TaxTMI 
TaxTMI 
2018 (9) TMI 679
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.....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, 233, 234 & 235/2018 : Mr.M.S.Krishnan, S.C., for Mr.K.Gowtha....
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.... 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the beneficial interest of the assets held on behalf of the "Group" by the individuals and the related parties was withdrawn.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 dated 31.12.2016 was issued by the defendant No.11 reiterating the above, which according....
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....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, directors and related parties. Until 31 December 2013, these consolidated financial statements included certain assets (including investment properties and investments in certain subsidia....
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....efendant 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 direct the cancellation of any duplicate share certificate if any issued: Or Direct that in the event the duplicate shares have been issued in favour of Defendant No.3 to 7 the same be cancelled. f. For costs; g. Pass any other or such ord....
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....fendant 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 action further arose on 21.12.2017 when newspaper articles of the Economic Times, being in public knowledge suggested that the five (5) companies have been shortlisted to purchase the Defendant No.1 and that the floor price of INR 5,500 crore has been put for the sale. The ar....
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....sed 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 done in the year 2005 to 2012. The cause of action also clearly shows that it has arisen only in the year 2016 onwards, which is after deconsolidation and the publication of draft financial statement. The plaintiffs and the defendant Nos.2 to 7 are from Dubai. The defendant No.2 is incorporate....
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....IN 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 appearing for the plaintiffs would submit that what is to be seen is from the point of view of the defendant No.2. If the defendant No.2 seeks the relief against the defendant No.1, the forum is this Court. At this stage, the averments in the plaint alone are to be seen. Defendants 3 to 7 are the permanent residents of Chennai though non resident Indians. Leave has been sought for due to insistence of the Court. As defendant No.2 is controlled....
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.... 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 following passage in MOUNT ROYAL/WALSH INC. V. JENSEN STAR, THE SHIP (1990) 1 FC 199) of the Federal Court of Appeal in Canada would exemplify the abovesaid position. In my view, the expression 'beneficial owner' was chosen to serve as an instruction, in a system of registration of ownership rights, to look beyond the register in searching for the relevant person. But such search cannot go so far as to encompass a demise charterer who has no equitable or proprietary interest which could burden the title of the registered ow....
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....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. Therefore, all facts, which are not material, would not constitute cause of action. There has to be an existence or infraction coupled with the right. 8.2. It is nothing but bundle of facts, which, when added with the law applicable provide the adequate right to the plaintiff 's relief. In a suit relates to a breach of contract, the making of a contract and its breach would be the proper cause of action. Therefore, the place in which it occurred would be very relevant. Thus, the fact which is remotely connected to another which forms a cause of action cannot....
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....her 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 mother, possession of the land in Schedule B, and the present suit is brought on the defendants herein similarly withholding the land comprised in schedule A, the defendants in both the cases having respectively come into possession of the lands comprised in schedules B and A under separate alienations made by the mother in favour of each on a different occasion. It will thus be seen that though the ground of title is one and the same in both the suits and the cause of action in respect of both arose at the same time, viz., the date of the mother's death, yet the persons who wrongfully withheld the land in schedule A are quite d....
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....ce 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. Humphrey', (1885) 14 QBD 141 (Z11), Little-dale J. said 'Generally speaking, there must be a temporal loss or damage accruing from the wrongful act of another, in order to entitle a party to maintain an action on the case.' Order 7, Rule 5 (Act 5 of 1908) is based on the same principle. It is as follows : 'The plaint shall show that the defendant is or claims to be interested in the subject matter and that he is liable to be called upon to answer the plaintiff's demand. 'Now in the present case the defendants' connection with the land in suit is wholly different from his connection with the lands covered by the other saies both in point of time and the subj....
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.....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 been the consistent practice of the Madras High Court to consider the issue of convenience of parties in ascertaining appropriateness of jurisdiction. In Seshagiri Row vs. Nawab Askur Jung Aftal Dowlah Mushral Mulk, reported in (ILR 30 Mad. 438), it was observed by the Division Bench that having regard to the wordings of Clause-12 of the Letters Patent, it was clear that the fact whether cause of action arises in part within the local limits is not the question, and notwithstanding that the cause has arisen within the local limits, the court may decline to leave to sue. The question of convenience cannot be thus excluded from consideration. This view was cited with approval in Madanlal Jalan vs. Madanlal and others re....
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....iyathan 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 power here a very material document.... (b) In Clan Line Steamers Co. Ltd. vs. Gordon woodroffe and Co. and others reported in (1979) 1 MLJ 349), it has been held thus: It is asserted now before us on behalf of the respondent/plaintiff that the entire evidence regarding the subject matter of the suit would be available only in Madras, for the main ground on which the suit has been filed is that the second defendant, who was the Chairman of the plaintiff-company at the relevant time misused his position as Chairman of the company and the trust reposed in him as such Chairman and induced the proposed fourth defendant and the first defendant to terminate the agency of the plaintiff and give it to the third defendant company which was formed by the second defendant. Further, in the case now before us the....
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....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 on business outside India, and even the credit report was received in England, and all the documents pertaining to the correspondence are in England. The defendants are also permanent residents of England, and even as against the first defendant, liquidation proceedings are pending only in England. If the second defendant is asked to contest the suit before this Court, naturally, it will be put to great difficulties. Taking into consideration these facts also, we feel that this is a fit case where leave to sue as against the second defendant has to be revoked. (f) In Parameswari Veluchamy and two others vs. R.T.Jayaraman and seven others reported in 2002(1) CTC 134, it was observed by the Division Bench, .....Morever, considerations of convenience are very germane while determining the question of grant, refusal or revocation of leave. Almost all the propertie....
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....tion, 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 the Company and the holders thereof was the registered office of the Company in Bellary (outside the State of Mysore), but the share certificates must, on the case of the plaintiffs as set out in the plaint, be deemed to be with the executors and compliance with the decree, if any, passed against the executors for an order of retransfer could be obtained under the Code of Civil Procedure ('see Order XXI, rr. 31 and 32 Mysore Civil Procedure Code). There is no rule of private international law recognised by the courts in India which renders the Bangalore Court incompetent to grant a decree directing retransfer of the shares merely because the shares have a situs in a dispute between. the Company and the shareholders outside the jurisdiction of the foreign court: Counsel for the plaintiffs submitted that the Mysore Court was incompetent to deliver an effective judgment in respect of the shares, but b....
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....so 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 not in dispute. They are with respect to the consolidation and deconsolidation of defendant No.2 by the defendant No.11. Similarly, a decision of the general body of a ETA Group, the Board of Directors and the participation of the plaintiffs in that are also not in dispute. These undisputed happenings lead to the draft financial statement of the defendant No.11. This draft financial statement confirms two things. One is with respect to the deconsolidation and the other is removal of status over the shares held by the individuals. The decision was to implement it with retrospective effect from 10.01.2014. It is an admitted case that the decision of the ETA Group and the draft financial statement of defendant No.11 would make the trustees of the holders of the respective shares involving beneficial interest as absolute owners. The plaintiffs may have grievance over this, but their remedy will lie elsewhere. That ....
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....ant 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 that it started happening only from the date of deconsolidation. Monies were sent by the defendant No.2 and on its behalf by defendant No.12 atleast till 2011. Though prima facie, the payment made was not in dispute, the entity from which it emerged actually cannot be decided here. The very fact that payments were made by defendant No.12 on behalf of defendant No.2 followed by book adjustment itself would vouch for the fact that such things have happened involving the other entities of the ETA Group as well and atleast defendant No.2 and its subsidiaries. These issues also cannot be looked into by this Court. 6.17. In the plaint, the plaintiffs have not stated anything about the derivative action available to a shareholder on behalf of the company in Dubai. We also note that the Indian Companies Act, 1956/2013 do not have an application to a foreign entity. Even assuming it to be so, Section 187(c) read with 89(8) of th....