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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 ..... these applications are not related to the profits of the company but related to the property of the company, which cannot be entertained. Consequently, the applicant/plaintiff has no locus standi to raise objection pursuant to the terms of agreement between D1-NEPC and D2-SWL. It is well-settled that interim injunction would be denied in a case where granting of it would cause greater hardship to the defendant. The balance of convenience lies only in favour of D2-SWL. The plaintiff has neither established prima facie case nor has shown that the balance of convenience lies in her favour. On the other hand, if the interim injunction is allowed to continue, D2-SWL having invested huge amount would be subjected to irreparable loss and hardship. Having regard to the facts and circumstances of the case, the interim injunction already granted is to be vacated. - O.A. NOS. 932 & 933 OF 2007 CS NO. 688 OF 2007 - - - Dated:- 30-10-2007 - R. BANUMATHI, J. S. Parthasarathy and P. Srinivas for the Petitioner. Arvind P. Datar and P. Valliappan for the Respondent. JUDGMENT 1. The suit and applications have been filed at the instance of a shareholder of the first d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an agreement with D2-SWL for transfer, sale or otherwise dispose of D1-NEPC s Wind Energy Division. The plaintiff has also given her consent to accord sanction by postal ballot on 25-11-2005. ( e )The plaintiff has alleged that the defendants have not furnished the required particulars and informations. It is further alleged that to defraud the shareholders, the defendants have acted in collusion and in connivance with each other. As the act of the defendants is detrimental to the plaintiffs individual interest and the interest of other shareholders of D1-NEPC, the transfer of Wind Energy Division is challenged by the plaintiff. ( f )Under the slump sale agreement, D1-NEPC agreed to sell Wind Energy Division to D2-SWL. Apart from other consideration equity was to be allotted to D2-SWL. The plaintiff has alleged that a fraud has been played on her and other similarly placed shareholders by the collusive act of the defendants. She has further alleged that only 87,50,000 shares were shown to have been transferred to the trust formed by D1-NEPC. ( g )According to the plaintiff, calculating 12.5 per cent on the enhanced assets of Rs. 85,00,00,000, D2-SWL ought to have transferred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f has not been allotted any share and as D2-SWL and the trustees are acting prejudicial to the interest of the plaintiff and other shareholders, the plaintiff has approached the civil court seeking for common law remedy. It was further urged that since D1-NEPC and D2-SWL have brought about an arrangement to defeat the lawful rights of the plaintiff, the availing of common law remedy by filing the Suit by the plaintiff cannot be denied on the ground of maintainability of Suit. 9. Countering the arguments, Mr. Aravind Datar, learned senior counsel for D2-SWL, has inter alia raised the following contentions : u The plaintiff has not disclosed material facts and, therefore, she is not entitled to the equitable relief of interim injunction. u When all the shareholders including the plaintiff have given their approval by postal ballot for sale of Wind Energy Division to D2-SWL as a going concern, the plaintiff alone, as a shareholder, cannot raise objection. u The interim injunction sought for against D2-SWL not to carry on business in any other name is against the terms of contract between D1 and D2 and when it would be the subject-matter of the arbitration proceedings, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cising the discretion in his favour. The court has every discretion to refuse to grant injunction in appropriate cases. 15. The slump sale agreement was entered between D1-NEPC and D2-SWL and the Wind Energy Division of D1-NEPC was sold to D2-SWL as a going concern with assets and liabilities. The resolution for transfer was approved by 98 per cent of the shareholders including the plaintiff. Notice pursuant to section 192A(2) of the Act was sent seeking for approval by postal ballot. 16. Concededly, the plaintiff herself has accorded her consent to the same by postal ballot on 25-11-2005. The approval of the above resolution by the shareholders would show that the procedural requirements under the Companies Act, 1956 for the sale of the Wind Energy Division by D1-NEPC to D2-SWL were duly complied with. 17. As per the terms of slump sale agreement, 87,50,000 12.5 per cent paid-up equity shares of D2-SWL have been allotted to the trust and it has been notified to the Registrar of Companies. It could be seen from the share certificate issued by D2-SWL that 87,50,000 equity shares were allotted to the trust comprising of the trustees, namely, Surendra Pipara, Madhukar Mool ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and performed all acts that were required to be done by D2-SWL. The company Board s power and discretion are wide enough to determine the matter especially when the resolution for the slump sale agreement was approved by the shareholders by postal ballot. When D1-NEPC has made it clear that all obligations and covenants have been performed as per the terms of agreement, it is not open to an individual shareholder to raise any objection as to the performance or non-performance of the terms of agreement on the ground of breach of terms of slump sale. 21. The courts are generally reluctant to interfere with the decisions taken at company Board meetings. Prima facie the decision of the chairman at such company meetings is allowed to stand until it is proved to be in breach of the articles or the statute. The burden of proving the chairman s decision to be wrong rests with the party challenging his decision. 22. The materials on record do not prima facie show that there was breach of articles of association or statute. In fact, the plaintiff and her family members are the beneficiaries of the slump sale. As per the directions of D1-NEPC, D2-SWL is stated to have made payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at apart, the plaintiff has also stated that she has sent a letter to the Registrar of Companies asking for certain particulars. But the plaintiff has not produced any letter in support of her allegations. The allegations made in the affidavit and the details of the internal functioning of the companies only probabilise that the plaintiff has filed the Suit at the behest of her father and brothers who are none other than the chairman, vice-chairman and managing director of D1-NEPC. 26. The bone of contention of the applicant/plaintiff is that 12.5 per cent paid-up equity share of Rs. 10 each is to be allotted on the date of enhancement of authorised share capital of D2-SWL. In para (12) of the affidavit, calculating 12.5 per cent on Rs. 85,00,00,000 (said to be authorised share capital of the D2-SWL in December 2006), the applicant/plaintiff has alleged that though D2-SWL ought to have transferred Rs. 10,62,50,000 value of shares to the trust, it has allotted only 87,50,000 shares. As rightly submitted by the learned senior counsel for D2-SWL, the value of allotment of 12.5 per cent equity share capital would be the subject-matter of dispute in arbitration proceedings. If the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case as has been adumbrated above and has been held by the Supreme Court that a shareholder has a right to participate only in the profits of the company and has no right in the property of the company, the relief sought for in these applications are not related to the profits of the company but related to the property of the company, which cannot be entertained. Consequently, the applicant/plaintiff has no locus standi to raise objection pursuant to the terms of agreement between D1-NEPC and D2-SWL. 29. A word on balance of convenience. It is well-settled that interim injunction would be denied in a case where granting of it would cause greater hardship to the defendant. The balance of convenience lies only in favour of D2-SWL. The plaintiff has neither established prima facie case nor has shown that the balance of convenience lies in her favour. On the other hand, if the interim injunction is allowed to continue, D2-SWL having invested huge amount would be subjected to irreparable loss and hardship. Having regard to the facts and circumstances of the case, the interim injunction already granted is to be vacated. 30. For the foregoing reasons, the interim injunction a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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