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TMI Blog2010 (3) TMI 909X X X X Extracts X X X X X X X X Extracts X X X X ..... essive acts have caused irreparable injury to the respondents. 2. C.P. No. 114/ND/2009 was filed by Mithra Thomas Majagaratna Dewars hereinafter referred to as "the petitioner" against the applicant/respondents on 13-11-2009 on the following averments. RBI Marketing Netherlands B.V. hereinafter referred to as "RBI Marketing" held a worldwide patent in its product RBI Grade-81, a unique and highly effective soil stabilization product. On being introduced by the petitioner and after several negotiations RBI Marketing granted a 10 years exclusive licence to Mr. Darayus Narimans hereinafter referred to as the "respondent No. 2" for manufacturing, marketing and selling or otherwise supplying the product RBI Grade-81 in India on condition that the petitioner would be an indispensable part of the respondent No. 1-company due to his extensive experience in sales and marketing in manufacturing industry and would lead the business operations of the respondent No.1. Subsequently the petitioner became a 17.18 per cent shareholder in and a director of M/s. Legend Surface Developers Pvt. Ltd. hereinafter referred to as "respondent No. 1-company". Shares held by the petitioner though not delive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ering the properties of the company in a manner prejudicial to the interest of the company it would cause irreparable loss to the petitioner and the respondent No. 1-company. 4. Considering the averments in the petition and the arguments advanced by the learned counsel for the petitioner and further to safeguard the interest of the company the following interim order was passed on 3-12-2009 which was made effective from the date of service of notice of a certified copy of the order on the respondents : "The matter was mentioned and heard on interim reliefs. Record is perused. It is a fit case for grant of ad interim relief. It is ordered that from the date of service of notice of a certified copy of this order, the respondents shall, till the next date of hearing, maintain status quo as regards the shareholdings pattern of the company and shall further not alienate or create any charge over any asset of the company in a manner prejudicial to and interest of the company. Learned counsel undertakes to serve a copy of this order on the respondents, and further submits that notice of the petition has already been served on respondent No. 2. As regard the service of notice of pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lants that were set up by the respondent No. 1-company, for which tens of crores were spent, have now become redundant. At the same time, the banks have recalled the loan of approximately Rs. 18 crores on the basis of a letter from the petitioner and RBI Marketing that the patent license is now terminated. In addition, the company has statutory liabilities to the tune of nearly Rs. 5 crores, market loans to the tune of Rs. 10 crores and vendor liabilities of approximately Rs. 5 crores. All these liabilities have interest mounting on a monthly basis. It is stated that in order to repay these liabilities which were increasing exponentially by the day, the company had no option but to either inject a new investor shareholder into the company or to sell off the plants of the respondent No. 1-company. It is submitted that unless the stay is vacated and the respondent No. 1-company is permitted to sell the plant and machinery the liabilities of the company would soon, due to mounting interest, outweigh the assets of the company and the plant and machinery of the company would greatly diminish in value as it is lying closed and would soon rust besides becoming old and obsolete. The petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion with RBI Marketing. The respondent has reliably learnt that the petitioner has already ordered for a plant to be fabricated in Pune by a company called Midas Autosoft Engineers Pvt. Ltd. at Nos. 204 to 206, 2nd floor, R. Square, Opposite Atul Nagar, Mumbai - Bangalore bypass, Waraje, Pune, Maharashtra 411-52 which should be ready by February 2010. An order for bags has also been placed for trials. The respondent has also learnt that the Finance Manager who had resigned from the respondent No. 1-company in August 2009 and the Engineers who were poached by the petitioner from the respondent No. 1-company are now working with him. On the aforesaid grounds the applicants/respondents urge that the company petition ought to be dismissed at the threshold as the petitioner had approached the equitable jurisdiction of the CLB with unclean hands, suppressed material particulars, acted to the detriment of the company s interest and had brought the respondent No. 1-company to a screeching halt by acting in collusion with RBI Marketing with mala fide intentions. 7. Applicants/respondents also contended that post termination of the patent licence agreement by the RBI Marketing with the res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n further consolidates the stand taken by the petitioner in the petition. On these premises it was urged that outright rejection of the petition was uncalled for and CA No. 62/2010 was liable to be dismissed. 10. I have heard the leaned counsel for the parties at length and have also perused the record with utmost circumspection. Jurisdiction of the CLB is an equity jurisdiction. Before seeking an equitable relief it is incumbent that the petitioner must approach the CLB with clean hands, must not suppress material facts which would tilt the balance of convenience against him and must not act in a manner detrimental to the interest of the company thereby causing it an irreparable injury. 11. The present petition under sections 237, 397, 398, 402, 403, 404, 406 and 408 of the Companies Act, 1956 was filed on 13-11-2009. It was stated in para 2.1 that the 17.18 per cent shares held by the petitioner were fully paid-up and no amount was due or outstanding from the petitioner to the company on the above shares. It was further stated in para 7.11 that there was gross and blatant financial mismanagement of the respondent No. 1-company by the respondent No. 2 in his capacity as the Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther, the applicant/respondent had made him the authorized signatory to represent the company in all its dealings. Annexed hereto and marked as Annexure-G is a detailed chart of various correspondences of the petitioner which conclusively establishes that it was he who was running the day-to-day affairs of the respondent No. 1. Pertinently the various correspondences were not copied to the respondents." 13. In reply to the above the petitioner admitted the contents of para 13(e) quoted above and the fact that it was the petitioner who was handling the day-to-day affairs of the respondent No. 1-company. Further, the petitioner s letter of resignation dated 9-11-2009 Annexure P-3 did not in any manner reveal the details of the alleged financial mismanagement of the respondent No. 1-company by the respondent No. 2. No prior correspondence between the petitioner and the respondent No. 2 revealing any objections raised by the petitioner to the so called financial mismanagement by the respondent No. 2 was filed by the petitioner. Thus, it is clearly borne out that the averments in the company petition that the petitioner was kept in dark and not allowed to participate in the day-to-day ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Defendants 1 and 2 have on several occasions requested more time and thereafter commenced requesting for financial assistance as opposed to meeting its obligation to pay the sums due to the Plaintiff. 24. On 4-12-2009, the Plaintiff received a letter from the Defendant No. 3 indicating that the Defendant had procured restraining orders against the Defendants 1 and 2." 16. The present petition was filed before the CLB on 13-11-2009 and was heard on interim reliefs on 3-12-2009. It was not divulged by the counsel for the petitioner on 3-12-2009 that pursuant to the filing of the petition the patent licence agreement with respondent No. 2 had been terminated by the RBI Marketing on 23-11-2009 thereby bringing the operation of respondent No. 1 and the production and marketing of RBI Grade 81 by the respondents to a standstill. The averment by the petitioner in para 7.34 of the petition that unless restrained by an interim order the respondent No. 2 would bring the business of the respondent No. 1-company to a halt and jeopardize its future prospects, threaten the interest of the company and its shareholders and would lead to wastage of the efforts of the petitioner till date was th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company by taking various loans. He was also aware that an injunction had been granted on 31-12-2009 by the High Court of Delhi against the respondent No. 1-company from selling or manufacturing RBI Grade 81. Now, a perusal of Annexure B filed by the applicants/respondents shows that pursuant to the termination of the patent licence agreement with respondent No. 2 on 23-11-2009 the RBI Marketing had, by fax dated 26-11-2009 also informed the State Bank of Hyderabad which had promptly advised the respondent No. 1-company to pay off the existing liability to the tune of Rs. 17,63,68,400 vide letter dated 15-1-2010 (Annexure-L) which reads as under : "Reg : Adjustment of CC and Term Loan Outstanding. We refer to our letter No. F/NP/LSDPL/1142, dated 15-12-2009 and subsequent.....on adjustment of dues to the Bank. We had served notice upon Mr. Mithra Dewars, the ex-director of M/s. Legend Surface Developers Private Limited to pay off the bank dues failing which bank would initiate appropriate recovery proceedings against him. In reply to our notice, Mr. Mithra Dewars has expressed that he is ready to repay the total outstanding loan amounting to Rs. 17.73 crs. as on 31-12-200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the respondent No. 1-company, shown his concern by writing to the respondent about the financial irregularities if any. The company petition thus sought to strangulate the business of respondent No. 1-company to benefit the petitioner and a third party to wit RBI Marketing to the detriment of the interest of the company and formed the basis for termination of the patent licence agreement between RBI Marketing and respondent No. 2. The petition is thus nothing but a gross abuse of the process of the CLB. It is trite law that in a petition under sections 397, 398 and 402 of the Companies Act, it is the interest of the company which is paramount and to be safeguarded by the CLB. The provision contained in Chapter VI of the Companies Act are meant to be used for bringing an end to the mismanagement and oppression in the company and can never be allowed to be used as a weapon to destroy the company. The petitioner filed the company petition in furtherance of his evil design to sabotage the respondent No. 1-company and to derive benefit for himself in furtherance of his collusion with RBI Marketing. The Act of the petitioner was thus extremely harsh and oppressive to the respondents and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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