2010 (3) TMI 909 - Board - Companies Law

Issues Involved:
1. Allegations of approaching the Company Law Board (CLB) with unclean hands and mala fide intent.
2. Suppression of material particulars by the petitioner.
3. Collusion with RBI Marketing Netherlands B.V. to facilitate termination of the patent license.
4. Financial mismanagement and dilution of the petitioner's shareholding.
5. Allegations of poaching employees and setting up a competing business.
6. Request for dismissal of the company petition and vacating interim relief.

Issue-wise Detailed Analysis:

1. Allegations of Approaching the CLB with Unclean Hands and Mala Fide Intent:
The respondents argued that the petitioner approached the CLB with unclean hands and mala fide intent, aiming to sabotage the respondent No. 1-company. The petitioner was accused of acting in collusion with RBI Marketing to terminate the patent license agreement and bring the company to a standstill. The CLB emphasized that its jurisdiction is an equity jurisdiction, requiring the petitioner to approach with clean hands and not act detrimentally to the company's interest.

2. Suppression of Material Particulars by the Petitioner:
The petitioner was accused of suppressing the shareholders' agreement dated 11-6-2007, which outlined the conditions for issuing sweat equity and the financial responsibilities of the petitioner. The CLB found that the petitioner had not invested any money in the company and had suppressed material facts, including his role in the day-to-day management of the company. The petition was filed to facilitate the termination of the patent license agreement with the respondents by RBI Marketing.

3. Collusion with RBI Marketing Netherlands B.V.:
The petitioner was found to have acted in concert with Josy Cohen of RBI Marketing to terminate the patent license agreement and halt the production and marketing of RBI Grade 81 by the respondent No. 1-company. The CLB noted that the petitioner had informed RBI Marketing about the interim order promptly, indicating collusion. The petition was filed to benefit the petitioner and RBI Marketing, leading to the termination of the patent license agreement and the filing of a civil suit by RBI Marketing against the respondents.

4. Financial Mismanagement and Dilution of the Petitioner's Shareholding:
The petitioner alleged financial mismanagement by respondent No. 2 and dilution of his shareholding. However, the CLB found no evidence of financial mismanagement and noted that the petitioner was involved in the day-to-day management of the company. The petitioner's resignation and subsequent filing of the company petition were seen as part of a strategy to facilitate the termination of the patent license agreement. The CLB also noted that the petitioner was present at the board meeting where additional shares were allotted, contradicting his claims of being kept in the dark.

5. Allegations of Poaching Employees and Setting Up a Competing Business:
The respondents alleged that the petitioner poached several employees from respondent No. 1-company to set up a competing business with RBI Marketing. The CLB found these allegations to be true, as the petitioner did not deny them. This further supported the inference that the petitioner acted in collusion with RBI Marketing to terminate the patent license agreement and halt the company's operations.

6. Request for Dismissal of the Company Petition and Vacating Interim Relief:
The CLB concluded that the company petition was filed with an evil and mala fide design, in collusion with RBI Marketing, to strangulate the business of respondent No. 1-company. The petition was deemed a gross abuse of the CLB's process. Consequently, the CLB vacated the interim order dated 3-12-2009, dismissed the company petition, and awarded exemplary costs of Rs. 2,00,000 to the respondents. The respondents were also permitted to transfer the plant and machinery from the Manesar Plant to the Jaipur Plant.

Conclusion:
The CLB found that the petitioner acted in collusion with RBI Marketing to terminate the patent license agreement and halt the operations of respondent No. 1-company. The petition was filed with unclean hands, suppressing material facts, and with a mala fide intent. The CLB dismissed the petition, vacated the interim relief, and awarded exemplary costs to the respondents.

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