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TMI Blog2007 (10) TMI 396X X X X Extracts X X X X X X X X Extracts X X X X ..... ia Ltd. ('D1-NEPC') has been carrying on and engaged in the business of manufacturing, selling, exporting, supplying, importing, and dealing in Wind turbine generator, generator and Wind mills. The second defendant-Southern Wind Farms (P.) Ltd. (hereinafter referred to as 'D2-SWL') has been carrying on the business of all kinds of power generation equipments including wind mills, etc. (b)D1-NEPC and D2-SWL had entered into a slump sale agreement on 16-1-2006. D2-SWL had purchased the Wind Energy Division of D1-NEPC as a going concern, with all its assets, liabilities and obligations, etc. consent of the members of D1-NEPC was obtained by postal ballot. As per the terms of slump sale agreement, the consideration of the transfer of Wind Energy Division shall be discharged by D2-SWL in the following manner : (i)Pay Rs. 135 crore to the secured, unsecured and creditors of the company. (ii)A value equivalent to or representing 12.5 per cent of fully paid equity shares of Rs. 10 each of Southern Wind Farms (P.) Ltd. to be issued to trust to be formed by the company, for the benefit to equity shareholders of the company. (c)Alleging breach of terms of slump sale agreement, D1-NEPC has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... D2-SWL has allotted 87,50,000, 12.5 per cent fully paid-up equity shares to the Trust which was also notified to the Registrar of Companies. The applicant/plaintiff has filed the Suit in collusion with D1-NEPC only to meet the extortionary, illegal and usurious demands. 5. The applicant/plaintiff being a shareholder has no right over the property or assets owned by the company and she has no locus standi to claim any entitlement for the allotment of shares directly to her. She has also not truthfully disclosed the material facts and she is not entitled to discretionary relief of interim injunction. The passing of the order of interim injunction and its continuance would cause harm to D2-SWL and, therefore, the applicant/plaintiff is not entitled to the discretionary relief of Interim Injunction. As the balance of convenience lies only in favour of D2-SWL, these applications are to be dismissed vacating the Interim Injunction already granted. 6. Heard both sides. 7. At the time of filing the suit, interim injunction was granted in favour of the plaintiff. Urging to confirm the order of interim injunction, Mr. S. Parthasarathy, learned senior counsel for the applicant/plaintiff, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is required to be seen whether the plaintiff has established prima facie case, both on facts and on law, which justify grant of injunction in company matters. Prima facie case has to be established by the plaintiff that she has strong case for ultimate success and the normal functions of the second defendant company is sought to be restrained. 12. The grant or refusal of a temporary injunction is subject to the following principles : (a) Prima facie case of plaintiff's legal right. (b)Balance of convenience in his favour. (c)Whether he would suffer irreparable injury if injunction is not granted. These conditions have to be satisfied and proof of any of them is not by itself sufficient to obtain a temporary injunction. Prima facie case means that there exists a strong probability that the petitioner has an ultimate chance of success in the suit. Balance of convenience is the principle by which the court weighs and balance the mischief or inconvenience to either side. 'Irreparable injury' means a substantial injury which cannot be adequately compensated for in damages. 13. While considering the question of prima facie case what the court is required to see is whether there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cute any document other than those already executed, nor is SWL and/or its shareholders required to make any payment, or give any consideration whether direct or indirect, or discharge or assume any obligations or liabilities of the company, whatsoever in nature, for effecting transfer of the Wind Energy Business to its name." 19. Along with the above said communication, D1-NEPC has also enclosed the extract of the resolution passed by the Board of directors of D1-NEPC at its meeting held on 17-11-2006. The following resolution makes it clear that no amount or consideration whatsoever in nature, is due or payable by SWL. "Further resolved that it be taken on record that no further amount or consideration, whatsoever in nature, is due or payable by SWL and/or is shareholders, whether directly or indirectly, in relation to the transfer of the Wind Energy Business by the company to SWL and also that SWL and/or its shareholders is not required to discharge or assume any obligations or liabilities of the company, whatsoever in nature, whether directly or indirectly, and therefore a valid release and discharge, on perpetual basis, is given to SWL and/or its shareholders in relation to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hemka, who are the vice-chairman and managing director of D1-NEPC. The plaintiff held 48,000 equity shares which is only 1 per cent of the total shares of D1-NEPC. 24. It is relevant to note that when the suit was filed, the plaintiff did not disclose the material fact that she is the daughter of the chairman of D1-NEPC and sister of other office bearers of D1-NEPC. The plaintiff, being a family member of D1-NEPC, in all fairness, she ought to have disclosed her close relationship with the chairman and vice-chairman and managing director of D1-NEPC. 25. Pointing out the relationship of the plaintiff, the learned senior counsel for D2-SWL has submitted that the plaintiff is only a stooge of D1-NEPC and she has been set up to interfere in the affairs of D2-SWL. Such contention is probabilised by certain noticeable features. Both in the plaint and in the affidavit, the plaintiff has stated that she made search with the records available with the Registrar of the Companies, Chennai and that she came to know that the authorised capital of D2-SWL was shown to be increased from Rs. 10,00,000 to Rs. 75,00,00,000 in March 2006 and from Rs. 75,00,00,000 to Rs. 85,00,00,000 in December 2006 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eholder acquires a right to participate in the profits of the company may be readily conceded but it is not possible to accept the contention that the shareholder acquires any interest in the assets of the company. A shareholder has not got a right in the property of the company. There is nothing in the Indian law to warrant the assumption that a shareholder who buys shares buys any interest in the property of the company which is a juristic person entirely distinct from the shareholders. The true position of a shareholder is that on buying shares an investor becomes entitled to participate in the profits of the company in which he holds the shares if and when the company declares, subject to the articles of association, that the profits or any portion thereof should be distributed by way of dividends among the shareholders. He has undoubtedly a further right to participate in the assets of the company which would be left over after winding up but not in the assets as a whole." (p. 74) 28.In considering the totality of the facts and circumstances of the case in the light of the law laid down the Apex Court in the decision cited supra, I am of the considered view that when pursuant ..... X X X X Extracts X X X X X X X X Extracts X X X X
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