TaxTMI 
TaxTMI 
2018 (11) TMI 1536
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....Rajgaria (Defendant No. 7) holding 571061 equity shares, Forex Finance Pvt. Ltd. (Defendant No. 8) holding 458377 equity shares and Jesmin Investment Ltd. (Defendant No. 5) holding 7526 equity shares aggregating to 1609035 equity shares in the Plaintiff No. 1 is illegal and void; (B) A decree of mandatory injunction or a decree in favour of Plaintiffs and against the Defendants, their agents, nominees, administrators, legal heirs, assignees etc. directing the Defendant Nos. 5 to 8 to transfer their shareholdings to the Plaintiff No. 1 at their face value; (C) Award Cost in favour of the Plaintiffs and against the Defendants; (D) Pass an order(s)/direction(s) as this Hon'ble Court may deem fit and proper in the facts and circumstances of the case." 2. While I.A. No. 17148/2015 has been filed by the plaintiffs for grant of injunction, I.A. Nos. 18714 & 18715 of 2015 have been filed under Order 39 Rule 4 by defendant nos. 8 and 6 respectively for vacation of interim order dated 19th August, 2015, I.A. Nos. 24462 & 24463 of 2015 have been filed under Order 7 Rule 11 read with Order 1 Rule 10 on behalf of defendant nos. 5 and 1 to 3 respectively. 3. ....
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....s transferred their total shareholding of 42.02% in plaintiff No.1 in favour of the Gupta Group on 23.08.2010. In December, 2010, the plaintiffs discovered that 14.1% shares held by defendant Nos. 4 and 5 which are owned by the Jindal Groups were transferred to defendant Nos. 6 to 9 i.e. the Saraf Group. It has been discovered that the said defendants have required cross-holdings in the plaintiff's company in contravention of Clause 7.4 of the inter se agreement. The plaintiffs seek restraint upon further transfer of the said shares to third parties and a restraint against the exercise of voting rights that go with these shares. Dr. Abhishek Manu Singhvi, the learned Senior Advocate for the plaintiffs would contend that if the interim injunction is not granted it would severely hamper the management and prejudice the rights of the plaintiffs. It appears prima facie that the shares held by defendant nos. 6, 8 & 9 are in contravention of the inter se agreement dated 23.09.2009 since the parties explicitly agreed that there would be no cross holdings in each others' company. This Court is of the view that the plaintiffs have made out a prima facie ca....
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....bruary, 2015 relied upon by Mr. Tripathi is reproduced hereinbelow:- "The Secretary thereafter informed the Board that pursuant thereto, preliminary information in respect of the acquisition of shares as aforesaid has been collected from the Stock Exchanges etc. A statement highlighting the acquisition of 2200616 equity shares amounting to 9.65% of the share capital of the Company by a group of 4 Companies viz. Jindal Photo Investment Limited, Delhi, Consolidated Photo Finvest Limited, Delhi, Consolidated Finvest and Holdings Limited, Uttaranchal, UP and White Pin Tie Up Limited, Kolkata, West Bengal was tabled in the Board Meeting for information of Board members. A copy of the said statement is annexed hereto as Annexure 1 and forms an integral part of these Minutes. The following preliminary conclusions and observations were made: 1. That all the said Companies formed part of the Jindal Group of Companies, 2. That 3 of the said Companies viz. Jindal Photo Investment Limited, Delhi, Consolidated Photo Finvest Limited Delhi and Consolidated Finvest and Holdings Limited, Uttaranchal, UP appear to be closely interconnected by virtue of common shareholdings....
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....ievances Committee of the Board consisting of Mr. SK Chibber, Chairman of the Committee and Mr. RK Bhargava, Mr. Sushil Gupta, Mr. Shiv Jatia and Mr. Arun Saraf, Members of the Committee, to study the opinions and recommendations received from the said legal counsel and decide as soon as possible on the final course of action to be taken in all respects to ensure that the Company's interests as well as the promoter Group's interests are safeguarded as per law and no violation of SEBI guidelines have taken place to the Company's detriment. Xxx  ....
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....nging the aforesaid acquisition of 9.65% shares of AHL by defendant nos. 1 to 4, on the ground that the said acquisition was in violation of Code, 1997. He contended that during the pendency of the aforesaid CLB petition (2003-09), defendant nos. 1 to 4 acquired further shareholding in AHL and thereby increased their combined shareholding to 14.46%. 7. Mr. Tripathi stated that in or about 2008, while the CLB petition was still pending, the three promoter groups realising that they had independent competing interests in the hospitality sector, decided to demerge AHL into three different entities to be managed individually by the three promoter groups. According to him, the three hotels at Delhi, Mumbai and Kolkata were to be managed individually by the three demerged entities and exclusively owned by each group, i.e. Jatia Group [Asian Hotels (North) Ltd.], Gupta Group [Asian Hotels (West) Ltd.] and Saraf Group [Asian Hotels (East) Ltd.] respectively and in which there would not be any cross holdings of the other groups. He stated that to achieve the aforesaid objective, a Scheme of Demerger was got approved from this Court on 13th January, 2010 and shares were transferred betwee....
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....184 of the Companies Act 1948 which empowered a company by ordinary resolution to remove a director. Russell L.J. said, ([1969] I All Er 1002 at 1006, [1969] 2 Ch 438 at. 447-448: 'Counsel for the plaintiff argued by reference to S. 10, and the well known proposition that a company cannot by its articles or otherwise deprive itself of the power by special resolution to alter its articles or any of them. But the point is the same one. An article purporting to do this is ineffective. But a provision as to voting rights which has the effect of making a special resolution incapable of being passed, if a particular shareholder or group of shareholders exercises his or their voting rights against a proposed alteration, is not such a provision. An article in terms providing that no alteration shall be made without the consent of X is contrary to section 10 and ineffective. But the provision as to voting rights that I have mentioned is wholly different, and it does not serve to say that it can have the same result.' Both parties sought to derive comfort from this dictum. Mr. McCartney relied on it as demonstrating that a provision as to the exercise of voting righ....
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....the plaintiffs on verification of records, like balance-sheets, found that the defendant no.4 was owned by the Jindal Group and substantial shares of the defendant no. 5 were held by Saraf Group as well as the Jindal Group. He contended that the Jindal Group and the Saraf Group had cross holdings in various companies and balance sheet of defendant no. 5 revealed that it was used only for the purpose of investing money in AHL. Mr. Tripathi handed over tables/charts, which according to him, showed that Jindal Group and Saraf Group had been, from the beginning (i.e. 2003), acting in concert with common intent of acquiring shares in AHL, which fact had been suppressed and concealed by Saraf Group from Gupta Group. One such chart handed over by Mr. Tripathi is reproduced hereinbelow:- a) Defendant no. 5 is a Jindal Group Company as over 90% shares of defendant no. 5 are held by defendant no. 3 which is admittedly a Jindal Group Company. b) In defendant no. 5, which was represented to be owned, controlled and promoted by Jindal Group, defendant No. 7, belonging to Saraf Group, was also a shareholder. c) Defendant No. 7 is a member of Saraf Group as she is the d....
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....t is a nullity and non est in the eyes of law. Such a judgment/decree - by the first court or by the highest court - has to be treated as a nullity by every court, whether superior or inferior. It can be challenged in any court even in collateral proceedings. xxx xxx xxx ....The principle of "finality of litigation" cannot be pressed to the extent of such an absurdity that it becomes an engine of fraud in the hands of dishonest litigants. The courts of law are meant for imparting justice between the parties. One who comes to the court, must come with....
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....erable like any other movable property. The only restriction on the transfer of the shares of a company is as laid down in its Articles, if any. A restriction which is not specified in the Articles is, therefore, not binding either on the company or on the shareholders. The vendee of the shares cannot be denied the registration of the shares purchased by him on a ground other than that stated in the Articles. xxx xxx xxx 11. In Swaledale Cleaners Ltd., Re (1968) 1 All ER 1132: (1968) 1 WLR 432 it was held that it is well established that a share in a....
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.... the Articles of Association. " 17. Mr. Wadhwa further contended that there was no restriction on purchase of shares by defendant nos. 6 to 9 under the Inter Se Agreement in perpetuity and the said Inter Se Agreement had worked itself out. He pointed out that Clause 7.4 of the Inter Se Agreement provided that the restriction was to remain in operation, only till the swap took place and not thereafter. He also stated that the Inter Se Agreement cannot give rise to any cause of action to any of the promoter groups of the erstwhile AHL prior to 2010. He stated that the swap had taken place in August 2010 and the shares were purchased in December 2010 and January 2011. Therefore, according to him, the restrictions in the Inter Se Agreement could not be enforced at this stage. 18. He also stated that the plaintiffs had misled this Court as they did not mention in the plaint that the defendant no. 7 was not a signatory to the Inter Se Agreement. He contended that the fact that defendant no. 9 had no shareholding in plaintiff no. 1 was also concealed from this Court. 19. Mr. Gaurav Varma, learned counsel for the defendant nos. 1 to 3 and 5, stated that the plaintiffs are not enti....
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....d that the Company Law Board rejected the said argument by way of a specific finding that defendant nos. 1 to 5 cannot be treated as "persons acting in concert". The relevant portion of the CLB Order dated 25th July, 2014 is reproduced hereinbelow:- "30. The Petitioner tried to impress upon this Bench saying that R-l to R-9 (Defendants herein) acted in concert to acquire the shareholding of in the petitioner company and Asian Hotels (West) Ltd showing as if seller and acquirer acted in concert, therefore all the respondents except R-5 violated the regulation hence acquisitions in these two companies shall be rectified, but I don't find any merit in this argument because R1-3 are managed by SS Jindal and R-4 is managed by DP Jindal. Just because they are real brothers, it cannot be assumed that they acted in concert in acquiring shareholding in the petitioner company, unless the evidence on record clearly establishes that they have common objective or purpose of substantial acquisition of shares or voting rights for gaining control over the target company. Of course it is an issue raised in the CP, thereby it would be decided when main petition is decided. The persons i....
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....icular shareholders relating to the transfer of specified shares, namely those inherited from the late Sukumaran and Madhavi, inter se. It was unnecessary for the company or the other shareholders to be a party to the agreement. As provided in clause 10 of the Karar, Exhibits R-59 and R-60 did not obviate compliance with the Karar. Both Ex. R-59 and R-60 were executed on 15.7.85 several months prior to the Karar. The parties who had consciously entered into the agreement regarding the transfer of their parents shares are therefore obliged to act in terms of the Karar. The defence of Ravi and Srinivasan based on Ex.R-59 and R-60 should not, in the circumstances, have been accepted by the Division Bench. Having regard to the nature of the shareholding, on the basis of the law as enunciated by the Federal Court and Privy Council in the decisions noted above, it must be held that the Karar was specifically performable." 26. Mr. Tripathi further submitted that in the case of an active misrepresentation knowing the fact to be false, it is not incumbent upon the party defrauded to establish that he had no means of discovering the truth with ordinary diligence. In support of his submiss....
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.... As pointed out by the Supreme Court in T. Arivandandam v. T.V. Satyapal [1977] 4 SCC 467 and ITC Ltd. v. Debts Recovery Appellate Tribunal [1998] 2 SCC 70 the ritual of repeating a word like 'fraud' or 'creation' of an illusion in the plaint can certainly be unravelled and exposed by the Court while dealing with an application under Order 7 Rule 11(a) CPC. In I.T.C. Ltd. case (supra), the Supreme Court held "non-movement of goods by the seller could be due to a variety of tenable or untenable reasons, the seller may be in breach of the contract but that by itself does not permit a plaintiff to use the word "fraud" in the plaint and get over any objections that may be raised by way of filing an application under Order 7 Rule 11 CPC." (emphasis supplied) Shares of a company are freely transferable and a restraint or prohibition on purchase or inter-se transfer of shares cannot be implied but has to be explicit and specifically provided, especially in the case of a public listed company 31. It is settled law that shares of a company are freely transferable and a restraint or prohibition on purchase or inter-se transfer of shares cannot be implied ....
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....Lal Gupta, currently residing at 4/11 Shanti Niketan, New Delhi-110021; 2. Mr. Sudhir Gupta, son of (Late) Mr. Chaman Lal Gupta, currently residing at 1801, Tivoli, Hiranandani Gardens, Powai, Mumbai-400076; 3. Mr. Sushil Gupta, Karta of Chaman Lal Gupta and Sons (HUF), a Hindu undivided family ("C L Gupta (HUF)"); 4. DSO Limited, a company incorporated under the laws of Guernsey, having its registered office at Level 4 North, Town Mills, Trinity Square, St. Peter Port, Guernsey, Channel Island ("DSO"); Parties referred to under serial numbers 1 to 4 above shall hereinafter be collectively referred to as the Gupta Group; 5. Asian Holdings Private Limited, a private company incorporated under the Companies Act, 1956 ("Act") and having its registered office at c/o Asian Hotels Limited, Bhikaji Cama Place, M.G. Marg, New Delhi-110 607 ("Asian Holdings"); 6. Mr. Shiv Kumar Jatia, son of Mr. (Late) Subhkaran Jatia, currently residing at B-50 Gulmohar Park, New Delhi-110049; 7. Yans Enterprises (H.K.) Limited, a company incorporated under the laws of Guernsey, having its registered office at Level 4 North, Town Mills, Rue Du ....
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....p; xxx 7.4 Each of the Promoter Groups undertake not to acquire further equity shares in AHL and post effectiveness of the Scheme not to acquire further equity shares in the resultant companies and shall ensure that the public shareholding of the resultant companies does not fall below the threshold stipulated under clause 40A of the listing agreement. This restriction will not apply after the inter-se swap of equity shares as per this Agreement. xxx xxx &n....
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....erred to one of the three promoter groups, that was to control and manage that particular hotel. However, after the inter se transfer of promoters' shares was effected, each of the promoter groups was at liberty to acquire shares in each other's companies/hotels. 34. In fact, Clause 7.4 of the Inter Se Agreement clearly stipulates that the restriction on purchase was to remain valid till the swap took place and not thereafter. Even as per the plaint, the swap had taken place in August, 2010 and the shares were purchased by defendants 6 to 9 in December 2010 and January, 2011. Hence, there was no violation of restriction on share purchase. In the opinion of this court, the restriction on transfer of shares in Clause 7.4 of the Inter Se Agreement was contextual, time bound and consequently, the judgement of the Supreme Court in M.S. Madhusoodhanan's case (supra) has no application to the facts of the present case. 35. Admittedly, neither any other alleged agreement between the three promoter groups nor the Articles of Association of AHL or Asian Hotels (West) Ltd. restrict or restrain or curtail or prohibit the said groups from having cross holding or purchasing or ....
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....nt nos. 1 to 4 had purchased shareholding of 14.46% in AHL. The allegation that non-disclosure of shareholding by Saraf Group, prior to the execution of Inter Se Agreement and the de-merger scheme was a material misrepresentation, does not stand to reason inasmuch as each promoter group was admittedly handed over management and control of a hotel with 59.269% shareholding and the balance shareholding of 40.731% was to be held by third parties/outsiders. 40. The allegation of the plaintiffs that a fraud had been perpetrated by Saraf Group by acquiring shareholding in pre-demerged AHL between 2003 to 2009 through defendant nos. 1 to 5 and that the Saraf Group had concealed the fact that it was 'acting in concert' and collusion with defendant nos. 1 to 5, with the malafide intent of holding shares in the plaintiff no. 1, contrary to the understanding of all the three promoters in the Inter Se Agreement, that none of them will hold any shares in company of any other promoter as aforesaid, is untenable in law. 41. This Court is of the opinion that the said allegation is irrelevant and immaterial as each of the three factions/promoter groups were given majority sha....
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.... negative language, making Public announcement condition precedent to acquisition, but it is not the case under Regulation 7 covered under the chapter of "disclosures of shareholding and control in a listed company", but whereas Regulation 11 is brought under the head of "substantial acquisition", meaning thereby that mere non-disclosure will not make acquisition invalid under Regulation 7 of the Code, at the most, SEBI might impose penalty if proved that acquisition is not in compliance of the regulation 7 of the Takeover Code......" 45. Moreover, in view of the CP 2/111/2005 filed by AHL having been dismissed as withdrawn on 27th April, 2015, which contained allegations of violation of Regulation 7(1) of the Code 1997 by defendant nos. 1 to 4, the same cannot be re-agitated by the plaintiffs in the present proceeding on the ground that the said defendants had actually purchased the shares for defendant Nos. 6 to 8. The defendant nos. 1 to 5 were not 'clairvoyant' and could not have 'known' in 2003 that three new legal entities would be created in 2010 and Gupta Group would get the Bombay hotel and purchase of said shares would result in destabilising t....
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.... Plaintiff No. 1 should not be concerned as to who manages and controls it. 50. It is not understood as to how the plaintiff no.1 is in any way concerned with who manages and controls it. Moreover, there was no agreement/understanding that plaintiff nos. 2 to 5 would control and manage plaintiff no. 1 hotel in perpetuity. The present suit filed on 10th December, 2015 is barred by limitation. The plaintiffs are not entitled under section 14(1) of the limitation act for exclusion of time during the period the matter had been pending before company law board as the reliefs sought in the company petition and company appl. Were absolutely distinct and different based on different cause of action. Further, plaintiff nos. 2 to 5 were not parties to the CLB proceedings and plaintiff no. 1 is not a party to the inter se agreement. Also the CLB did not dismiss the company petition due to defect of jurisdiction or other causes of like nature. 51. AHL had filed a company petition being CP No.2/111/2005 under Section 111A of the Companies Act on 28th March, 2005 contending that the acquisition of 2200616 equity shares amounting to 9.65% of the share capital by a group of four J....