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TMI Blog2017 (8) TMI 1144X X X X Extracts X X X X X X X X Extracts X X X X ..... s’ contention that the instructions should be routed through the Board of Directors is untenable on the fulcrum of oppression and mismanagement. The Appellants have attempted to cause confusion between ‘Reserved Matters’ as per Article 63 of the AoA and ‘matters wherein the Appellants have a conflict of interest’ as per Article 60(d). The contentions raised by the Appellants which pertain to alleged unauthorized instructions given by the Nominee Directors to ITSL relate to matters concerning OPCD documents and thus fall within the ambit of Article 60(d) and not under Article 63. In fact, money is recoverable by ‘Vinca’ pursuant to legal proceeding initiated by ITSL on behalf of ‘Vinca’. It was pointed out by the Ld. Counsel for the Respondents that the present proceedings are fundamentally premised on the contention that the subject transaction is illegal and/or a colourable device to circumvent FEMA in order that FMO can secure for itself an assured return which it can repatriate out of the country. On this basis, the Appellants have contended that the actions of ITSL including of taking out legal proceedings for the enforcement of security given by or on behalf of ‘Amazia’ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore the rights accrued to FMO on ₹ 418 crores invested by Vinca by it shall not be exercised and all the rights vested with FMO shall be set aside by this Bench holding FMO exercising its rights for realisation of its money as oppressive conduct against the petitioners so that these petitioners need not comply with the Hon ble Supreme Court Order dated 15th November, 2016. 4. Keeping into consideration all facts as alleged, including the subscription dated 20th November 2009 with FMO (a foreign company), which invested ₹ 418 crores by allotment of fully paid up transferable, non-marketable, unsecured, fully and mandatorily convertible INR denominated debentures of Vinca to 2nd Respondent into two tranches and by allotment of 1244 class A equity shares of Vinca to 2nd Respondent with 10% of the voting rights of the entire share capital of the company as submitted by Vinca came to a conclusion that the Appellants cannot impose obligation upon nominee directors of FMO to exercise their affirmative vote for conversion Optionally Partially Convertible Debentures (hereinafter referred to as OPCDs) into shareholding. The Tribunal held that no case is made out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by mortgage of all assets of Amazia and Rubix which are real estate companies. 10. Ld. Counsel for the Appellants submitted that the 3rd and 4th Respondents have acted in a manner oppressive to Appellants and in a manner prejudicial to the interest of Vinca . They are directors of Vinca and 3rd Respondent as a director of Amazia and Rubix have a fiduciary duty to Vinca whose only business carried on through its two 100% subsidiaries is not prejudiced. They were aware that Amazia and Rubix at present are not in a position to serve the debenture on Amazia and Rubix failing to serve the debentures, 3rd and 4th Respondents could call up the monies that are due under the same and thereafter proceed against its securities for recovery or invoke the corporate guarantee against 5th Respondent or in the alternative convert the OPCDs of Amazia and Rubix into equity. 11. It was contended that 3rd and 4th Respondents by not converting the OPCDs into equity or granting extension of time to Amazia and Rubix to serve the debentures and instead seeking to enforce the security and invoke the guarantee have in effect acted against the interest of Vinca as this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to Appellants, the findings of Tribunal that if a party acts in accordance with Articles the same cannot be oppressive is also incorrect in law, as if such action is not for the best interest of the company or is oppressive the same can be challenged. Ld. Tribunal failed to appreciate the specific case of the Appellants is that Articles were being abused to kill the business of Vinca carried on through its two 100% subsidiaries Amazia and Rubix and that too by taking decisions which were not in compliance with Articles 60 and 62 of the AoA of Vinca and thereby null and void. 18. It was also submitted that the finding of Ld. Tribunal that the investment structure was not violative of FEMA is perverse and contrary to records as the Hon ble Apex Court in its order has directed the suit filed by 10th Respondent against 5th Respondent to be decided expeditiously without being influenced by observations of the Hon ble Supreme Court. 19. Further according to Appellants, as funds have been used for real estate, there is clear violation of Regulations 3 to 6 of FEMA (Borrowing or Lending in Foreign Exchange) Regulations, 2000, particularly and Clause 4 of Schedule to the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... executed including the following :- (a) Deed of Corporate Guarantee dated 9th December 2009 executed by Hubtown Ltd., as guarantor in favour of ITSL (as debenture trustee for the benefit of Vinca ) and (b) Indenture of Mortgage executed by Amazia in respect of 11 (eleven) ATC Units in the building Akcruti Trade Center and also in respect of the Trust and Retention Account which would hold all the proceeds of lease rents received by Amazia from the ATC Units. 23. According to Respondents, the Appellants, by this proceeding, are seeking to overturn the promises made by way of a solemn contract at the time that this Respondent was induced into investing a sum of ₹ 418 crores in companies owned and controlled by the Appellants (including Vinca , Amazia and Rubix ) and guaranteed by Hubtown Ltd., whose control also lies in the hands of the Appellants. It is patently dishonest and too late for the Appellants to contend now that the contractual terms should be held to be oppressive when companies controlled by them (i.e. Hubtown Ltd.) have been called upon to deposit/repay the said sums which were received by them. 24. It was also submitted that the Appellants ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear and unambiguous that the Nominee Directors have been given full liberty to give instructions to ITSL directly and therefore the Appellants contention that the instructions should be routed through the Board of Directors is untenable on the fulcrum of oppression and mismanagement. 30. The Appellants have attempted to cause confusion between Reserved Matters as per Article 63 of the AoA and matters wherein the Appellants have a conflict of interest as per Article 60(d). The contentions raised by the Appellants which pertain to alleged unauthorized instructions given by the Nominee Directors to ITSL relate to matters concerning OPCD documents and thus fall within the ambit of Article 60(d) and not under Article 63. 31. In fact, money is recoverable by Vinca pursuant to legal proceeding initiated by ITSL on behalf of Vinca . It was pointed out by the Ld. Counsel for the Respondents that the present proceedings are fundamentally premised on the contention that the subject transaction is illegal and/or a colourable device to circumvent FEMA in order that FMO can secure for itself an assured return which it can repatriate out of the country. On this basis, the Appellants ..... X X X X Extracts X X X X X X X X Extracts X X X X
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