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TMI Blog2006 (7) TMI 704X X X X Extracts X X X X X X X X Extracts X X X X ..... rmative vote of the first petitioner; and (ii) no quorum for any meeting of the board of directors of the Company would be possible without the presence of the first petitioners' nominee; (d) to restrain the respondent Nos. 3 4 or any other nominee of the respondent Nos. 2 5 from holding the board meeting on 12.11.2005; and (e) to appoint an independent valuer assess the value of the Company and the loss suffered it on account of the breach committed by the second respondent under the JV Agreement and to surcharge the respondent Nos. 2 to 5 who have acted in concert for having caused loss to the company, the petitioners have come forward with the present application under Regulation 44 of the Company Law Board Regulations 1991, for amendment of the company petition by incorporating certain averments in relation to, among others, Odyssey America Re-insurance Corporation ( OARC ) and claiming additional reliefs, for the reasons stated therein, in support of which Shri Karthik Seshadri, learned Counsel, submitted: The second petitioner and his wife promoted the Company in November 2003 with the main object of establishing industrial estates, information technology parks, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he prayer for surcharging OARC in terms of the JV agreement can be enforced only when OARC is made a party to the present proceedings. OARC's presence is necessary for a complete and final decision on the question involved in the present proceedings and without which, no effective order can be made, especially when OARC is directly interested in the subject matter of the litigation. These are the essential requirements for impleadment of a party as laid down by the apex court in Hirachand Kundanmal v. Municipal Corporation of Greater Bombay, which has been followed by this Board inA. Vellayan v. Cynosure Investments (P) Ltd. (2006)2 CLJ 272. The second respondent had arranged a term loan of US $ 66 million, in the name of the Company from G.E. Capital Services India Limited, against the security of an irrevocable and unconditional guarantee of OARC, as borne out by in principle letter of approval dated 13.09.2004 issued by G.E. Capital Services India Limited, upon receipt of which the Company remitted the upfront fees of US $ 50,000 to G.E. Capital Services India Limited. However, OARC did not furnish any irrevocable corporate guarantee in favour of the lending institution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tue of Order 1 Rule 10(2) of the Code of Civil Procedure, necessary parties in a suit are determined when there must be a right to some relief against such party in respect of the controversies in question; and (ii) no effective decree can be passed in the absence of such party; (b) strangers to the contract are neither entitled to the right, nor subject to the liabilities which arise out of it; strangers can neither enforce the contract nor can recover damages for its breach; (c) necessary parties are those persons in whose absence no decree can be passed by the court or there must be a right to some relief against some party in respect of the controversy in question and proper parties are those whose presence would be necessary to enable the court to effectually and completely adjudicate upon all question in the suit; and (d) strangers to the contract are neither proper nor necessary parties and are not entitled to join as defendants in the suit. OARC never committed any acts of omission or commission of oppression or mismanagement in the affairs of the Company so as to invoke the jurisdiction of Section 397/398. There are no pleadings either in the petition or the proposed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 542, safeguarding the interests of the Company. 3. I have considered the arguments advanced for the parties. The issue that arises for my consideration is whether the prayer for amendment of the company petition is justified in the facts and circumstances of the present case. While the petitioners seek to implead OARC, being proper and necessary party to the present proceedings, it is vehemently opposed by the respondents. In the present backdrop of rival claims, the legal proposition laid down in several of the decisions cited by either side assumes relevance, which is broadly summarised here below: a) A necessary party is one without whom no order can be made effectively. b) A proper party is one in whose absence an effective order can be made, but whose presence is necessary for a complete and final decision on the question involved in the proceeding. c) A party proposed to be added must have direct and legal interest in the controversy involved in the litigation. d) There must be a right to some relief against such party in respect of the controversies involved in the proceedings. e) A proper party is one whose presence before the court would be neces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... million in favour of Data Access US, a wholly owned subsidiary of DAIL. Data Access US had on 19.08.2004 transferred the said amount of US $ 17 billion to DAIL, instead of transferring the funds into account of CHPL, on account of certain criminal acts of Siddartha Ray and his associates. Thereafter, the second respondent took steps to transfer from DAIL, an amount of ₹ 78.45 crores remitted by Data Access US, to CHPL, which in turn transferred a sum of ₹ 35.30 crores to the Company, thereby realising the sum utilised for acquiring the shares of DAIL from Siddartha Ray and associates by CHPL. Further CHPL, out of the remaining balance transferred a sum of ₹ 18.05 crores to KCP Associates Holdings Private Limited (KCPAHPL) and further sum of ₹ 25 crores in favour of Sporting Pastime (India) Private Limited (SP1L). Due to several moves and complicated transactions which were interconnected in the Company, DAIL and CHPL, serious disputes arose between the petitioners and the respondents. In the meanwhile, Siddartha Ray instigated the filing of a winding up petition against DAIL before the Delhi High Court in October 2004. A number of creditors of DAIL intervene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meeting convened on 12.11.2005, the respondent Nos. 2 to 4 have proposed to review the various decisions which have taken over a period of time including the directors of the Company and its subsidiaries, review the financial and accounting controls and procedures, hiring of consultants, replacing of the Managing Director, approving a new name of the Company, new registered office and future plans for the Company and the JV Agreement, with the sole object of removing the second petitioner from the office of Managing Director of the Company. The respondent Nos. 2 to 4 with their strength in the board namely, 2:1 are taking all steps to take over the Company from the second petitioner. The respondent Nos. 2 to 5 acting in breach of trust reposed on them by the petitioners, cannot seek to extract money from the petitioners merely because the petitioners are not amenable to their demands. It is far from doubt that the above charges are levelled only against the respondent Nos. 2 to 5. The petitioners are aggrieved on account of non-adherence to the terms and conditions of JV Agreement by the respondent Nos. 2 to 5 and the reported usurpation of the Company from the second peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fer by virtue of any possible order, which may be passed by the Bench. There are no specific pleadings regarding the default committed by OARC in providing a corporate guarantee. No relief has either been claimed against OARC. The plea of default by OARC raised by the petitioners herein, in their counter statement filed in the company petition No. 76 of 2005, in my view will not go in their aid to enforce any claim against OARC in the light of the observations of the Supreme Court in Sangramsinh P.Gaekwad and Ors. v. Shantadevi P. Gaekwad (supra), the relevant portion of which runs thus: (a) It is now well settled that a case for grant of relief under Sections 397 and 398 of the Companies Act must be made out in the petition itself and the detects contained therein cannot be cured nor the lacuna filed up by other evidence oral ox documentary; (b) If no relief could be granted having regard to the pleadings contained therein, it is inconceivable in law that such relief would be granted on the basis of the pleadings made in other proceedings. It is, therefore, not necessary that OARC should be required to be brought in as a respondent. The petitioners on the basis of the pleadings an ..... 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