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TMI Blog2017 (7) TMI 460X X X X Extracts X X X X X X X X Extracts X X X X ..... of the form or structure Binny Limited morphed into from time to time. Second, the principle of "quasi-partnership" or "in substance a partnership" would apply to the relationship, which subsisted in the first instance, amongst Late Ramasamy, Ethiraj, M.Nandagopal and Natarajan, and after, the death of Ramasamy amongst his son Venkatachalam and the other three gentlemen. Third, Natarajan, admittedly, did not receive any professional fee. He clearly discharged functions as Director entrusted to him, first on behalf of Binny Limited and, thereafter, on behalf of SVG as well. Over the years, it appears from the record, an understanding was reached between the persons referred to above, that they would have a representative each on the BOD of the concerned company/companies, as the case may be. Fourth, though there was clearly no written agreement in place an understanding built on trust had been forged, which required each side to ensure the appointment of the nominee of the other side on the Board of the concerned company. This facet comes through upon examining a long corporate history of nearly 27 years, spanning between 1987 and 2014. The understanding and trust, which ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then, reverse the direction issued by the CLB on that score, which, in its own wisdom, has tried to do substantial justice between the contesting parties, by compelling the controlling group to purchase the shares of the Natarajan block. This power, as held hereinabove by me, was rightly exercised by the CLB, save and except to the extent it directed SVG to purchase the shares, upon failure of the controlling group to do so. To my mind, this power was available to the CLB, contrary to what has been argued by the counsels. Therefore, the CLB's endeavour to unlock the asset of the Natarajan block, which has stayed the course along with other co-venturers for nearly three decades, in the given facts and circumstances, does not call for interference, as it is both fair and equitable. Eighth, the deadlock, as indicated above, need not necessarily be an ingredient of 397 and 398 action. It is only one of the circumstances in which, such an action can be brought to Court. Besides, the concept of deadlock need not to be looked at in absolute terms. In my view, any issue, which creates an impediment or a possibility of a logjam in the smooth functioning of the company in the foreseeab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . To ensure that there is a compliance, the Controlling group and/or its constituents are injuncted from selling, transferring or creating third party interest, qua their shareholding in SVG, till further orders of the NCLT, and in case, a charge or interest has already created by the controlling group, vis-a-vis their equity stake in SVG, the protem charge so created by this direction will stand subordinated to any such prior charge or interest. SVG is also injuncted from registering or recording any request for transfer of shares which are owned or controlled by Ethiraj and Shanmugam and/or its constituents except with the prior permission of NCLT. Furthermore, pending the completion of the aforesaid exercise, SVG will not transfer and/or create third party interest in its immovable assets.The NCLT would be free to modify and/or vary the protem order and also to seek other forms of solvent security, if, offered by the controlling group, till such time, the equity interest of respondent Nos.1 to 6 is bought over by them, i.e., the controlling group and/or their nominees. - Com.Apel.Nos.3 and 4 of 2016 and Cros. Obj.No.39 of 2016, C.M.P.Nos.6828, 6864, 7563, 7564, 7575 and 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re divided. The first block comprises of the controlling group, which holds 55% of the share. The second block comprises of respondent Nos.1 to 6, which includes Natarajan's wife and the five companies, in which, he has controlling interest, i.e., respondent Nos.1 to 5. This block, as indicated above, holds 18.98% of the equity share capital of SVG. Since, Natarajan is the face of this block, it will be referred to as the Natarajan block , accordingly, unless context requires specific mention of respondent Nos.1 to 6. 2.4. These two (2) groups together control nearly 74% of equity share capital of SVG. The remaining 26% of the equity stake is distributed amongst public shareholders. The record shows that the numerical strength of the public shareholders is 9014. 2.5. Therefore, the dispute in the present proceedings is really between the controlling group and the Natarajan block. The controlling group is aggrieved by the impugned judgment and order of the CLB, broadly, on the ground that even though the CLB returned findings of fact that there was no quasi-partnership in existence, and that, there was no deadlock in running and managing the affairs of SVG, it, passed dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order dated 10.03.2016, passed by the CLB. (ii). The Valuer shall be appointed in terms of directions (a) and (b) contained in paragraph 10.8 of the impugned order of the CLB, with due intimation to the respondents 1 to 6, within a period of two weeks from the date of receipt of a copy of this order. (iii). The fee of the Valuer shall, however, be paid for the time being by the respondents 1 to 6, as arrayed in the captioned appeal. The appellant will, however, not extend any loan or make any investment to any associate or related third party, without leave or permission of this Court. 5. Furthermore, the condition contained in Clause (f) of paragraph 10.8 of the impugned order shall remain stayed, till further orders of this Court. 4.2. The next returnable date was fixed as 06.07.2016. In the interregnum, C.M.P.Nos.7564 and 7576 of 2016 were filed on behalf of the controlling group, wherein, the following directions were sought: Prayer in CMP No.7576 of 2016 : .... to direct that the pro-term (sic) appointment of the Valuer agreed upon would not create any equities and be without prejudice to the rights of the appellant challenging the directions for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereafter, on 01.08.2016, upon an application being moved by Natarajan, i.e., C.M.P.No.12274 of 2016, a clarification was issued that Brahmayya Co. will submit a valuation report, by taking recourse to all recognised methods of valuation, which would include the Break-up Value/Net Asset Value Method and the Profit Earning Method. 6.1. Mr.P.S.Raman, who, as indicated above, also appeared for the controlling group, was, in fact, the proponent of the plea that all recognised methods of valuation should be taken into account by the valuer. 7. On 15.09.2016, Brahmayya Co., Chartered Accountants, submitted their valuation report, albeit, in a sealed cover. A decision was taken by me, on that date, to defer opening of the sealed cover. It was indicated that this aspect of the matter would be examined, once arguments in the appeal would commence. 7.1. Thereafter, the matter was heard from time to time and finally, the judgment in the matter was reserved on 10.02.2017. 7.2. Furthermore, on that date, without prejudice to the rights and contentions of the parties, the valuation report was opened and its contents were shown to the counsels for the parties. The counsels were giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dit and Holdings Pvt. Ltd., - Rs.42.50 lakhs (iii) Rajat Chankra Credit and Holdings Ltd., - Rs.42.00 lakhs (iv) Calcom Credit and Holdings Pvt. Ltd., - Rs.42.00 lakhs 9.5. The stand of the controlling group appears to be that Natarajan was required to return the shares, upon receipt of an aggregate sum along with an indemnity that recovery of the sums loaned to respondent Nos.1 to 5 would not be triggered. The controlling group takes the stand that while, indemnity bonds were received from Natarajan, he went back on his promise to re-transfer the shares in Binny Limited. 9.6. The record seems to indicate that since, the financial health of Binny Limited was weak, on account of its net worth having been eroded, it had to approach the Board for Industrial and Financial Re-construction ( BIFR ) under the provisions of Sick Industrial Companies (Special Provisions) Act, 1985 ( SICA ). Consequently, in 1992, a Scheme of rehabilitation was submitted to the BIFR. The Scheme of rehabilitation, so formulated, required, inter alia, infusion of a sum of ₹ 60 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d their constituents in the aforementioned companies were concerned, they were done away with, so as to ensure that each of these families controlled the companies coming under their sway, without interference from other families, with Natarajan, being the only common factor. 10.4. It is the stand of the controlling group that on two occasions, i.e., in 2007 and 2013, an attempt had been made to purchase the equity stake of Natarajan in SVG. It is suggested that in a meeting held in May, 2007, Natarajan, had agreed to sell his shares in all three companies, for a total sum of ₹ 50.00 Crores. 10.5. As indicated above, this attempt was, once again, made in December, 2013, at which point in time, the controlling group, via Ethiraj, seems to have indicated that he would purchase Natarajan's interest in SVG for a sum of ₹ 16.66 Crores, which was 1/3rd of ₹ 50.00 Crores, offered in 2007, for purchase of his interest, in all three companies, i.e., Binny Limited, Binny Mills Limited and SVG. 11. Be that as it may, in so far as SVG is concerned, (which became the cause of falling-out between the controlling group and Natarajan), the following dates and events ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring appointment of a Managing Director, the board of directors at their meeting held on 01.09.2012. It was decided to appoint Mr.E.Shanmugam as Managing Director of the Company, subject to the consent at the general meeting of shareholders, for a period of 5 years with effect from 02.04.2012. The term of office/remuneration payable to the Managing Director by way of salary and perquisites (as given in annexure) are within the specified limits land down in Schedule XIII of the Companies Act, 1956. This may be treated as an abstract of the terms and conditions governing the appointment of and remuneration payable to the Managing Director pursuant to Section 302 of the Companies Act, 1956. Accordingly, the said resolution is submitted for your consideration. Details of Perquisites referred to in the Resolution No.5 1.Free use of furnished accommodation owned or leased by the company with amenities including Water, Gas, Electricity and Furnishings. If no accommodation is provided, the Managing Director is entitled to House Rent allowance subject to a celling of 70% of his salary. The expenditure incurred by the Company on Water, Gas, Electricity and Furnishings will be evalu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eappointment was blocked by the controlling group. What made matters worse was that, while the Natarajan block had voted in favour of the resolution seeking reappointment of Ethiraj, as the Director of SVG, albeit, via electronic voting, the controlling group, on the other hand, admittedly, voted against the resolution seeking reappointment of Natarajan. Concededly, the controlling group had cast their votes, at the AGM held on 26.09.2014, via paper ballots, instead of through electronic means. Consequently, Natarajan ceased to remain the Director of SVG. 12.5. This action of the controlling group propelled Natarajan to institute Company Petition No.62 of 2014 in the CLB, albeit, via respondent Nos.1 to 6. The petition was filed on 18.10.2014. Though, interim orders were sought, the CLB declined to grant any interim orders and instead, called upon the appellants to file their reply to the Company Petition. 12.6. Respondent Nos.1 to 6, being aggrieved by this approach of the CLB, preferred a Company Appeal to this Court. This Appeal was numbered as : Company Appeal No.14 of 2014. Natarajan, also joined the fray by filing a separate appeal. Natarajan's appeal was numbered a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res of respondent Nos.1 to 6, by the controlling group, even when it had found that there was no oppression of the minority shareholders or mismanagement in running the affairs of SVG. (ii) The grievance of Natarajan was, in substance, in the nature of a directorial complaint , which was dressed up as an action for oppression and mismanagement . Therefore, the fact that Natarajan failed to get elected, in what was a democratic process involving balloting by shareholders, could not form the basis of an action under Section 397 and 398 of the Companies Act, 1956 (in short the 1956 Act ). (iii) The will of the majority shareholders, not to reappoint Natarajan, as a Director, could not be negated by a judicial process, merely because the outcome was not to his liking. (iv) The entire premise of the action, though erroneous, was that, there was in existence an S.N.group (i.e., S.Natarajan group), which was a co-promoter group along with the Venkatachalam group, the Nandagopal group and the controlling group. A perusal of the Scheme of demerger of 2010 would show that there was no S.N.group in existence. Furthermore, there is no reference to the S.N.group, even in the Article ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , notwithstanding the fact that the controlling group had cast their vote via paper ballot, despite the AGM notice holding out that voting would take place by electronic means. (x) Respondent Nos.1 to 6 were not entitled to appoint their nominee as a Director on the Board of SVG by applying proportional representation principle, having regard to their minority shareholding. The CLB erred in holding that respondent Nos.1 to 5 were entitled to representation on the Board of SVG, when, there was no pleading of legitimate expectation. (xi) The CLB erred in holding that there was an expectation of expression of mutual good faith and confidence between the contesting parties, merely because Natarajan was shown as a promoter at a point in time when he was associated with Udayar group and, that too, after CLB found that there was no quasi partnership in existence. (xii) The CLB ought to have appreciated that e-voting was introduced for the convenience of shareholders to enhance the possibility of their participation and voting in general meetings. E-voting is intended only to supplement and not supplant the process of voting put in place by SVG. The circular dated 17.06.2014, issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard to its affairs. (xiv)(a) There is, in fact, no prohibition in carrying out related- party transactions, albeit, after complying with the requisite provisions of the law. (xiv)(b) In this behalf, reliance was placed on Sections 295, 297, 299, 300 and 372 of the 1956 Act and the corresponding provisions of the 2013 Act, i.e., Sections 185, 186, 188 and 184. The checks and balances, according to the appellants, were not only provided for in the Acts referred to above, but also in the Regulations framed by Securities and Exchange Board of India (in short SEBI), in that behalf. Specific reference was made, in this connection, to Regulation 23 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 [in short SEBI (LODR)]. (xv) The CLB had erred in holding that there were disputes among the promoters and, hence, Binny Limited had to be demerged. There were no complaints lodged by respondent Nos.1 to 6 (except for pre-litigation correspondence), which could be said to be suggestive of the fact that there was oppression, or that, it was practically difficult to manage the affairs of SVG. The controlling group had managed the affairs of SVG, in which, Nata ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntosh Kumari, AIR 2008 SC 171; 16. Mr.T.K.Seshadri, Senior Advocate, who appeared for the independent Directors, largely, supported the submissions made on behalf of the appellants. 16.1. In sum, Mr.Seshadri, submitted that no case for oppression and mismanagement was made out and, therefore, there was no cause for the CLB to grant the reliefs, which it did in Company Petition No.62 of 2014. 16.2. In particular, Mr.Seshadri, submitted that, the decision taken by the Board of SVG, to permit Shanmugam, to use the Boat Club Property as his residence, was in order. Furthermore, Mr.Seshadri submitted that the resolution passed, in consonance with the provisions of Section 372A, was also in order. It was also submitted that, if at all, loans are extended or investments are made in associate entities/companies of SVG, they would be made, after terms and conditions qua such transactions, if, entered into, are duly vetted by the Board of SVG. Since, that stage had not arisen, the allegation was based on a mere apprehension, which could not form the basis for filing a Company Petition, under Sections 397 and 398 of the 1956 Act. In support of his submissions, reliance was placed on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inny Limited, SVG and Binny Mills Limited. It was further stressed that such splitting of assets had also taken place in 2004 as well, when, Binny Limited was demerged into Binny Limited and Binny Karnataka Limited. It was averred that consequent thereto, the then new co-promoters, took control of Binny Karnataka Limited. At this point, according to Mr.Raghavan, the valuation of shares was carried out based on net asset value methodology. 17.3. The assets, according to the learned counsel, were divided at that stage as well. Learned counsel emphasised the fact that even after demerger, Natarajan continued to be nominated on the BOD of SVG, as the representative of respondent Nos.1 to 6. 17.4. Thus, in sum, learned counsel contended that it is these facts, which the CLB took into account that persuaded it to come to a conclusion that there existed a relationship of probity, good faith and mutual confidence between the controlling group and Natarajan. 17.5. In so far as the failure of Natarajan to get reappointed at the AGM, held on 29.12.2016, was concerned, learned counsel attributed the same to the illegality committed by the controlling group in voting, contrary to the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, unless 75% of the shareholders voted in favour of the resolution. For appellants to cobble up 75% votes in favour of a special resolution would be a tough-ask, given the fact that there was a remote possibility of the controlling group, and Natarajan, who hold together, 74% of the shares in SVG, coming together on any issue. Moreover, what complicates matters is the fact that the balance 26% of the equity stake, which is in public domain, is dispersed amongst nearly 9,000 shareholders, making it difficult for the controlling group to get them to vote en bloc in favour of a special resolution. Therefore, there was nothing wrong, according to the counsel, in the CLB coming to the conclusion that there was a practical dead lock in the working of the SVG. 18.3. Furthermore, it was submitted that, since, the shares of SVG were infrequently traded , even though listed, it was only appropriate for the CLB to direct purchase of respondent Nos.1 to 6's equity stake in SVG, albeit, at a fair value, as in any case, the controlling group in the past had shown interest in purchasing their shares in SVG. As to how infrequently traded shares could be valued, reliance was placed by M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iv). V.S. Krishnan v. Westfort Hi-Tech Hospitals Ltd. amp; Ors., (2008) 3 SCC 363 (xxv). PPN Power Generating Companies v. PPN Mauritius Company, 2005 3AR BLR 354 (xxvi).Nazir Ahmed V. King Emperor, 44 L.W.538 (Privy Council) (xxvii).Nalinakhya Bysack V. Shyam Sundar Haldar and Ors., AIR 1953 SC 148 (xxviii).Dr.Baliram Waman Hiray v. Justice B. Lentin and Ors. (1988) 4 SCC 419 (xxix).Hukam Chand Shyamlal v. Union of India and Ors. (1976) 2 SCC 128 (xxx).M/s.Madan Co. Wazir Jaivir Chand (1989) 1 SCC 264 (xxxi).Taylor v. Taylor (1875) 1 CH.D 426 (xxxii).Babu Verghese Ors v. Bar Council of Kerala and Ors. (1999) 3 SCC 462 (xxxiii).MP Wakf Board v. Subhasa (2006) 10 SCC 696 19. Mr.Murari, Senior Advocate, who appeared for Natarajan, largely, supported the submissions advanced by Mr.Raghavan. It was Mr.Murari's endeavour to demonstrate that Natarajan was in fact, a promoter - Director of Binny Limited and, therefore, continued to get appointed to the Board of the Resulting Company, i.e., SVG, post the 2010 Demerger scheme. Learned counsel also sought to demonstrate that the directions issued by the CLB were legal and tenable, exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Boat Club Property as his residence, it ought to have invalidated the actions taken pursuant thereto, in consonance with the provisions of Section 299 and 300 of the 1956 Act. (iv) The CLB erred in treating the defect as curable by directing the appellants to have the defect removed by having a resolution passed by the shareholders to ratify the transaction. Since, the resolution was fundamentally flawed, the CLB could not have permitted the appellants to cure the same. Consequently, the CLB ought to have directed Shanmugam, to vacate the Boat Club Property and to pay a fair rent to SVG for its illegal occupation. (v) Lastly, the CLB ought to have declared that the decision taken at the Board Meeting dated 01.09.2012 was defective, for the following reasons: (a) Lack of quorum, in relation to appointment of Shanmugam, as the Managing Director of SVG and grant of permission to him to use the Boat Club Property as his residence. (b) Non-declaration of interest by the controlling group, in the resolution, granting Shanmugam, the right to use the Boat Club Property as his residence. (c) Deliberate misstatement to the public shareholders that the BOD had approved appo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The reason, for this, is, perhaps, that statutes such as the 1956 Act and 2013 Act are inspired by the provisions of the English Companies Act, which too has been amended from time to time. Suffice it to say that one of the very first judgments, to which, often, reference is made by the Courts, in order to understand the scope and effect of the expression just and equitable , which is found, both in clause (f) of Section 433 of the 1956 Act as well as in clause (b), sub-section (2) of Section 397 of 1956 Act is the judgment in In Re Yenidje Tobacco Company Ltd. - [1916] 2 Ch 426. 25.1. This was a case, where two (2) persons decided to amalgamate their business to form a private limited company; they were the only shareholders and Directors in the Private Limited Company. Under the Articles of Association, each person had equal voting powers and, one, Director could form a quorum. Importantly, the articles provided that in case a dispute arose between the Directors with regard to any resolution, the matter could be referred to arbitration. 25.2. In this background, dispute arose between the Directors. The Court invoked the just and equitable principle and granted the relief o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormed and which ought to be terminated as soon as possible. We are told that we ought not to do it because the company is prosperous, making large profits, rather larger profits than before the disputes became so acute. I think one's knowledge of what one sees in the streets is sufficient to account for that, having regard to the number of cigarettes that are sold, and we can take judicial notice of that in judging whether the business is much larger than it was before. Whether such profits would be made in circumstances like this or not, it does not seem to me to remove the difficulty which exists. It is contrary to the good faith and essence of the agreement between the parties that the state of things which we find here should be allowed to continue. ..... (emphasis is mine) 26. The next case, which, dealt with this principle, albeit, in the context of a Public Limited Company is : Loch V. John Blackwoods Ltd. [1924] AC 783. 26.1. In this case, the concerned company was registered in Barbados. It appears, one Mr.John Blackwood established an engineering business in Barbados and carried on the same until his death in January, 1904. Under the provisions of his wil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered it to be a fit case to apply the just and equitable clause to wind up the company. 27.2. The following observations of the Court, being relevant, are extracted hereafter: Now, in any case in which the shareholders who hold a preponderating interest in a company make it manifest that they intend to set at naught the security provided by company procedure, and to treat the company and its affairs as if they were their own property, it is impossible that the minority should retain any confidence in the impartiality or probity of the company's administration, and - according to the circumstances of each particular case - it becomes a question whether the minority are not entitled, as a matter of justice and equity within the meaning of subsection (vi.) of section 129 of the Companies (Consolidation) Act, 1908, to have the company wound up. It is always true that the majority are entitled to use their voting power in what they believe to be the interests of the company; and the petitioner's fellow-shareholder had no doubt been allowed to acquire an overwhelmingly preponderant power so far as votes were concerned. But whether he could have used that power, n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y with a person by the name : Mr.Ebrahimi. Consequently, Mr.Nazar and Mr.Ebrahimi were the first Directors of the company, with equal shareholding; each holding 500 shares. However, soon after the company had been formed, Mr.Nazar's son, one Mr.George Nazar, was appointed as a Director in the company. The existing shareholders shed their shareholding and transferred 100 shares each to Mr.Geroge Nazar. Resultantly, the senior Mr.Nazar along with his son held 60% of the shares, while Mr.Ebrahimi held 40% of the shares in the company. 28.2. Evidently, by an ordinary resolution passed at the General Meeting, Mr.Ebrahimi was removed from the office of the Director. Though the resolution was effective and valid in law, a petition was filed by Mr.Ebrahimi, seeking the following reliefs : that his shares be purchased by the senior Mr.Nazar and his son, or, in the alternative, the company be wound up under the just and equitable clause. The Plowman, J. allowed the alternative relief, which was, to wind up the company. 28.3. The Court of Appeal, however, reversed the judgment, by holding, inter alia, that, if the majority shareholders, in a general meeting, exercised the power conf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar way. It would be impossible, and wholly undesirable, to define the circumstances in which these considerations may arise. Certainly the fact that a company is a small one, or a private company, is not enough. There are very many of these where the association is a purely commercial one, of which it can safely be said that the basis of association is adequately and exhaustively laid down in the articles. The superimposition of equitable considerations requires something more, which typically may include one, or probably more, of the following elements : (i) an association formed or continued on the basis of a personal relationship, involving mutual confidence - this element will often be found where a pre-existing partnership has been converted into a limited company ; (ii) an agreement, or understanding, that all, or some (for there may be sleeping members), of the shareholders shall participate in the conduct of the business; (iii) restriction upon the transfer of the members' interest in the company - so that if confidence is lost, or one members is removed from management, he cannot take out his stake and go elsewhere. It is these, and analogous, factors which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l underlying obligation of his fellow member(s) in good faith, or confidence, that so long as the business continues he shall be entitled to management participation, an obligation so basic that, if broken, the conclusion must be that the association must be dissolved. And the principals on which he may do so are those worked out by the courts in partnership cases where there has been exclusion from management (see Const V. Harris [1824] Tur. Rus. 496, 525) even where under the partnership agreement there is a power of expulsion (see Blisset V. Daniel [1853] 10 Hare 493; Lindley on Partnership, 13th ed. (1971), pp. 331, 595). ..... (emphasis is mine) 29. The next case, to which, one would like to make a reference, is the judgment of the Supreme Court in Hind Overseas Private Limited V. Raghunath Prasad Jhunjhunwalla and Another, [1976] 46 Comp Cases 91 (SC). 29.1. This is a case, where, a dispute had arisen between two groups of shareholders, who had formed a company, which had its genesis in a partnership firm. Because of the disputes, one group filed a petition for winding up, which was dismissed by a Company Judge, at the very threshold, albeit, without admitting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matter. Even admission of a petition which will lead to advertisement of the winding up proceedings is likely to cause immense injury to the company if ultimately the application has to be dismissed. The interest of the applicant alone is not of predominant consideration. The interests of the shareholders of the company as a whole apart from those of other interests have to be kept in mind at the time of consideration as to whether the application should be admitted on the allegations mentioned in the petition. ..... (emphasis is mine) 29.3. What is to be noted in this case is that, the Court came to the conclusion that : assuming that the company had initially emerged from a partnership, that partnership was subsequently abandoned with the formation of the company. In coming to this conclusion, the Court noted that one person, who was an outsider (as in an employee of the one of the persons involved in the dispute), was inducted into the company. This, according to the Court, railed against the idea of a partnership, which gives preeminence to equal status amongst partners. Furthermore, the Court also noted that the person, who had filed the winding up petition served ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, and conversely a resolution which is in contravention of the law may be in the interests of the shareholders and the company . On this question, Lord President Cooper observed in Elder v. Elder and Watson [1952] SC 49 : The decisions indicate that conduct which is technically legal and correct may nevertheless be such as to justify the application of the 'just and equitable' jurisdiction, and, conversely, that conduct involving illegality and contravention of the Act may not suffice to warrant the remedy of winding up, especially where alternative remedies are available. Where the 'just and equitable' jurisdiction has been applied in cases of this type, the circumstances have always, I think, been such as to warrant the inference that there has been, at least, an unfair abuse of powers and an impairment of confidence in the probity with which the company's affairs are being conducted, as distinguished from mere resentment on the part of a minority at being outvoted on some issue of domestic policy . Neither the judgment of Bhagwati J. nor the observations in Elder, are capable of the construction that every illegality is per se oppressive or that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon it under Section 402 of the 1956 Act, directed Mehra be appointed as the Director of the company. In addition thereto, Dubey was directed to return to the company, a certain sum, which he had misappropriated. A direction was issued to the Registrar of Companies to inspect the records of the company. 31.4. It is, in this background that the matter, once again, reached the Supreme Court. The Supreme Court following the dicta laid down in Hind Overseas case (cited supra), came to the conclusion that the approach adopted by the Division Bench was correct. In coming to such a conclusion, the following observations were made by the Court in paragraphs 11 and 12 : ..... 11. The promoters of a company, whether or not they were hitherto partners, elect to avail of the advantages of forming a limited company. They voluntarily and knowingly bid themselves by the provisions of the Companies Act. The submission that a limited company should be treated as a quasi-partnership should, therefore, not be easily accepted. Having regard to the wide powers under Section 402, very rarely would it be necessary to wind up any company in a petition filed under Sections 397 and 298. 12. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the shares in the company. It was also indicated to Neill that he would be allowed to draw 50% of the profits. At some stage, during the course of business, it was further indicated by Mr.Phillips, that Mr.Neill would be allotted additional shares. It appears that Mr.Phillips, at some point in time, decided to retire from the day-to-day affairs of the company, leaving Mr.Neill, in effect, as its sole Director. In effect, Mr.Neill was the Managing Director of the company. 32.3. While, the business environment was good, Mr.Neill appeared to do well. However, when, the industry went into recession, the company struggled. Mr.Phillips became alarmed about the company's financial position and Mr.Neill's management skills. Mr.Phillips decided to take control of the company, being the majority shareholder. He also told Mr.Neill that he would no longer be acting as its Managing Director, and that, he would not be given 50% of the profits. In other words, Mr.Neill was restricted to the salary he got and dividends receivable by him on his 25% shareholding in the company. 32.4. This propelled Mr.Neill to file a petition under Section 459. The petition was dismissed; a decision, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gave as an example the standard case in which shareholders have entered into association upon the understanding that each of them who has ventured his capital will also participate in the management of the company. In such a case it will usually be considered unjust, inequitable or unfair for a majority to use their voting power to exclude a member from participation in the management without giving him the opportunity to remove his capital upon reasonable terms. The aggrieved member could be said to have had a legitimate expectation that he would be able to participate in the management or withdraw from the company. It was probably a mistake to use this term, as it usually is when one introduces a new label to describe a concept which is already sufficiently defined in other terms. In saying that it was correlative to the equitable restraint, I meant that it could exist only when equitable principles of the kind I have been describing would make it unfair for a party to exercise rights under the articles. It is a consequence, not a cause, of the equitable restraint. The concept of a legitimate expectation should not be allowed to lead a life of its own, capable of giving ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company, and therefore, the appellant should purchase the shares of the respondent No.1 at a value to be determined by a chartered valuer. An appeal made to the Division Bench of this Court did not succeed. Consequently, the appellant approached the Supreme Court for reversal of the judgment of the Division Bench, which sustained the view of the CLB. 34.1. The Supreme Court refused to interfere with the direction for purchase of shares, despite a plea that, since, no finding of oppression have been returned, such a direction could not be issued. In doing so, the Court noticed the methodology employed by the Three-Judge Bench of that very Court in Needle Industries (cited supra), which was that even where a petitioner fails to make out a case of oppression, the Court is not powerless to do substantial justice between contesting parties, and thus, if, the situation so demands order purchase of shares of the minority group. 34.2. Furthermore, the Court, as indicated above, reiterated its view that the decision in Kilpest Private Limited (cited supra), ran counter to Needle Industries. (See paragraphs 15 and 16 of the Judgment). ISSUE NO.1: 35. The first and foremost issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re having 1050 beds with full spectrum of clinical activities and hi-tech medical care. He is also concerned with other social and voluntary organization and Chemical Manufacturing Associations. Details of other Directorships Name of the Company Position held XXXXXX XXXX Mrs.V.R.Venkatachalam is not a Member of any Committee of the Company. ii) Mr.S.Natarajan is one of the Promoter Directors of the Company with effect from 11.01.1988, aged 57 years and is a graduate in Commerce and a Practicing Chartered Accountant since 1975 and also Director in many leading Companies with the industrial experience in the field of financial restructuring, accounts, etc. Name of the Company Position held XXXXX XXXXX Mr.S.Natarajan is a Member of Audit committee and Share Transfer Committee of Binny Limited. (emphasis is mine) 36. This apart, the shareholding pattern of Binny Limited, as on 30.09.1993, as put out in its public documents, shows under the heading Promoters , not only the shares held by Ramasamy group and the Ethiraj group, but also, the shares held by the Natarajan block. 36.1. As is indicated in my narration above, in and abou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Board of Directors of the Company constitutes of 1. Mr.M.Ethurajan Promoter Non-Executive Director 2. Mr.M.E.Shanmugam Promoter Non-Executive Director 3. Mr.R.Narayanan Independent, Non-Executive Director 4. Justice Mr.S.Jagadesan Independent, Non-Executive Director 5. Mr.S.Natarajan Promoter - Non-Executive Director 6. Mr.Y.Satyajit Prasad Independent, Non-Executive Director 36.5. A perusal of the extract would show that against Serial No.5, Natarajan, was shown as promoter Non-Executive Director . This apart, in the Annual Reports of SVG generated between 2010 and, upto the AGM of 26.09.2014, Natarajan, continued to be shown as its Director. This fact emerges, clearly, upon perusal of SVG's Annual Reports of March, 2011, March, 2012 and March, 2013 and March, 2014. 37. The question, therefore, is, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Director and is, in whole time employment of the company. Thus, the logical sequitur of this would be that a Non-Executive Director is a Director, who is not in whole time employment of a company. In other words, he is not involved in the day-to-day management of the company. 38.4. It is not Natarajan's case that he was in the whole time employment of the company. Natarajan's case, which is borne out from the record, was that as a part of the Board of SVG, he was involved in the policy formulation of the company, which also enabled him to protect his investment in SVG, which was routed via respondents No.1 to 6. Furthermore, the record also depicts contrary to what was argued by the appellants that Natarajan was a member of two crucial Committees, i.e., The Audit Committee and Share Transfer Committee. 38.5. Therefore, the argument advanced on behalf of the appellants that, since, Natarajan was a Non-Executive Director and hence, by necessary implication, an Adviser, to my mind, is contrary to the record placed before the Court. 38.6. In my view, Natarajan was a co-venturer, who, along with Late Ramasamy, Nandagopal and Ethiraj, decided to acquire and run Binny ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lling the acquirer of Natarajan's interest to make a public offer. In my view, this submission is completely untenable for the reason that right from the time, i.e., 1987-1988, when, Natarajan came on to the Board of Binny Limited, the equity stake held by him, via respondents No.1 to 6, was shown under the head Promoters . Even according to the appellants, the attempts at purchasing Natarajan's interest was made only in May 2007 and 2013. Therefore, the linkage, sought to be made between the two, is, clearly, an afterthought. 39. This apart, I would like to believe that it was never the intention of the controlling group, or, even that of the Nandagopal group or Venkatachalam group, either in 2007 or, thereafter, in 2010, to violate the law and to portray a state of affairs, which was contrary to actual facts, only to sidestep the law. If, this presumption is to be made, with which, I do not think that the appellants would want to quarrel, then, it cannot be argued, at this stage, by the appellants that Natarajan was never the part of the promoter group. The controlling group, I would assume, did not wish to violate any provisions of law, and, therefore, if, shares of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of SVG were traded on the Stock Exchange. 40.4. These facts have not been controverted by the appellants. 40.5. Given these facts, one is required to consider as to whether or not, the principle of quasi-partnership would apply to a public listed company, as it is the submission of the appellants that the said principle could never apply to a public limited company. While, I will be dealing with other aspects of the relationship subsisting between contesting parties as well, to demonstrate as to why I am of the view that the principle of quasi-partnership would apply in this case, suffice it to say, to my mind, there is no limitation in law that the principle of quasi-partnership cannot apply to a listed company, if, the facts and circumstances so demand. There are several companies, which fulfill the legal regimen of a public listed company, but are otherwise controlled in large measure by a group of shareholders, who run the company, like a family-owned company. There are several examples of such companies in India, of which judicial notice can easily be taken. SVG is, only, one such case. 40.6. Therefore, in my view, CLB's conclusion that the principle of quasi-part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding up order qua the company, on the ground that it is just and equitable to do so, and that, the only reason it would not do so, would be, that, it could unfairly prejudice such member or members, who would have brought the action to court. 41.5. The just and equitable clause could kick-in in myriad situations, including where, in point of fact, a company, say for instance, emerges out of the pre-existing partnership, or, where, there is an agreement or understanding of the kind, amongst some or all the shareholders, that they shall participate in the conduct of business, or where there is in place a restriction on the transfer of shares, and despite, loss of confidence, or removal from management, a shareholder is unable to liquidate his stake in the company. (See : Ebrahimi V. Westbourne Galleries Ltd.). 41.6. These are situations, which give rise equitable considerations, and would, thus, require legal rights to align with equity. Thus, the principle of quasi-partnership , or in substance partnership comes into play via the just and equitable clause found in Section 397(2)(b) of the 1956 Act, as the concepts of probity, good faith and mutual confidence are founded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar ending 31.03.2014, a decision was also taken to appoint a scrutiniser for the purpose of e-voting to be conducted at the said AGM. Accordingly, the Board appointed one Mr.R.Kannan, Company Secretary, as the scrutiniser for the purpose of conducting e-voting. 42.2. The notice, which was sent to the members, in respect of the AGM to be held on 26.09.2014, amongst other business, placed for consideration of the members, two (2) crucial resolutions : first to appoint a Director, in the place of Ethiraj, who retired by rotation and being eligible, had offered himself for re-appointment; and, second, to appoint a Director, in the place of Natarajan, who, likewise, retired by rotation and being eligible, had offered himself for re-appointment. 42.3. The note No.12 appended to the notice convening the said AGM, clearly, indicated that the members were offered e-voting facility, in respect of the business scheduled to be conducted at the AGM. The relevant extract of note 12, is set forth hereafter: .... 12. Pursuant to the provision of Section 108 of the Companies Act, 2013 read with Rule 20 of the Companies (Management and Administration) Rules, 2014, the Company is offering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decided by show of hands, unless a poll is demanded under Section 109 or voting is carried out electronically. Section 108 mandates the Central Government to prescribe the class or classes of companies and the manner in which a member may exercise his right to vote by electronic means. Section 109 confers on the Chairman of the meeting, the authority, to order a poll either on his own motion or on the say so of the members, who fall under clause (a) or (b) of Section 109 (1). This exercise can be undertaken, both before or on declaration of the result of voting, on a resolution by show of hands. 43.2. As a matter of fact, in exercise of powers, so conferred and in consonance with the provisions of Section 108, the Central Government has notified the CMA Rules. Sub-rule (1) of Rule 20 of CMA Rules compels every listed company, having not less than 1000 shareholders, to provide to its members facility to exercise their right to vote at the general meetings via electronic means. It appears that by notification dated 19.3.2015, there was an amendment brought about in Rule 20, which, however, did not dilute what is stated above, which is, provisioning of electronic voting facility. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under rule 20) who are present in the general meeting. It is hereby clarified that since voting through e-means would be on the basis of proportion of share in the paid-up capital or 'one-share one-vote', the Chairperson of the meeting shall regulate the meeting accordingly. (vii) Applying rule 20 voluntarily :- Stakeholders have referred to words 'A company which opts to' appearing in rule 20(3) and have raised a query whether rule 20 is applicable to companies not covered in rule 20(1). It is clarified that rule 20(3) is being amended to align it with rule 20(1). Regarding voluntary application of rule 20, it is clarified that in case a company not mandated under rule 20(1) opts or decided to give its shareholders the e-voting facility, in such a case, the whole of procedure specified in rule 20 shall be applicable to such a company. This is necessary so that any piece-meal application does not prejudice the interest of shareholders. (emphasis is mine) 43.6. A perusal of the said clarifications, extracted above, would show that a person, who had voted via e-voting mechanism, could not vote again, after having cast his vote by such means even whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ular did not, to my mind, provide that where companies had notified to their members/shareholders that the business fixed at the general meeting, would be transacted via electronic means, such intimation would not bind the concerned company. 44.2. SVG, in this case, had made a representation to the shareholders at large, which included the public shareholders, that the resolutions to be considered at the AGM convened on 26.09.2016, would be vested upon via electronic means. Therefore, once that intimation had been given by SVG upon exercising the option of electronic voting, in my view, no shareholder could, thereafter, have acted in a manner contrary to what had been indicated in the notice convening the AGM. 44.3. What makes it more disconcerting is the fact that the deviation in the manner of voting was brought about by none other than the Chairman and the Managing Director of SVG. This apart, the public shareholders, who, even according to the appellants hold 26% of the equity stake in SVG would have no clue, that the rules of the game had been changed midway. Therefore, the submission advanced on behalf of the appellants that, if, one were to ignore the paper ballots, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or a period of five years with effect from 02.04.2012 upon the terms and conditions as set out below : 1. Salary : Subject to a ceiling of ₹ 5 lakhs per annum 2. Perquisites: As detailed in the explanatory statement. RESOLVED FURTHER THAT the Board of Directors be and is hereby authorised to increase vary or amend the remuneration and other terms of the appointment from time to time provided that such revised remuneration shall also be in conformity with and within the ceiling of Part II under Section 2 of Schedule XIII to the Companies Act, 1956 or any statutory modifications or re-enactment thereof. ......... (emphasis is mine) 45.2. Furthermore, the details of perquisites were provided in item No.5 of the explanatory statements, the relevant extract of which, reads as follows : Item No.5 Considering the paid-up capital of our company, subsequent to demerger and relevant provisions of Section 269 of the Companies Act, 1956, requiring appointment of a Managing Director, the board of directors at their meeting held on 01.09.2012. It was decided to appoint Mr.E.Shanmugam as Managing Director of the Company, subject to the consent at the gener ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers in respect of the AGM, to be held on 29.09.2012 alluded to the proposed appointment of Shanmugam, as the Managing Director, on the terms and conditions indicated hereinabove. There is no dispute that the resolution appointing Shanmugam, as the Managing Director, on the terms indicated above, was carried at the AGM, held on 29.09.2012. This is, clearly, discernible from the BOD Meeting held on 02.11.2012. At this meeting, Natarajan was present. Apart from Ethiraj and Shanmugam, Satyajit Prasad, one of the independent Directors, was also present. 45.6. The BOD, at this meeting, confirmed the minutes of its earlier meeting dated 01.09.2012 as well as took on record, the minutes of AGM held on 29.09.2012. 45.7. The aforesaid facts bring out the following: (i) There was no disclosure whatsoever made at the BOD meeting held on 01.09.2012, that the property, which was to be given for the use to Shanmugam, as his residence, was the Boat Club Property. (ii) That the notice issued to the shareholders did not advert to the Boat club Property. (iii) That Natarajan was not present at the BOD Meeting held on 01.09.2012; he was, though, present at the subsequent meeting dated 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thin the bounds of law and adhered to the norms of transparency. 46.2. As a matter of fact, respondent Nos.1 to 6 have filed cross objections in that behalf, to which, I have made a reference above. One of the directions, respondent Nos.1 to 6 have sought via their cross objections is that Shanmugam, should be called upon to vacate the Boat Club Property and pay fair rent for the period that the property was illegally occupied. 47. The questions, which arise for consideration are: (i) Has SVG committed infraction of any provision of law ? (ii) Is the direction contained in the impugned order qua calling upon SVG to seek ratification valid ? 47.1. In so far as the first aspect is concerned, as already indicated above, while the disclosure with regard to the property, which was to be given for use to Shanmugam, as his residence did not meet the standards of corporate governance, as fixed by SEBI - there was disclosure, nevertheless, that a property owned or leased by SVG was to be given for such use to Shanmugam. Therefore, what was complied with was literally the letter of the resolution and not its spirit. This conclusion can, however, be only partially correct, as the res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esh resolution was passed by the shareholders, ratifying the decision taken to allow Shanmugam to use the Boat Club Property as his residence, would relate back to the date when the decision, in that behalf, was taken in the first instance. This, however, may be plausible, if, the only defect in resolution so passed pertained to the factum of disclosure of the particulars of the property, which was to be given for use of Shanmugam. As indicated above, it appears, that no exercise was carried out to value the subject perquisite by the Board of SVG. Therefore, the direction issued to SVG to obtain ratification of the shareholders, is not in order. SVG, to my mind, would have to do a de novo exercise, by placing the matter afresh before the shareholders along with the requisite background material. 47.5. In that behalf, the BOD would have to carry out the necessary exercise of valuing the subject perquisite, in order to ensure that the total salary and remuneration paid to Shanmugam, during the relevant period, did not cross the limit specified in Schedule XIII of the 1956 Act, or the extant provisions of law, if any, formulated in that regard. ISSUE NO.6: 48. This brings me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved a further payment of ₹ 88.11 Crores along with interest at the rate of 8% towards balance consideration. The emphasis was, that the use of these funds needed to be safeguarded considering the past proclivity of the controlling group to divert funds to associate entities/companies. 48.5. The submission of respondent Nos.1 to 6 was, given the background, in which, the aforementioned resolution was passed, it is quite possible that the appellants would attempt to divert the monies received from acquisition of SVG's Bengaluru property, to its related entities/concerns, and that, such acts could only be prevented, if, Natarajan, remained as its representative on the Board, as was the case for the past four (4) years. 48.6. In my opinion, the submission of the appellants that apprehension, by itself, can never form the basis of an act of mismanagement, seems too wide a proposition. A distinction has to be drawn between what is in the realm of possibility as against that in respect of which some incipient steps have already been taken. In a situation like the instant case, where a resolution has already been passed, albeit, with a caveat, which is that, the final decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red, it appears, advice on financial and taxation matters to the Udayar group. This brought about his proximity with the other two (2) members of Udayar group, apart from Late Ramasamy, that is, Ethiraj and his brother, Nandagopal. (iii) Apparently, an opportunity for investment of funds and acquiring a company arose, in and about, 1987, in the form of Binny Limited. It appears, according to Natarajan, Binny Limited, at that time, as indicated above, was widely held listed company, which had on its Board, nominees of Banks and financial institutions. Natarajan takes the stand that he saw an opportunity to acquire Binny Limited and, accordingly, took the proposal to Late Ramasamy, Nandagopal and Ethiraj. The result was that the controlling interest in the company, i.e., Binny Limited, was acquired, and in fact, the stand of Natarajan is that he had provided a sum of ₹ 14.00 lakhs to Late Ramasamy and his son Venkatachalam via his concern, Saranga Investment and Consultancy Private Limited, for acquisition of equity stake in the said company. (iv) It is also the stand of Natarajan that it was because he had funded monies to the Udayar group at various times, in 1993, shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rol of Binny Limited. 49.6. Furthermore, respondent Nos.1 to 6 aver in their Company Petition that along the way the net worth of Binny Limited got eroded, which led to filing of a reference with BIFR, in and about 1992. While, the reference was pending before the BIFR, a Scheme of rehabilitation was preferred, which required infusion of funds. The new co-promoters, who could invest funds, were identified by Natarajan. Consequently, an MOU dated 21.12.1993 was executed between the existing promoters, which included Natarajan and the newly inducted co-promoters. As a result of which, according to respondents No.1 to 6, funds to the tune of ₹ 60.00 Crores in the form of equity and loan were invested in Binny Limited. 49.7. It is also the stand of respondent Nos.1 to 6 that the new co-promoters decided to opt out of Binny Limited and, accordingly, an MOU was executed on 08.05.1996 to freeze the terms of exit of the inductee co-promoters. This MOU could not be implemented and therefore, was followed with the execution of another MOU dated 27.3.2002. Finally, the exit of the inductee co-promoters took place only in 2004, which resulted in the demerger of Binny Limited into B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p would vote in his favour at the AGM to be convened on 26.09.2014. 50.2. Natarajan, thus, takes the stand that it is, in this background, that respondent Nos.1 to 6 cast a favourable vote on a similar resolution concerning, Ethiraj's reappointment, albeit, via electronic means. Natarajan says that, given the background that he had all along been a stake holder, i.e., a partner in the ventures undertaken by the other three persons, i.e., Late Ramasamy, followed by Venkatachalam, M.Nandagopal and Ethiraj, his non-renomination, which, in substance amounted to removal from the Board was an act of oppression. Natarajan says that the association with the aforementioned persons was, in substance a partnership and that, he had, therefore, neither sought nor received any remuneration for the services that he had offered, first to Binny Limited and, then to SVG. 50.3. Having regard to the material on record, I am of the view that the appellants' stand that Natarajan, was mere an adviser, is not correct. I have already discussed this aspect of the matter. In the ordinary course, one cannot, but agree that the appellants have a right to vote in any manner that they think fit, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are many and varied. Amongst many reliefs sought, there is a prayer made for residuary relief as well, which is generally asked for by litigants, particularly in a petition preferred under Sections 397 and 398 of the 1956 Act, which is that, the CLB may grant any other relief that it may deem necessary. It is not unknown to law that where litigants ask for reliefs, which have a wide ambit, the Tribunal/Courts modulate the reliefs, depending on the jurisdiction, in which, they operate and the power vested upon them in law. To cite an example, while in a Writ Petition and, in an action of a present kind, where Courts/statutory authorities employ equitable jurisdiction, there is latitude available, within the realm of law, to modulate, fashion and forge a relief, which according to it, would ultimately meet the ends of justice. Such a power, perhaps, a Court may not exercise (and I am not foreclosing the possibility altogether), say for example, while rendering a decision in a suit action. 51.2. Therefore, in my view, there was no impediment, in principle, in the CLB having the power to grant such a relief. As a matter of fact, in so far as a Section 397 and 398 action is concerne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e shares of Natarajan, in the facts and circumstances of the case, if the controlling group failed to do so. 51.6. In my view, the direction should have been restricted to the controlling group, and that, it ought not to have extended it to SVG. The reason why I say so, is that, the battle for control, and/or representation on the Board of SVG obtained between the controlling group and the Natarajan block. As discussed above, Natarajan was, contrary to what is sought to be portrayed by the appellants, a part of the promoter group and not a mere adviser. Therefore, if, the appellants were desirous of obtaining greater control of SVG, so that, they could have a further play in the joints , both at the Board level and in the shareholders forum, i.e., meetings, the CLB should have called only upon them to buy the interest of some one like Natarajan to the exclusion of all others including SVG. The public shareholding in the SVG is a reality, which the controlling group have had to live with, since the time they first acquired interest in Binny Limited, in 1987. Therefore, unless the appellants were willing to make an open offer, in accordance with the extant Rules and Regulations, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t renominated to the Board of SVG. (v) Fifth, the nature of the relationship between Natarajan and the controlling group cannot be given a short shrift by labelling it as Directorial complaint . While, in isolation, one cannot, but agree, that corporate democracy and shareholders will must prevail these principles need to be tested in the context of facts and circumstances obtaining in each case. Bereft of context, a grievance regarding failure to obtain renomination to the BOD may seem like a Directorial Complaint. (vi) Sixth, the appellants, in my view, cannot use the Directorial Complaint argument or even the argument that it is a limited company having public shareholders to deny the Natarajan block its right to sit on the high table, that is, the BOD. When these arguments are put to scrutiny, what does come through, starkly, is that the public shareholders, which approximately, number 9014 are dispersed and, the company, i.e., SVG is run, in substance, like a closely held company by the Controlling group, who hold 55% of the equity stake. It is because of this reason that the Board of SVG could take a decision to allow for use of the Boat Club Property, which is even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le future, is an aspect, which ought to be factored in, while examining the tenability of an action instituted under Section 397 and 398 of the 1956 Act. The majority shareholders will always allude to the argument that, since, they have the requisite numbers, whether in terms of shares or members on the Board that they can run the company without a hitch; an argument, if, accepted, would actually mean, that the Court would then give legal credence to the submission that they could run rough shod over the minority. Running of the company requires inclusiveness, which is intrinsic part of any democratic process and cannot, to my mind, be any different, where corporate jurisprudence or governance is involved. 52.1. Therefore, in substance, I find no difficulty in CLB coming to the conclusion that there would be impediments in running the affairs of SVG, as indicated above, and therefore, perhaps, as against the use of the expression practical deadlock , some other expression, which would describe the situation more accurately could have been used. Perhaps, gridlock would better describe such like situations. RELIEFS: 53. Based on the foregoing discussion, the appeals are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esaid exercise, SVG will not transfer and/or create third party interest in its immovable assets. 57.2. The NCLT would be free to modify and/or vary the protem order and also to seek other forms of solvent security, if, offered by the controlling group, till such time, the equity interest of respondent Nos.1 to 6 is bought over by them, i.e., the controlling group and/or their nominees. 57.3. This exercise will be completed within eight (8) weeks of the date of first appearance before NCLT, as indicated in paragraph 55. This would take care of the directions contained in paragraph 10.8 clauses (a) to (d) of the impugned judgment. 57.4. Since, independent valuer's report has already been submitted, as indicated above, the directions contained in paragraph 10.8(e) of the impugned judgment and order stands already satisfied. Similarly, in so far as the directions contained in paragraph 10.8(f) is concerned, it stands suitably modified, in the light of the reasons given herein above, with respect to the issue concerning the Boat Club Property. 58. The appeals and the cross objection are disposed of accordingly in terms of the aforesaid directions. Consequently, the conn ..... X X X X Extracts X X X X X X X X Extracts X X X X
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