments o....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... consideration for the shares. Thus, in so far as the 155 million shares are concerned, the petitioners are entitled to have the registration of transfer effected in favour of the 4th petitioner. As far as the price for these shares is concerned, since the transfer had been concluded at par value, and that WBIDC has already accepted Rs. 30 crores on that basis, asking the petitioner to pay more than the par value would be highly inequitable to the petitioners. However, not only with the to put an end to this controversy, but also to ensure that WBIDC gets the balance consideration, I shall be directing the petitioners to pay the balance consideration of Rs. 125 crores in one go, instead of paying in installments as earlier agreed to. It was further contended by Shri Sundaram that at present IDBI consent is not available for registration of these shares. While I shall be separately dealing with the conduct of IDBI in this regard, a perusal of the letter of IDBI dated 10.1.2006 shows that IDBI had only kept the earlier approval in abeyance up to 31.5.2006 or up to the resolution of the issue at CLB, if earlier. From this letter it has to be presumed, in the absence of any further com....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the Chairman by his letter dated 30.6.2005 informed Dr. PC that the allotment to IOC was pending in view of resolution of the promoters issues. The matter of transfer of shares held by WBIDC is in the knowledge of the board is also evident from the circular letter issued by the Chairman on 28th July, 2005 wherein he has stated "In recent board meeting we have been briefed by the Government of West Bengal and the Chatterjee group on inter-se promoter issues, with particular reference to the proposed disinvestments by the State Government in favour of the Chatterjee group". Thus, even though it would appear that the transfer of the balance shares of WBIDC in favour of the petitioners is an issue between two groups of shareholders, yet, the company is directly involved in this issue and as such it has to be held that this issue is also in the affairs of the company. 89. Having held that the transfer of the balance shares of WBIDC to the petitioners is in the affairs of the company, the claim of the petitioners in this regard has to be examined. Whatever legitimate expectations that the petitioners had in regard to the transfer of WBIDC shares in the past, came to an end with the s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o Dr. PC. In that letter it is stated " It is in this context that the State Government entered into discussions with you since January, 2005 to disinvest in your favour. These discussions have continued over 7 months and as you are aware, the State Government took several steps in the direction including application to IDBI for approval to sell shares ". However, when the petitioners had indicated the availability of funds to the tune of Rs. 11.10 billion towards purchase of the shares, it is not clear as to why and how GOWB informed the petitioners on 27.7.2005 in the following terms "However, the negotiations have not been concluded and the documentation you have sent with your letter of 25th July is unclear in several respects. It is not clear to the State Government from the papers whether you are in a position to conclude the matters. It appears not. Accordingly, in the best interest of HPL and to reflect our continued commitment to the company, we have decided to defer the proposal to disinvest and shall remain in HPL to extend full support to the company. We do so because a state of flux is not in the interests of the company". 90. Shri Sundaram submitted that by stip....
X X X X Extracts X X X X
X X X X Extracts X X X X
....produce a letter of comfort and also to bring in Rs. 500 crores, they failed to do so. On the production of comfort letter, I find that Shri Sundaram was not factually correct. By a letter dated 25th January, 2002, Citi Bank, New York had given a letter of comfort. The same was confirmed by another letter dated 8.2.2002 by Citi Bank. These letters of comfort were accepted by GOWB by a letter dated 15.2.2002. As a matter of fact, the agreement transferring 155 million shares was entered into subsequent to these comfort letters, on 8th March, 2002. In so far as Rs. 500 crores is concerned, I do not find any document by which the petitioners were sought to comply with this undertaking and considering the fact that further agreements do not refer to this amount of Rs. 500 crores, WBIDC/GOWB cannot make any grievance in this regard. Further, as I have indicated in the earlier paragraph, the very fact that GoWB/WBIDC had taken steps to honour their commitments, they do not appear to have attached any importance to the alleged failures of the petitioners or that they had considered that the transfer of shares to the petitioners would be against public interests. Shri Sarkar invoked the pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....MD and discharging various functions in that capacity had not been objected to by the petitioners for a long time. The petitioners took objection to his appointment only in September, 2005 after he had filed his counter to the petition, perhaps, because he has defended the allotment of shares to IOC. The main contention of the petitioners is that there was no vacancy in the board to appoint Shri Bhowmik as the MD. On the day when he was appointed, the petitioners were aware that there was no vacancy but yet their nominees on the board approved the appointment. This Board has taken a consistent view that a person who is a party to a decision cannot, when the relationship becomes sour, seek to impugn the said decision as being illegal or void in a petition under Sections 397/398 of the Act. As a matter of fact, during the hearing Shri Sarkar mentioned that Shri Bhowmik was a nominee of the petitioner but he had turned against them after the disputes between the shareholders. Shri Sarkar relied on the decision of the Supreme Court in Coal Products Limited 40 CC 715 to state that a person who has not been validly appointed as a director cannot claim to be a director. In that case, the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....llotment of shares to IOC and relating to 155 million shares, and they have defended the appointment of the 16th respondent as the MD as per the available records. Therefore, it cannot be construed that they are siding with once group of share holders. In so far denial of inspection is concerned, the MD should not have taken the stand that since Dr.PC is a party to the present proceeding, he cannot inspect the statutory records as , not only as a director, but also as a major shareholder Dr.PC is entitled to inspect the records. According to the petitioners, as on 2.11.2004, the private holding in the total paid up capital inclusive of preference shares constituted 52.95% shares and the Government holding was only 47.05% and therefore, CAG Audit was not attracted. For this computation, the petitioners have treated 155 million shares as belonging to them. However, as long as the 155 million shares continue in the name of WBIDC in the members register, for application of Section 519B of the Act, the shareholding as per the register of members alone can be taken into account. Therefore, when the company has complied with the statutory provisions, the question of alleging that the comp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tor. Regarding the allotment of shares to IDBI/lenders, I find that they had originally agreed for allotment of shares three days after the petitioners had acquired the shares held by WBIDC and once the transfer was deferred by GoWB/WBIDC by their letter dated 27.7.2005, IDBI demanded allotment immediately by its letter dated 2.8.2005. Taking note of this fact, I shall be issuing suitable directions for allotment of shares to IDBI. 96. IDBI has intervened in the matter and as such it was aware that the petitioners have relied on the approval of IDBI for seeking registration of 155 million shares in their favour. Therefore, while IDBI may have a grievance, rightly or wrongly, about the restraint order, yet, its action during the pendency of the proceedings in sending the letter dated 10.1.2006 by which it has kept in abeyance the earlier approval, does not augur well with its status as a leading financial institution. When the claim of the petitioners for majority on the day of filing of the petition was on the basis that with the approval given by IDBI there was no impediment in the registration of 155 million shares in their favour, such a position could have never been altered....
X X X X Extracts X X X X
X X X X Extracts X X X X
....WBIDC as to whether they would be willing to exist from HPL and if so on what terms. On 31.3.2006, they gave a without prejudice proposal indicating therein that they would offer a particular price for their shares which the petitioners should accept within a certain time frame failing which the petitioners should sell their shares to WBIDC/GoWB at that price. When this suggestion was made, Shri Sarkar submitted that the petitioners were not insisting to purchase the shares of WBIDC nor the petitioners were willing to sell their shares to WBIDC and their only prayers were that the 155 million shares should be registered in the name of the petitioners and IOC allotment should be cancelled. Only at this time, pointing out that if the reliefs sought for by the petitioners were granted, they would be in the majority, Shri Sundaram argued that GOWB/WBIDC had lost faith in the petitioners and that in public interest they cannot allow the petitioners to take control and manage the company. 99. Taking into consideration this back ground, the reliefs have to be moulded. During the course of the proceeding, it became apparently clear that the long and fruitful association of the petitione....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... by it at any time, GoWB committed to transfer its shares by a letter dated 17.12.2004 and also by the agreement dated 14.1.2005. It is to be noted that this agreement was entered into, not withstanding the earlier discussions with IOC and the alleged secret agreement. Further, thereafter, GoWB/WBIDC took further steps in this regard, culminating in seeking the approval of IDBI for the transfer of its shares to the petitioners by a letter dated 25.5.2005 and IDBI also "gave its approval. Even in its letter dated 27.7.2005, GOWB had only deferred disinvestment and had not said that it would not disinvest. Thus, it is evident, that right from the beginning, the intention of GoWB/WBIDC has been to remain either as minority shareholders or dis-engage themselves as shareholders of the company, not withstanding the enormous sacrifice that GoWB has made in the form of tax concessions, timely financial assistance in the time of needs and also by giving up enormous amount of interest on loans granted by them to the company, by accepting preference shares. At no time, WBIDC/GoWB expressed their intention, either in writing or by conduct, to acquire the shares of the petitioners till they mad....
X X X X Extracts X X X X
X X X X Extracts X X X X
....petitioners also, however, with the stipulation that the price payable by the petitioners would be either the fair price to be determined by the valuer or Rs. 28.80 per share, which is higher. In so far as 155 million shares already transferred to the petitioners are concerned, I have already held that the price per share shall be Rs. 10. Further, since WBIDC/GoWB would be going out of the company, the petitioners should also purchase the preference shares held by GoWB/WBIDC within a stipulated period or they should ensure that the company redeems these shares within the same period. 102. Accordingly, in terms of Section 402 of the Act, I declare/direct as follows: 1. The allotment of 150 million shares to IOC is upheld and it is at liberty to deal with these shares in any manner. 2. Likewise, the transfer of 155 million share by WBIDC to the petitioners at Rs. 10 per shares is confirmed. 3. WBIDC/GoWB shall transfer 520 million shares held by them in HPL to the petitioners. 4. The price payable for the 520 million shares shall be the fair price determined by the valuer to be appointed by this Board or Rs. 28.80 per share, whichever is higher. 5. The petitioners s....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... relation to the shares. 15. There shall be a lock in period of 3 years in respect of all shares, except in case of public offering in line with SEBI guidelines. The petitioners shall continue to hold majority shares and be in control of the company for a minimum period of 3 years from the date of acquisition of the shares held by WBIDC. I am stipulating this lock in period and continuity of majority shareholding and control of the company with the view to ensure, that after acquiring the shares from a promoter of ten years association, the company is not handed over to a third party. 16. As far as allotment to IDBI and other lenders is concerned, it is on record that they had agreed for allotment of shares 3 days after the petitioners had acquired the shares held by WBIDC. Accordingly, they will be issued sharers as per the CDR package simultaneously with the registration of 520 million shares in favour of the petitioners. 17. The petitioners are at liberty, as soon as they pay the consideration for the 155 million shares to take control of the day to day management of the company, (as they would be holding majority equity shares of 52%) with the stipulation that no major....