TaxTMI 
TaxTMI 
2018 (9) TMI 679
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.... Appellants in OSA. Nos.232 & 233/2018 : Mr.Arun Karthik Mohan and Mr.Suhrith Parthasarathy For Appellants in OSA. Nos.234 & 235/2018 : Ms.Harshini Jothiraman For Appellants in OSA. Nos.236 & 237/2018 : Mr.N.P.Vijay Kumar and Mr.R.Pradeep For Respondents 1 & 2 in OSA. Nos.221 to 223, 227, 228 & 230 to 234/2018 & R2 and R3 in OSA.Nos. 235 to 237/2018 : Mr.P.S.Raman, S.C., Allwin Godwin For Respondent No.3 in OSA. Nos.221 to 223 & 232 to 234 and for R1 in OSA Nos.235, 236 & 237/2018 : Mr.P.H.Aravind Pandian, S.C., for M/s M.B.Gopalan Associates and Mr.Vijayaraghavan For Respondent No.6 in OSA. Nos.220 & and 221/2018, for R9 in OSA Nos.222, 223, 227, 228, 230 & 231/2018 & for R10 in OSA Nos.232, 233 & 235/2018 : Mr.N.P.Vijayakumar, Mr.R.Pradeep For Respondent No.8 in OSA.Nos.220 & 221/2018 & for R11 in OSA Nos.222, 223, 227, 228, 230 to 233, 236 & 237/2018 : Ms.Harshini Jothiraman For Respondent No.7 in : OSA.Nos.220 & 221/2018 & for R10 in OSA Nos.222, 223, 227, 228, 230, 231, 236 & 237/2018 : Mr.Arun Karthik Mohan and Mr.Suhrith Parthasarathy For Respondent No.4 in OSA.Nos.220 to 223 & 232 to 237/2018 & for R3 in OSA Nos.230 & 231/2018 & R12 in OSA Nos.232, 2....
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....defendants 1 and 2. Defendant No.12 is also a company incorporated under the Laws of UAE. This appears to be the status. 3.5. The accounts of the defendant No.2 was consolidated with that of the defendant No.11 in the year 2007 through the acquisition of 100% beneficial interest. On 31.12.2012, defendants 3, 4, 7 and 9 gave a Management Representation letter to audit the affairs of defendant Nos.2 and 11. Thereafter, the Board of Directors of the Group re-assessed the relationship, which has become sour between the shareholders with respect to the company subsidiaries associates and joint ventures. Thus, in pursuant to the resolution, in which both the plaintiffs and defendants 3 to 7 were parties, a decision was made towards the loss of control over different entities. Accordingly, the "Group" deconsolidated the operating results and financial position of certain entities from its consolidated financial statements with effect from 01.01.2014. 3.6. Consequently, the beneficial interest of the assets held on behalf of the "Group" by the individuals and the related parties was withdrawn. This exercise was done with effect from 01.01.2014. Resultantly, a financial statement date....
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.... (iii)Lack of a practical ability of the Group to exercise its shareholders rights; (iv)No involvement of the Group in day to day operations of certain overseas entitles; (v)No visibility over the financial results of these entities due to non-receipt of financial information from certain overseas entities; and (vi)The Group's shareholding interest in the majority of these entitles was held on its behalf by certain individuals and related parties, who were also the legally registered shareholders of these entities. The Directors were of the view that effective 1 January 2014, these shareholders ceased to hold their shareholding interest for the benefit of the Group. Since it was a loss of control, no consideration was exchanged between the Group and the legal shareholders for the transfer of ownership interest in these entities. Accordingly, the Group deconsolidated the operating results and financial position of these entities from its consolidated financial statements with effect from 1 January 2014 and..... ETA Star Holding LLC and its subsidiaries Notes (continued) 2.6. Assets held in the personal name of shareholders,....
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....eficial interest of Defendant No.2 in the suit shares bearing folio numbers 0001; 0002; 0005; 0006; 0008; 01; 08; 1 and 8 held by Defendant Nos.3, 4, 5, 6 and 7 constituting a total of 6.16% of the shareholding of defendant No.1 as described in Para 34; b. Permanently injunct defendant Nos.1, 3 to 10 from in any manner interfering with the beneficial interest of Defendant No.2 with respect to suit shares bearing folio numbers 0001; 0002; 0005; 0006; 0008; 01; 08; 1 and 8. c. Permanently injunct Defendant Nos.1, 3 to 10 from acting in any manner or dealing with the suit shares bearing folio numbers 0001; 0002; 0005; 0006; 0008; 01; 08; 1 and 8, which is likely to prejudice the interests of defendant No.2; d. Direct that appropriate measures be taken by Defendant Nos.1, 8 and 9 to make and record the beneficial interest of Defendant No.2 over and with respect to the suit shares bearing folio numbers 0001; 0002; 0005; 0006; 0008; 01; 08; 1 and 8; e. Direct that if not already issued no duplicate share certificates are issued to Defendant Nos.3, 4, 5, 6 and 7 with respect to the originals share certificate in the possession of Defendant No.11 and dir....
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....of beneficial interest of Defendant No.2 but also to deconsolidation with retrospective effect of its accounts with Defendant No.11. With the deconsolidation of accounts it became clear that a hostile action denying the beneficial interest of Defendant NO.2 stood taken by Defendant Nos.3, 4 and 7. The cause of action further arose on 07.06.2017 when Defendant No.1 refused to acknowledge the beneficial interest in the suit shares. The cause of action further arose when Defendant No.1 through Defendant No.10on 27.06.2017 once again refused to acknowledge the beneficial interest in the suit shares. The cause of action further arose when Defendant No.1 through Defendant No.10 on 27.07.2017 once again refused to acknowledge the beneficial interest in the suit shares. The cause of action further arose on 12.11.2017 and 24.11.2017 whgen newspaper articles, being in public knowledge suggested that the quity of the Defendant No.1 is being sold to private equity investors through a bidding process and the present investors including the Defendant Nos.3 to 7 along with Defendant Nos.8 and 9 are attempting sell their investments in the Defendant No.1 and exit the health insurer. The cause of a....
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....ally stems out from the decision made in the year 2014, by which Board of Directors, through the resolution, decided to deconsolidate and release the beneficial interest. The deconsolidation took place in UAE. The defendant No.1 has nothing to do with the inter se dispute. The dispute raised in the suit might involve whole lot of subsidiaries and associates of the ETA Group along with the entire shareholders. The decision was made only to resolve the disagreements between the shareholders of the ETA Group. This cannot be challenged in a different form. At best, it is a dispute between the two different groups among the shareholders. These entities are situated outside the jurisdiction of this Court. Clause 12 of the Letters Patent has got no application. There is no corresponding duty on the defendant No.1 to recognise the beneficial interest of defendant No.2. The nature of the transaction between the defendant No.2 and other entities including the defendant No.1 on the one hand and defendant No.1 and defendants 3 to 7 on the other hand can never be made amenable to the jurisdiction of this Court. The suit is barred by limitation. There cannot be a cause of action for an act do....
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....AIN V. SONIA GANDHI ((2001) 8 Supreme Court Cases 233); (v) POPAT AND JOTECHA PROPERTY V. STATE BANK OF INDIA STAFF ASSOCIATION ((2005) 7 Supreme Court Cases 510); (vi) PIRAMAL HEALTHCARE LIMITED VS. DIASORIN S.P.A., ((2010) 172 DLT 131) (vii)VISWANATHAN AND OTHERS V. RUKN-UL-MULK SYED ABDUL WAJID SINCE DECEASED AND OTHERS (AIR 1963 Supreme Court 1) (viii)TUTICORIN ALKALI CHEMICALS AND FERTILIZERS LTD., V. M/S COCHIN SILICATE & GLASS INDUSTRIES (OSA NO.250 OF 1989 DATED 11.09.1991). (ix) DURO FLEX PVT. LIMITED VS. DUROFLEX SITTINGS SYSTEMS (2014 (6) CTC 577) FB., (x) MYTRAH ENERGY (INDIA) LIMITED VS. GAMESA RENEWABLE PRIVATE LIMITED (2016 (4) LAW WEEKLY 86) (xi) HARI SHANKER JAIN V. SONIA GANDHI ((2001) 8 Supreme Court Cases 233); (xii)POPAT AND JOTECHA PROPERTY V. STATE BANK OF INDIA STAFF ASSOCIATION ((2005) 7 Supreme Court Cases 510); (xiii)PIRAMAL HEALTHCARE LIMITED VS. DIASORIN S.P.A., ((2010) 172 DLT 131); (xiv)R.VISWANATHAN AND OTHERS V. RUKN-UL-MULK SYED ABDUL WAJID SINCE DECEASED AND OTHERS (AIR 1963 Supreme Court 1) 5. Submissions of the Plaintiffs:- The learned Senior Counsel ....
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....etween the plaintiffs and the beneficial owner, which may be a company is also of relevance. It may involve a case of deceit, fraud, inability or incapacity. However, the fundamental factor to be considered is the relationship between the plaintiff and the party, which he seeks to represent. 6.2. "Beneficial Interest" is defined under Section 3 of the Indian Trust Act, 1882 as follows: "Beneficial Interest" is defined in Section 3 of the Indian Trusts Act, 1882 as-- "beneficial interest" or "interest" of the beneficiary is his right against the trustee as owner of the trust property." 6.3. There are two parties involved in an issue governing beneficial interest. One is a beneficiary named as "Beneficial owner" and the other is the owner named as "Registered owner" being the Trustee of the property or the asset in question. Thus, one can deduce the underlining principle that the ownership is nonetheless legal over the Trust property, which vests on him but he also acts as a trustee of the beneficiary. A beneficial owner may include a person who stands behind the Registered owner when he acts like a trustee, legal representatives or an agent. 6.4. The follo....
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....n to the merits of the case, let us deal with the word "cause of action". The word "cause of action" has not been defined either under the Civil Procedure Code or under the Letters Patent. A cause of action has to be seen in the context of territorial jurisdiction available to the Court while entertaining a suit. It is the basis for the maintainability of a suit. It is the foundation of a suit, around which, the other provisions of the Civil Procedure Code revolve. While dealing with the cause of action, the Courts are concerned with the material facts required to be established in support of the right of the party to get a judgment. Such a material fact may be a fact in issue or a relevant fact. It has got no relationship with the case of a defendant. Such a fact shall not be equated with the evidence, which is necessary to prove a fact. A cause of action would include not only the right of the plaintiff, but also, the facts disclosing the infringement of its right. Therefore, the facts which are in support of its right and leading to infringement would form cause of action. Thus, what is important is that a fact will have to be material to the suit and the relief. Theref....
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.... set up by the defendant, nor does it depend upon the character of the relief prayed for by the plaintiff." Subsequent decisions have followed the lead given by the earlier decisions. 48. In 'Gangi v. Ramaswami', 12 Mad LJ 103 (Z.7), Bhashyam Aiyangar J. struck a different note which is more in consonance with the later view regarding the meaning of the word "cause of action." There a first suit was brought by the plaintiffs for the recovery of some land which was in the possession of the defendant on the ground that they succeeded to the father's estate, and that the alienation made by the mother during her lifetime was bad. They obtained a decree therein, but subsequently they filed another suit to recover possession against another defendant in respect of another item which they claimed as part of the same inheritance. It was contended that the later suit was barred by Section 43, Civil P. C. In dealing with that contention, Bhashyam Aiyangar J. made the following pertinent remarks at p. 105 : "The former suit was instituted against the de-fondant therein, by reason of his wrongfully withholding from the plaintiffs, on the death of their mo....
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....ay say so, on the question raised is found in -- 'Bahadur Singh v. Sultan Husain Khan', AIR 1922 Oudh 171 (Z9). Syed Wazir Hasan A. J. C. held that, "A revisioner has a separate cause of action in respect of each alienation made by the widow, and a suit to recover property comprised in one alienation is not barred by Order 2, Rule 2, C. P. C. by reason of a proper suit for the recovery of property comprised in another alienation." The learned Judge traced the history of the meaning of the words "cause of action" and then made some weighty observations to the following effect at p. 175 ; "Though the cause of action has no relation to the defence which may be set up by the defendant, yet it would be an error to suppose that it has no relation to the defendant and his acts preceding the suit. A 'cause of action' is not a theoretical term entirely picked up from text books and placed on a plaint. In cases of torts, the right of the plaintiff and its infringement by the defendant will generally make up the 'cause of action'. In --'Williams v. Morland', (1824) 107 ER 620 (210), cited by Bowen L. J. in -- 'Bransden v.....
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....n. But it has no relation whatever to t he defence which may be set up by the defendant nor does it depend upon the character of the relief prayed for by t he plaintiff." 6.8. Clause 12 of the Letters Patent has got several facets. A leave is required to be obtained only when a part of cause of action arises. Such a cause of action, as discussed above, shall involve a material fact. Therefore, the relief sought for against the defendant No.1 being at best a consequential one cannot give a cause of action. Even the defendant No.2 cannot seek such a relief without resolving its dispute as against defendant Nos.3 to 7. Such a dispute can only be dealt with by a competent forum at Dubai under its own law. 6.9. The principle governing forum non conveniens would fundamentally require the existence of a jurisdiction. Thus, when there is no jurisdiction available to a Court, the aforesaid principle will have no application. The Full Bench of our High Court has considered in extenso the principle governing forum conveniens in DURO FLEX PVT. LIMITED VS. DUROFLEX SITTINGS SYSTEMS (2014 (6) CTC 577) through the following paragraphs. "35. Learned counsel emphasised that it has....
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....dant or might result in injustice, the Court should in all cases readily refuse leave or if leave has already been granted, revoke the leave as a matter of course". 36. The said view was approved in the affirmative by the Honourable Supreme Court in Kusum Ingots and Alloys Ltd., vs. Union of India and Another reported in 2004 (6) SCC 254, inter alia holding that High Court may refuse to exercise its discretionary jurisdiction even if a small part of the cause of action arises within its territorial jurisdiction, applying the test of 'forum conveniens'. 37. Learned counsel for the respondent referred to different judicial pronouncements on the principles of 'forum conveniens', referring to relevant passages therein :- (a) In P.J.Parameswara Pattar vs. Viyathan Mahadevi reported in (AIR 1923 Mad. 272), the Division Bench has observed that 5.The real question to be considered is the balance of convenience. Nearly the whole of the alleged cause of action arise in Malabar. There would be no ground at all in my judgment for bringing it here if it did not happen that two of the defendants reside here who, it is alleged, have in their pow....
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.... vs. Nawab Askur Jung Aftal Dowlah Mushral Mulk (ILR 30 Mad. 438). It has been observed in the said Judgement: Having regard to the wording of Article 12, it is clear that the fact that the cause of action arises in part within the local limits is not conclusive, and that, notwithstanding that the cause of action arises in part within the local limits, the Court may decline to give leave to sue. As regards the law of this Country, so far as we are aware, it has never been held the question of convenience is not a question which may be taken into consideration in dealing with applications under Clause 12, and we are certainly not prepared to hold that this question should be excluded from consideration. (e) In National Westminster Bank Ltd., U.K. vs. M/s.Devraj Nensee and Company reported in (1997(1) LW 117), it has been observed by the Division Bench as: 30. Even while granting leave, this Court is bound to consider the forum non-convenience. In paragraph-5 of the affidavit filed in support of the Applications, the second defendant has stated the reasons why the leave should not be granted. It is said therein that both the defendants are carrying....
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.... Thus, what is to be seen in case of grant or refusal of leave or revocation of leave is the convenience of the parties or appropriateness of the jurisdiction. Balance of convenience was considered to be material for exercise of discretion under Clause 12 of the Letters Patent and thus, steps have been enunciated by the Calcutta High Court in Madanlal Jalan's case (supra). 6.10. The judgment referred supra would in clear terms has held that the aforesaid principle would be applicable in dealing with the application seeking leave to sue. 6.11. When a dispute arose against the company, which issued the shares, then the situs would be its registered office. However, when the dispute is between the shareholder and the company with respect to the shares held in another, the mere existence of registered office of the subsequent company is not a factor to clothe jurisdiction. In this connection, it is apposite to refer the following paragraphs of the judgment of the Apex Court in R.VISWANATHAN AND OTHERS V. RUKN-UL-MULK SYED ABDUL WAJID SINCE DECEASED AND OTHERS (AIR 1963 Supreme Court 1). "Per J.C.Shah, J. (Majority) : The situs of the shares in any question between t....
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.... decision. It is therefore not necessary for me to consider the argument of Mr. Desai that jurisdiction attaches on the principle of effectiveness propounded by Dicey, but which has been criticised by the present editors of his book and by Cheshire. In my opinion, this controversy does not arise in this case, which must be decided on the plain words of s. 13 of the Code of Civil Procedure." 6.12. Keeping in view of the abovesaid principle of law, let us consider the issues raised before us. Admittedly, the defendant No.2 is a foreign entity governed by the laws of Dubai. The plaintiffs are its shareholders. Therefore, any dispute between them will have to be resolved under the laws of Dubai. Hence, the contention of the learned Senior Counsel appearing for the plaintiffs that they are stepping into the shoes of the defendant No.2 seeking a relief against the defendant No.1 cannot be countenanced. This is also for the reason that there must be a declaration in clear terms qua the status of a beneficial interest holder before seeking a relief against the defendant No.1. More so, when defendant No.2 itself denies it. 6.13. In the case on hand, the fundamental and core facts are ....
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....urt though the plaintiffs contend that defendants 3 to 7, despite being non resident Indians are permanent residents of Chennai. This is nothing but an attempt to review the decision made already by the ETA Group as acknowledged by the defendant No.11 in the draft financial statement. After all, the relief that is sought against the defendant No.1 is a mere consequential one. When once the plaintiffs succeed against defendant Nos.2 to 7 then defendant No.1 is bound to give effect to it. For doing so, the remedy for the plaintiffs against defendants Nos.2 to 7 lies elsewhere. 6.15. When the status of defendant No.2 being the foreign company is not in dispute, no relief either direct or indirect can be sought against it under the Indian Law. We are not concerned with the ultimate relief but the issues leading to it. What we are dealing is nothing but a fight between two groups. Defendant No.2 is controlled by defendant Nos.3 and 5 to 7 whereas, defendant No.11 is by the plaintiffs. This explains the letter sent by the defendant No.11 through the plaintiff No.2 to the defendant No.1 dated 01.06.2017. 6.16. A perusal of the cause of action as indicated in the plaint would show....