9911796707
TMI Blog2004 (5) TMI 600X X X X Extracts X X X X X X X X Extracts X X X X ..... Government decided to divest 49% shares in the company in favour of a strategic partner through international competitive bidding. By a detailed shareholders agreement between the Government of Orissa and AES Corporation, Delaware, USA, 41% shares were transferred to the petitioners and another 8% shares were allotted for a total consideration of ₹ 603.4 crores. Most of the terms of the shareholders agreement have been incorporated in the articles of association of the company. The entire electricity power generated by the company is to be supplied to Grid Corporation of Orissa which is a 100% Government company. In turn, GRIDCO supplies the entire power to various distribution companies including CESCO in which one of the subsidiaries of AES holds 51% shares. The company had entered into a power purchase agreement (PPA) with GRIDCO. This power purchase agreement was amended by a tripartite agreement entered into between the company, the Government of Orissa and GRIDCO. As per this agreement, an escrow account was to be set up by GRIDCO in favour of the company in which all the proceeds of sale by GRIDCO would be credited for timely payment to the company and every month the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the company. The shareholders agreement sets out the valuable, infallible, and inviolable right of the petitioners including vesting of all day-to-clay affairs of the company and operations in the nominees of the petitioners. As per the articles of association of the company/ shareholders agreement, the petitioners have the right to appoint the managing director vesting with him all the powers of day-to-day management of the company. However, the 2nd respondent and his nominee directors have blatantly violated this agreement and are also carrying on the affairs of the company in a manner prejudicial to the company, the petitioner shareholders and public interest. The 2nd respondent and his nominees on the board have progressively tried to overreach the terms of the shareholders agreement and articles and taken decisions wholly contrary to the same. They have also been acting in breach of their fiduciary duties as directors of the company. 4. The learned counsel continued: In terms of the tripartite agreement, GRIDCO had allotted 15% power bonds aggregating to ₹ 60 crores on 1 April 1998 redeemable in 3 installments. In terms of the allotment of the bonds, the company had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 33.75 crores which was payable to the 2nd respondent. Additionally, the company also owed a further sum of ₹ 12.41 crores towards loan installment and guarantee commission. Thus a total amount of ₹ 46.17 crores was payable by the company to the 2nd respondent. After the petitioners became shareholders, in the year 1998, in the tripartite agreement, it was provided that this sum of ₹ 46.17 crores would be adjusted against the 25% contribution to be made by the 2nd respondent towards the escrow account. A sum of ₹ 31.71 crores was adjusted immediately. Of the balance, ₹ 8.46 crores was adjusted in anticipation of the approval of the 2nd respondent. The remaining balance of ₹ 5.98 crores was paid to the 2nd respondent. This was done in the year 1999 and was duly recorded in the letter issued by the nominee directors of the 2nd respondent-(Annexure M). Due credit was also given to GRIDCO. However, in spite of the fact that outstanding dues to the company were mounting, and the 2nd respondent, which was in breach of its 25% contribution commitment, issued two letters to the company dated 13.8.2001 and 26.9.2001 seeking for payment of ₹ 8.46 cro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GRIDCO bonds against monies in escrow account. By a notice to CM (Finance), GRIDCO, dated 10.8.2000, the managing director of the company pointed out to various defaults committed by GRIDCO under the power purchase agreement. Similarly, he had also taken up with the 2nd respondent and GRIDCO to comply with the terms of the tripartite agreement. The constant disregard of the mandate of the minority protection contained in the articles of association of the company is a grave act of oppression against the petitioners who have invested substantial amount of money in the company as a strategic partner. 6. The learned counsel further submitted: In terms of Article 25 of the articles of association, the managing director appointed by the petitioners shall be in charge of all day-to-day affairs of the company. Unit No. 2 of LB Thermal Power Station was shut down for maintenance in May 2001. Since an enormous amount of dues was outstanding from GRIDCO, the managing director decided to resume supply at a reduced load. The fifth respondent had also earlier expressed his concern that in view of the mounting arrears from GRIDCO, it would not be justifiable to operate the plant at a high pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the director (finance) has acted contrary to the instructions given by the managing director in the matter of payment of bills for supply of coal. The company has been buying coal from MCL. Since the quality of coal supplied by MCL, a PSU, was not up to the mark resulting in a huge loss to the company, the managing director issued instructions that part payment from the bills of MCL be withheld till the quality improved. Accordingly, director (operations), a nominee of the petitioners, issued instructions that future payments to MCL should not exceed 50% of the bill amount without clearance by the managing director. How-ever, on 19.9.2001, the director (finance) released the entire monthly bill of MCL. When the matter came up for consideration in the 100th board meeting, the nominee directors of the 2nd respondent in spite of protest by the managing director voted in favour of full payment to MCL and since there was a lie, the chairman exercised his casting vote in favour of payment to MCL. In that meeting, the director (finance) and CMD, GRIDCO, expressed the view that while the managing director has the authority to order payment of coal bills, he has no authority to withhold t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve a detailed dissenting note protesting against any such delegation. Instead of putting the proposal for voting, it has been recorded in the minutes that the proposal had been approved. Such delegation of powers to the finance director is a deliberate attempt to encroach upon the day to day management powers of the managing director in terms of Article 25, especially, when it has been proposed that financial powers delegated to the managing director and other full time directors will be exercised by them only after due constitution with the Director (Finance). For delegation of power to Director (Finance), the nominees of the 2nd respondent have relied on the guidelines which are applicable to public sector undertakings. Once the Government has taken a policy decision to divest in favour of a strategic partner, the question of application of the guidelines pertaining to public sector undertakings does not arise. It has been very clearly spelt out in the articles that the managing director shall be in charge of the day-to-day affairs of the company and, therefore, by this delegation of financial powers to the Director (Finance), the nominees of the 2nd respondent have attempted to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ominees of the majority shareholders have effectively nullified the minority protection given in Article 25. The only way by which the interest of the company could be protected and the oppressive actions of the 2nd respondent and his nominees could be put an end to is by deletion of Article 3026, which empowers the Hoard to delegate powers to the director (finance) and also by direction to the 2nd respondent to divest further 2% of the shares in favour of the petitioners so that the petitioners who are experts in power generation business become the majority shareholders. The power of the Company Law Board to alter/delete has been answered in the affirmative by Bombay High Court in Bennett Coleman Ltd. v. Union of India (1977) 47 Comp Cas 92 (Bom). When the petitioners joined the company as strategic partners by paying a huge amount of over ₹ 600 crores for 49% shares in the company was on the basis of the commitment of the Government of Orissa to enhance the holding of the private sector participant, to a majority by 2000-2001. This decision was communicated by the Principal Secretary, Energy Department of Orissa Government to DSP Merryl Lynch Ltd. by a letter dated 10 Dece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orders through gross misrepresentation, concealment of material facts and misleading statements. 12. On merits, he submitted: The main thrust of the petition is that the nominees of the 2nd respondent have been showing undue favour to GRIDCO and the 2nd respondent in breach of their fiduciary duties. This allegation is baseless. It is true that there have been dues receivable from GRIDCO and such dues were being reviewed practically in every board meeting in which the nominees of the petitioners were always present. At no lime, the nominees of the petitioners either suggested any coercive method like invoking the Government guarantee in respect of the bonds or exercise of put option in relating to the same nor the nominees of the 2nd respondent objected to such actions proposed by the nominees of the petitioners. 13. He further submitted: The company is a board managed company, both the petitioners and the 2nd respondent having equal number of nominees on the board. Therefore, the question of the 2nd respondent conducting the affairs is neither a fact nor is permissible in law. Further, it is the nominee of the petitioners being the managing director is in charge of day-to-d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the nominee directors of the 2nd respondent have acted in breach of their fiduciary duties, by not enforcing the terms of PPA and tripartite agreement are baseless. If there was any default in enforcing contractual rights by the company, the nominees of the petitioners are also guilty of the same. It is a settled law that a party to a decision cannot complain of the same later held by the Company Law Board in Desein (P) Ltd. v. Electrim India Ltd. (2001) 3 Comp LJ 459 (CLB) and as held by Madras High Court in Anugraha jewellers v. KRS Mani (2005) 1 Comp LJ 457 (Mad): (2003) 111 Comp Cas 501 (Mad). Therefore, all the allegations in regard to bonds and dues from GRIDCO have no basis to allege that the nominees of the 2nd respondent have acted in breach of their fiduciary duties. No doubt, the 2nd respondent holds 100% shares in GRIDCO. It is equally important to note that it also holds 51% shares in the company and, therefore, there is no reason for the 2nd respondent to show any favours to GRIDCO against the interest of the company. 14. As far as dilution of the escrow arrangement with GRIDCO is concerned, the allegation of the petitioners is that the 5th respondent-the dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd payable to 2nd respondent, it took the decision to receive the amount in cash. Therefore, there is nothing illegal or oppressive on the part of the 2nd respondent to ask for payment of the dividend. A company is mandated to pay the dividend to the shareholders and it cannot unilaterally adjust the same against any dues. In the present case, while the 2nd respondent agreed for adjustment of a part of the dividend, it did not agree for the balance. When a shareholder claims the dividend declared, the petitioner cannot say that by claiming the dividend, the 2nd respondent has acted in a manner either prejudicial to the interest of the company or oppressive to the minority shareholders. As a matter of fact, the company had no business to adjust a part of the dividend on the basis of certain contractual obligations. Even otherwise, such adjustment was subject to the consent to be given by the 2nd respondent. Therefore, this allegation has been made for the sake of making the allegation. 16. He further submitted: As far as release of payment to MCL for purchase of coal is concerned, it was a commercial decision taken by the Director (Finance) in the interest of the company. MCL is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the transfers created considerable confusion in the Finance Department, the chairman had to intervene and had to issue the office order and therefore, the exercise of executive powers by the chairman cannot amount either to an act of oppression or mismanagement. 18. Shri Natrajan further submitted: As far as delegation of powers to Director (Finance) is concerned, lie had always enjoyed parallel and concurrent powers with the managing director in terms of the board resolution dated 19.2.1996. However, since disputes arose regarding the powers of Director (Finance), the nominee directors of the 2nd respondent desired to explicitly spell out the powers of the managing director and director (finance). But the nominee directors of the petitioners did not cooperate. While the director (finance) had given his proposal of his powers and functions, managing director has not so far given his proposal as to what all constitute day-today management. Inaction on his part has been minuted in the minutes of the board meetings held on 13.7.2002 and 29.9.2001. Since the 2nd respondent holds 51% shares in the company, in terms of Section 617 of the Act, it continues to be a Government company, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omotions in violation of the company rules, interferes with the administrative powers of the Director (Finance). Therefore, it is the nominees of the petitioners who are acting in an oppressive manner and against the interest of the company and as such, do not deserve any relief. Even otherwise, the petitioners have not established that the nominee directors of the 2nd respondent have acted in breach of their fiduciary duties nor the 2nd respondent have acted in an oppressive manner and as such the petition should be dismissed. 20. I have considered the pleadings and arguments of the counsel and also their written submissions except that 1 have not referred to some of the case laws relied on by the petitioners in the written submissions which were not cited during the hearings. When the petition was mentioned on 13.11.2001, certain interim reliefs were sought ex parte. Considering the facts and circumstances of the case, this Bench stayed the circular resolution relating to curtailment of the financial and commercial powers of the managing director. Thereafter, the petitioners filed a few more applications seeking for certain interim reliefs on which this Bench had passed approp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng which he would be in breach of his fiduciary duties. It is more so in case of nominee directors when there is a clash of interest between the company and their nominators. Some of the allegations of the petitioners are that the nominees of the majority shareholders are guilty of inaction in the sense that they have failed to enforce contractual obligations of their nominator, viz.. the 2nd respondent and/or that of GRIDCO. The question as to whether acts of omission/ inaction could also be considered to be oppressive has been examined in Scottish Cooperative Wholesale Society Ltd. v. Meyer (1958) 3 All ER 66 (HL) which has also been followed in Needle Industries (India) v. Needle Industries Newey (India) Holding Ltd. (1982) 1 Comp LJ 1 (SC). In terms of the decision in these cases, shareholders can complain that the directors have acted in an oppressive manner when, with ulterior motive, they do nothing to defend the interest when they ought to do something. Similarly, if they fail to enforce contractual rights, the shareholders could definitely claim that the directors have acted in an oppressive manner. Keeping these principles in mind, the allegations of the petitioners have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said decision is either oppressive or against the interest of the company. In this connection, Shri Natarajan rightly referred the decisions in Electrim India and Anugraha cases [i.e., Desein (P) Ltd. v. Electrim India Ltd. (2001) 3 Comp LJ 459 (CLB) and Anugraha Jewelers v. KRS Mani (2005) 1 Comp LJ 457 (Mad)], respectively]. Further, I also note that the commitment by the 2nd respondent to contribute toward 25% was agreed to be an interim arrangement for a period of 18 months from 1 April 1998 and was to be reviewed later [clause 6(ii) of the tripartite agreement]. Whether any review was done and the commitment was continued after October 1999 is not clear. If it had run been renewed, then, the allegation of inaction by the nominees of the 2nd respondent to enforce the said commitment after October 1999 has no basis. Therefore, I am of the view that all the allegations relating to these issues have been made only for the sake of making the allegations and not on valid grounds. 24. As far as the allegation relating to dilution of the security for payment of energy bills is concerned, the allegation is that the Director (Finance), a nominee of the 2nd respondent, by entering i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lder whether a minority or a majority is entitled to receive the dividend declared by a company. The complaint of the petitioners is that the director (finance) had complied with the demand of the 2nd respondent to pay ₹ 8.46 crores which had already been adjusted against a part of 25% contribution to be made by the 2nd respondent. It is on record that this adjustment was made in anticipation of the approval of the 2nd respondent and was not done with its approval. It is to be noted that an amount of ₹ 31.71 crores was adjusted with the specific approval of the 2nd respondent. If a shareholder makes a concession that some dues from him could be adjusted against the dividend, it does not mean that the company could demand such a concession from him as a matter of right and if he refuses to give the concession, allege that it is an act of oppression. The contention that the release of this payment required affirmative vote of the nominees of the petitioners in terms of Article 30(0 is unfounded inasmuch as this Article 30which reads 'Contracting any loan or executing guarantee or indemnity or giving more time for payment than contracted for or making investments in an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nominees of the petitioners insisted, as a proposal to the board, enforcement of the same to attract the provisions of Article 30(f). When the articles protect the interest of the petitioners and the company, in the absence of any concrete instance of the nominees of the 2nd respondents showing any favour either to the 2nd respondent or GRIDCO without the consent of the nominees of the petitioners, seeking for restraining the nominees of the 2nd respondent from participating in decisions relating to 2nd respondent of GRIDCO, does not arise. 27. Other allegations in this petition and counter allegations by the respondents reflect that there is a struggle for power going on between the parties. While the petitioners complain that the nominees of the 2nd respondent have usurped the powers of the managing director, it is the complaint of the respondents that the managing director has been exercising powers not vested in him. The power struggle appears to have started from the decision of the managing director to resume the power plant with a reduced load and passing of a circular resolution on 21.5.2001 by the nominees of the 2nd respondent restraining the managing director from ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions in the Act according to which certain decisions can be taken only with the approval of the general body and there are provisions according to which certain decisions can be taken only by the board. In terms of the second proviso to Section 291(1), the exercise of the powers by the board is, inter alia, also subject to the provisions in the articles. In the present case, the managing director has been entrusted with all clay-to-day affairs of the company by Article 25. Article 33 elaborates the powers of the board indicating clearly that the managing director cannot exercise any of those powers. Likewise, in terms of Article 30, even the board cannot take certain decisions indicated in that Article 30without an affirmative vote of at least one nominee each of the petitioners and the 2nd respondent. In other words, the division of powers is explicit in the articles. Therefore, it appears that except those matters reserved for the board in terms of articles 30 and 33, all other matters would fall within the day-to-day affairs of the managing director. To come to this conclusion, I have taken into consideration the nature of participation of the petitioners in the company. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of what constitute the day-to-day affairs of a company, which incidentally, is also very difficult to visualise and list. Further, it is not disputed that at the relevant time, the plant had been closed down for maintenance during the period from 8 May 2001 and the managing director had only taken a decision to resume operation at a reduced load and he had not decided to close down the unit as indicated in the circular resolution. The letter of the managing director dated 17.5.2001 to CMD GRIDCO reads: This letter is to inform you that we expect to have Unit 2 of LB TPS 100% available tonight. We are, however, not going to resume normal operation of the unit due to non-payment of electricity as required by the PPA. The output of LB TPS will remain at a reduced load until further notice. It is unlikely to resume until significant progress has been made at reducing the outstanding receivables. You are again requested to urgently lake up this matter. . 28.5 It is not uncommon, as a sound commercial practice, to warn a customer who owes a large amount for the supplies made earlier that further supplies would be either stopped or reduced till the dues are cleared. Such a power is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether the failure of GRIDCO to clear the bill was wilful or because of its inability to recover dues from its own customer in time, taking into consideration that by delaying the payment of the monthly bills, GRIDCO would not be entitled to the rebates provided for prompt payment. Any way, viewing as a commercial proposition and his authority to do so, the managing director cannot be faulted for taking such a decision in the interest of the company and the nominees of the 2nd respondent which is Government of Orissa being the custodian of the public interest, can also not be faulted for directing the resumption of normal supply in public interest. Therefore, instead of passing an urgent circular resolution, the issue could have been sorted out through mutual discussions as it had happened in the past whenever dues from GRIDCO were being discussed in board meetings. 29. As far as the second part of the resolution restraining the managing director from exercising his financial and commercial powers is concerned, which has hardened the attitude of the parties, as is evident from subsequent events, 1 am of the firm view that the nominees of the 2nd respondents had grossly erred an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the plant could be affected. I am of the view that the hasty action of the Director (Finance) was unjustified. I have already observed that the managing director being in charge of day-to-day functions can take decisions in the interest of the company which actually is a fact as no one can expect to be paid for inferior quality of goods supplied. Further, there is nothing on record that MCL had stipulated that in the absence of full payment, further supplies would be suspended. Acting on a mere apprehension and countermanding-a bona fide commercial decision taken in the interest of the company by the managing director when the fact that the quality of the coal supplied was not up to the mark is fully known, the Director (Finance) had either exhibited lack of experience in dealing with commercial matters or did so to favour MCL which is also a PSU. Further, this action of the director (finance) also undermines the dignity of the office of the chief executive (managing director) in the eyes of his subordinates, which is not in the interest of the company. It is all the more surprising that even the other nominees of the 2nd respondent should have come to the conclusion, on exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resent case, since the managing director has been entrusted with all day-to-day affairs of the company in Article 25, the same cannot be altered either by the board or the general body without amending the articles. However, the same Article 30provides that he shall exercise his powers subject to the superintendence of the Board. The term 'superintendence' means the act of superintending, care, and oversight for purpose of direction and with the authority to direct': Law Lexicon By S. Ramanatha Iyer. Therefore, the board has the right to oversee his functions and give directions as to how he is to discharge his functions, without either curtailing or curbing his powers in discharging his day-to-day functions. Further, in every organisation, besides the day-to-day functions, there are policy matters which will not form part of day-to-day functions of the managing director. Policy matters have to be decided only by the board and the managing director has to function within the policy framework in discharging his day-to-day functions. As long as the policy decisions do not curtail or curb his powers relating to discharge of his day-to-day responsibilities, there would be n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s omission is significant as the 2nd respondent should have been conscious of the fact that such a stipulation in the articles would be counter productive to the reform process. Therefore, guidelines as exist in PSUs cannot be applied to the company. In terms of Article 3026, the finance director and operating director shall exercise such powers as may be delegated by the board. The respondents have relied on the delegation of powers made by Board on 19.2.1996 (Annexure R-1). It is to be noted that this resolution was passed when the company was a 100% Government company. It appears that at that time, the posts of chairman and managing director were a combined post and the Director (Finance) was a full time director and they were to exercise all powers vested in the board except those enumerated in Annexure A to the resolution. Once the articles have been amended providing for a full time managing director with full day-to-day management powers, and the director finance is to exercise powers to be delegated to him, the question of relying on the resolution dated 19.2.1996 does not arise. Therefore, the contention that the chairman, managing director and director (finance) have conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be protected and not that of the majority shareholder. In terms of the Article 3026, the finance director is to exercise such of those powers that may be delegated by the Board. Therefore, the petitioners cannot claim that the Board cannot delegate any powers to the finance director. While delegating powers to the finance director, the Board should keep in mind that the concepts of financial consultation, financial concurrence and financial advice are not synonymous. While it is a healthy practice and is financially prudent to provide for consultation with or advice of the director (finance) beyond certain financial limits, with the final decision resting with the managing director, providing for concurrence, especially in the present strained atmosphere, would not be in the interest of smooth functioning of the company, and would also amount to undermining the general powers of the managing director. In terms of the articles, the 2nd respondent is entitled to appoint the director (finance), and the petitioners, the director (operation) and they are to be delegated powers by the Board. Therefore, the powers delegated to both of them should be similar and on equal fooling, of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... casting vote as long as it holds more than 50% shares in the company. The Companies Act does not provide for or define the office of 'chairman' nor does it elaborate his powers. Even in the articles of the company, other than staling that the chairman will have a casting vole, it has not elaborated his powers. The company has adopted Table A contained in the First Schedule to the Companies Act. In terms of Article 76 of Table A, the board has the power to elect a chairman of its meetings and determine the period for which he is to hold office. In the present case, in terms of the Article 24, the 2nd respondent has to right to appoint a chairman. Therefore, in the absence of any powers vested in the chairman by the articles, or by any board resolution, his role has to necessarily be limited to that of chairing board meetings and general body meetings (in terms of Article 50 of Table A) with the right to exercise a casting vote. Further, it is also on record that he is the Principal Secretary to the Government of Orissa, Energy Department and as such, is not a full lime executive chairman. Therefore, in the normal circumstances, he has no power to exercise any executive power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce that the chairman had acted in a manner oppressive to the rights granted to the nominees of the petitioners in terms of Article 25. Therefore, till the finance director is delegated powers by the board, this office order can have no effect. 35. As far as the exercise of casting vote by the chairman is concerned, no doubt, Article 24 provides for the same. Casting vote is exercised when there is a tie. Exercise of casting vote is always discretional. Article 24 is silent as to on what occasions the chairman can exercise his casting vote. Normally, when the chairman has a casting vote, he is entitled to exercise the same in respect of every business that is transacted in a board meeting or in. a general meeting. However, in the present case, the managing director is vested with all day-to-day affairs of the company and the articles also specifically stipulate matters which are to be decided in the Board and also which require the affirmative votes from a nominee from both the groups. Therefore, in respect of any matter that comes before the board in terms of Article 33, the chairman has the right to exercise his casting vote. However, in respect of other matters, more particul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 2nd respondent to the effect that the strategic partner would be made a majority by 2001, is found. There is nothing on record that the petitioners had relied on the letter written to Merrill Lynch by the 2nd respondent, before investing in 49% shares and that such reliance had been communicated to the 2nd respondent and that the 2nd respondent had also acted on that reliance to bind the 2nd respondent. Therefore, there is no scope for application of the principle of estoppel. The only commitment of the 2nd respondent regarding shares, as is evident from Article 309, is that the 2nd respondent cannot transfer its shares without first offering the same to the petitioners and that in case of issue of further shares, the same must be offered to the shareholders in proportion to their existing holding (Article 15A). The learned counsel for the petitioners, alternatively submitted, relying on the decision of this Bench in Manshobra Resorts case, that the petitioners being experts in power generation, they must have the majority. In that case, even though this Board formed an opinion that the petitioner being an expert in hotel business, it should be entitled to purchase the shares of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eholders. liven though I have given certain directions to protect the interest of the minority with the view to put an end to the acts complained of and also to ensure that such complaints do not occur in future, yet the nominees of the petitioners should be pragmatic and practical when the issues requiring the affirmative votes come before the Board and the chairman, in exercising his casting vote, These protective provisions in the articles are not meant to be used for testing the strength of the parties, but only to prevent abuse of authority by one against the other. When the 2nd respondent has inducted the petitioners as strategic partners as a part of power sector reforms, the success of the reforms should be reflected in the better performance of the company for which the nominees of both the sides should work together instead of trying to score over the other. I am confident that both could work together successfully forgetting the past, as, there is a substantial change in the composition of the Board now, than what was prevailing when the disputes started. In this connection, I may also refer, for the benefits of the parties, to Article 3019A, according to which both the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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