9911796707
TMI Blog2011 (6) TMI 939X X X X Extracts X X X X X X X X Extracts X X X X ..... taking steps which would tantamount to revocation, impediment, detraction from, or devaluation of the sanction granted in favour of the Petitioner under Sanction Agreement till the disputes are resolved through arbitration. The Petitioner also seeks a restraint that, in case the Respondent, in breach of Sanction Agreement, has entered into any agreement with any third party, then the same should be injuncted from being given effect to or implemented to prevent the violation of the terms of the Sanction Agreement. O.M.P. No. 92/2011 has been filed by the Petitioner to seek a restraint against Indian hockey players from entering into any contract with any other league, other than the league organized by Petitioner; a restraint against foreign players to attend any other league, not organized by Petitioner; and a restraint against players who have already entered into agreements with third parties from playing with them. I may, at this stage itself note that in the rejoinder filed by the Petitioner in O.M.P. No. 52/2011, the Petitioner has stated in para 7 that, The Petitioner further submits that the Petitioner is not claiming any relief against the hockey players/third parties . T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecution 8.1 Following the execution hereof the Parties will make good faith efforts to negotiate the terms of definitive agreements as may be necessary in relation to the arrangements contemplated herein and execute the same within the duration of this MOU. The Definitive Agreements shall include: (i) Subscription Agreement (between ESS/ESS Sub, IHF and New Co.); (ii) Master Rights Agreement (between ESS, IHF and New Co.); (iii) Sanction Agreement (between IHF and New Co.); and (iv) Services Agreement (between LSM and New Co.). 4. It appears that IHDPL was formed, as contemplated, in the MOU. On 31.12.2004, the following agreements were entered into: (i) Subscription and Shareholders Agreement between the ESPN Software India Private Limited, the Respondent-IHF and the IHDPL referred to as the company . Clause 2.1 of this agreement provides as follows: 2.1 Subject to the terms of this Agreement and fulfillment of the conditions precedent mentioned in Section 3 hereinbelow, ESPN and IHF hereby agree to subscribe for, and the Company hereby agrees to allot and issue to the ESPN and IHF at Completion forty nine hundred and fifty one hundred Equity Shares respectiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithin sixty days of the League's first Match; 3.3.4.4.4 any other players which the Company and IHF have agreed are sufficiently proficient hockey players to participate in the League; and 3.3.4.4.5 any other players who have participated in the Bombay Gold Cup, Beighton Cup, Surjeet Hockey Tournament and any other hockey tournament in the country which is approved and accredited by IHF. (iv) A Service Agreement was entered into between IHDPL and LSM, whereunder LSM agreed to provide managerial services and assistance in organizing and managing the Hockey League in payment of consideration. 5. The case of the Petitioner is that the Petitioner (whose name was changed to PHDPL on 18.01.2006), in terms of the Sanction Agreement organized the Indian Hockey League in the years 2005, 2006, 2007, and between December 2007 January 2008. It is also the case of the Petitioner that thereafter the Petitioner could not organize the Premier Hockey League due to circumstances surrounding the Respondent IHF, and on account of the fact that the status of the Respondent was a subject matter of judicial proceedings before this Court. It is claimed that the Respondent was not in a posit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Associations in their respective territories, or by the FIH in the Territory. 3.4.3 In the event that any Competing League commences in the Territory, with or without the direct or indirect sanction, facilitation or accreditation of IHF, then IHF will be obliged to take all necessary steps and actions to ensure that the Players will not participate in such a Competing League. ... XXX 5.3 IHF represents and warrants to the Company that: 5.3.1 it will not do anything which revokes, impedes, detracts from, or devalues the Sanction;.... 7. The submission of the Petitioner is that the Sanction Agreement has not been terminated in accordance with its terms. Clause 8 of the Sanction Agreement sets out the Term and Termination . The said Sanction Agreement is effective from 03.12.2004, and is to continue to remain in force and binding between the parties unless terminated either by mutual consent, in writing by the parties or in the event of any of the party being liquidated or wound up or discontinuing its business or activities. It is argued that the agreement is, therefore, not terminable unilaterally by the Respondent. 8. I may note that the Respondent has purported to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n favour of Mr. Gill for ₹ 50,000/- and another, for ₹ 1,000/- issued in favour of Mr. Rajput, both dated 27.01.2006 issued by the President, IHF have also been placed on record. 12. I may note that though the Petitioner sought to throw doubt on the transfers registered on the aforesaid share certificates, as these have been signed on behalf of the Petitioner by Mr. Gill as its authorized signatory, despite my requiring the Petitioner to produce its register of members during the course of hearing, the same has not been produced. Prima facie, I am, therefore, inclined to accept the position as stated by the Respondent in its reply, that the Respondent holds 51% shareholding i.e. controlling stake in the Petitioner company, and ESS holds the remaining 49%. 13. The Respondent has argued that the board of directors of the Petitioner company has not passed a legally binding resolution to initiate the present proceedings against the Respondent, and to authorize Mr. Rajput to act on behalf of the Petitioner company in these proceedings. 14. The submission of the Respondent is that under the subscription and shareholders agreement dated 31.12.2004, to which the Petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Directors of the Petitioner company. The same was delivered to Mr. Sabyachi Dasgupta and Mr. Jyotikumaran, two other directors only on 10.01.2011 and 09.01.2011 respectively. 18. The Respondent submits that in terms of Clause 10.3.2 extracted above, the directors were entitled to not less than clear ten days notice. It is not the case of ESS that the meeting called on 18.01.2011 was an adjourned meeting pursuant to Clause 9.3.3, or that the Directors of the Petitioner had waived the requirement of not less than 10 days notice, in writing. Mr. Nigam also submits that the undated notice issued by Mr. Rajput did not specify the agenda for the proposed meeting. For this reason as well, the said undated notice was illegal and ineffective. The Board of Directors, in any event, could not have considered the passing of any resolution, or could not have transacted any business, for which the agenda was not circulated. There was no agreement between the Directors that the Board may take up the business of considering the filing of the present petition against the Respondent, and for authorizing Mr. Rajput to file the present petition. In relation to the calling and conduct of the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d letter of 20.01.2011 in the light of which, it was categorically stated by Mr. K.P.S. Gill that no valid and legal Board Meeting was held on 18.01.2010. The said letter was duly sent to Mr. Vijay Rajput through registered post. 19. The Respondent submits that in the so called Board meeting held on 18.01.2011, an unauthorized person viz. Mr. Aloke Malik was present. Mr. Jyothi Kumaran, one of the Directors was not present, as sufficient notice was not given. Mr. Sabyasachi Dasgupta, the Managing Director of LSM was present, though he did not represent the Respondent IHF. The Respondent submits that LSM, like ESS, had opposed the agreement entered into by the Respondent with Nimbus Sports and had sent a letter dated 28.12.2010 in this respect. Therefore there was no member in the so-called board meeting held on 18.01.2010, who could represent the interest of IHF. Mr. Dasgupta had a conflict of interest with the Respondent, and could not represent the interest of the Respondent in the said board meeting. 20. The Respondent argues that the Petitioner has not disclosed the fact that the Respondent is 51% shareholder in the Petitioner. The Petitioner has also withheld its own inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 011, called by Mr. Vijay Rajput. The Respondent submits that the excuse given by ESS/Petitioner in the petition, for not organizing the Premier Hockey League, is merely an afterthought and factually not true. It is submitted that the aforesaid communication was issued in March 2008, whereas the Indian Olympic Association illegally suspended the Governing Council of the IHF, and appointed an ad-hoc committee for administering the affairs of IHF, only on 28.04.2008. Therefore, when the aforesaid e-mail was sent on 14.03.2008, the IHF was being governed by its Governing Council. In the said e-mail communication dated 14.03.2008, ESS could not have taken, and did not take the ground, now sought to be urged in the petition for pulling the shutters down on Premier Hockey League after January 2008. It is also submitted that the aforesaid set of agreements, were agreements with IHF, which is a registered society. Even if its Governing Council had been suspended, the Respondent did not cease to exist, and the ad-hoc committee appointed by the Indian Olympic Association was still in existence to administer the affairs of IHF. The agreements entered into by IHF could have been enforced by or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t been filed by a duly authorized representative, and that there is no valid resolution of the board of directors of the Petitioner company, thereby resolving to initiate the present litigation. 28. The Respondent has placed reliance on Article 10.3.2 of the Subscription and Shareholders Agreement entered into on 31.12.2004 between ESS, the Respondent IHF and the Petitioner company. To repel the said reliance placed by the Respondent on Article 10.3.2 and 10.3.3 of the said agreement, the Petitioner has contended that these Articles have not been incorporated in the Articles of the Petitioner company, and consequently cannot be enforced against the Petitioner. 29. To advance this proposition, the Petitioner has sought to place reliance on the decision of the Supreme Court in V.B. Rangaraj v. V.B. Gopalakrishnan and Ors. (1992) 1 SCC 160. In this case, the privately held company had two groups of shareholders, namely, two brothers of the joint family, each holding 50% shareholding in the company. There was an oral agreement between the two brothers that each of their branches of the family would always continue to hold equal number of shares, and that if any member in either o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Company Ltd. 2000 (56) DRJ 405 (DB), and the second being that of a learned Single Judge of this Court in Modi Rubber Ltd. v. Guardian International Corporation 2007 (2) Arb. LR 133 (Del), the decision in Rangaraj (supra) has been distinguished. 33. In Madhusoodhanan (supra), the Supreme Court took notice of Shanti Prasad Jain v. Kalinga Tubes Limited AIR 1965 SC 1535, wherein it had been held that while it is imperative that the company should be a party to any agreement relating to the allotment of new shares, before such an agreement can be enforced, it is not necessary for the company to be a party in any agreement relating to the transfers of issued shares for such agreement to be specifically enforced between the parties to the transfer. (emphasis supplied) 34. Therefore, even if the company is not a party to the shareholders agreement, that by itself, does not prevent the shareholders, inter se, from enforcing their agreement in relation to the transfer of shareholding. At the same time, the court recognized the position that, if the company is a party to an agreement relating to allotment of new shares, the said agreement can be enforced against the company. The S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d agreement only binds the parties to that agreement. The prohibition contained in the shareholders agreement was not rendered illegal or unreasonable, because of any provision of the Companies Act, or any clause of the Articles of Association. It was also held that the agreement was not rendered void or not binding for the reason that it was not incorporated in the Articles of Association of the joint venture company. The covenant between the contracting parties is not prohibited under any other statutory provision, and the same was entered into for the benefit of the joint venture company. It was held that these issues had not been raised before the Supreme Court in the case of Rangaraj (supra). The Court, therefore, held that the restriction contained in the shareholders agreement would bind the parties to the agreement, even if the clause was not contained in the Articles of Association of the joint venture company. 39. In the present case as well, there is no Article pointed out by the Petitioner, in the Articles of Association of the Petitioner company, which conflicts with Articles 10.3.2 and 10.3.3 of the Subscription and Shareholders Agreement. The said articles are als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neither of them got sufficient notice, in terms of Article 10.3.2 of the Subscription and Shareholders Agreement. Even if it were to be assumed that Mr. Dasgupta waived the said infirmity by attending the said meeting, the same cannot be said for Mr. Jyotikumaran. Pertinently, this aspect was raised by Mr. Gill in his communication dated 20.01.2011. 42. The notice for calling a board meeting issued by Mr. Rajput simply reads as follows: Dear Sir, The board meeting of the Company will be held on January 18, 2011 at 11:30 a.m. at 7th Floor, Tower C, Infinity Tower, DLF Ph-2, Gurgaon. The agenda for the meeting will be circulated at the board meeting. Kindly make it convenient to attend the meeting. Yours sincerely, Vijay Rajput Director. (Emphasis supplied) 43. From the aforesaid, it is evident that no agenda for the said meeting was circulated by Mr. Rajput while calling the board meeting. This is in clear contravention of Article 10.3.2 of the Subscription and Shareholders Agreement, which specifically requires that the notice shall be accompanied by a written agenda specifying the business of such meeting. It prohibited the conduct of any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that Order 29 Rule 1 of the Code of Civil Procedure does not authorize persons mentioned therein to institute suits on behalf of the corporation. It only authorize them to sign and verify the pleadings on behalf of the corporation. 24. In my view, the provisions of Companies Act, 1956 and particularly Sections 14, 26, 28 Schedule I, Table A and Section 291 are very clear. 25. It is well-settled that under Section 291 of the Companies Act except where express provision is made that the powers of a company in respect of a particular matter are to be exercised by the company in general meeting-in all others cases the Board of Directors are entitled to exercise all its powers. Individual directors have such powers only as are vested in them by the Memorandum and Articles. It is true that ordinarily the court will not unsuit a person on account of technicalities. However, the question of authority to institute a suit on behalf of a company is not a technical matter. It has far-reaching effects. It often affects policy and finances of the company. Thus, unless a power to institute a suit is specifically conferred on a particular director, he has no authority to institute a suit on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 48. The submission of the Petitioner that Mr. Dasgupta was a nominee of the Respondent and represented the interest of the Respondent in the said board meeting held on 18.01.2011 also does not appeal to me. According to the Respondent, the agreement with LSM, of which Mr. Dasgupta is the Managing Director, had come to an end on 30.06.2010. Mr. Dasgupta had sent a communication on 28.12.2010 to IHF expressing its concern at IHF contemplating the launching of a National Hockey League along with Nimbus Communication Limited. Mr. Dasgupta in the said communication stated as follows: We invite your attention that it is a subsisting contractual commitment of your Association whereby not only we have successfully acted as your Event Manager but have the option of renewal thereof for further terms. In the light of the aforesaid, it is an obligation of your Association not only to hold all such events jointly with us but also to disclose your Plans in advance so that necessary arrangement can be made by us on that behalf as your Event Manager. Indeed, we regret that your above acts definitely tend to infringes our valuable commercial and/or legal rights. 49. From the aforesaid, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Petitioner, as claimed by the Respondent. The Respondent has produced the aforesaid email communication dated 14.03.2008 sent by ESS, inter alia, to the Respondent. Pertinently, this communication was not produced by the Petitioner. A perusal of the said communication leaves no manner of doubt that by the said email, the ESS decided that for future editions of the league to happen, adequate sponsorship support needs to be generated to meet the cost of the entire event (operations plus production) as a minimum requirement ... .... .... In case this requirement is not achieved within the target date, we will have to look at postponing future editions till a time when such sponsorship support does come up. Consequently, the Petitioner evinced its intention not to hold the Premier Hockey League on the ground that it was not able to muster sufficient sponsorship support for holding the future editions of the Premier Hockey League. Pertinently, the Petitioner does not dispute the Respondents' statement that after 2008, no fee has been paid by the CRH ESS under the Master Rights Agreement to the Petitioner. There is no denial of the allegation that ESS has also not paid the player ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ek suspension of the premier hockey league for such period as it encounters difficulty in raising sponsorship or other avenues to hold the premier hockey league, by placing reliance on Article 6.3 cannot be accepted for various reasons. Articles 6.3 and 6.4 of the Sanction Agreement read as follows: 6.3 The Parties acknowledge that in the event that the CRH encounters difficulties in raising sponsorship or other revenues as it requires during any year of the Term, the CRH shall have the right to require the Company to suspend the League during such year of the Term, and the CRH shall have the right to require that the Company provide to it the Commercial Rights in relation to League seasons which shall take place in a number of years immediately subsequent to the Term hereof which is equivalent to the number of years of the Term in which the League is so suspended, at no additional consideration to that set out in the Master Rights Agreement. Consequently and on provision of written notice to IHF by the Company, the Company shall have the right and obligation to suspend the League during such year of the Term, and the Company shall have the right to require that IHF provide to i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unication placed on record, ever issued by the Petitioner to IHF, in terms of Article 6.3 of the sanction agreement. By taking refuge under Article 6.3 or 6.4, ESS or the Petitioner could not have held the IHF to ransom for an indefinitely long period. IHF is obliged to take steps to promote the cause of field hockey in India. Merely because the aforesaid set of agreements had been entered into with the ESS as the CRH, who is the sole provider of funding for the premier hockey league, it cannot mean that CRH will not make any meaningful efforts to hold the premier hockey league on its own by providing the requisite funds/sponsorship for years on end, and not allow any other party to hold the same in collaboration with the Respondent. An interpretation of the agreement, which would give absolute rights to ESS, without any corresponding obligations, prima facie, would be opposed to public policy and public interest and would, prima facie, to be void and unenforceable not only under Section 23 of the Contract Act, but also on account of lack of consideration. It would also hinder the promotion of the national sport, i.e. field hockey in the country. It appears, ESS has woken up only a ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
