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TMI Blog2022 (3) TMI 1411X X X X Extracts X X X X X X X X Extracts X X X X ..... he UK proceedings, AAPICO has secured an award from Singapore Arbitration Tribunal holding that AAPICO is entitled to 3/4 representation in the Board of SACL on the basis that AAPICO currently has majority in SGAH even though the same is disputed in UK Court - Also, as per Section 48 of the Arbitration and Conciliation Act, 1996 a Foreign Award cannot be enforced until the Hon'ble High Court of Madras pass an order to that effect. It was also brought to our knowledge that AOP No. 296 of 2021 is pending adjudication before the Hon'ble High Court of Madras. The Petitioner has made out a prima facie case for this Tribunal to pass an order of interim relief and also the balance of convenience lies in favour of the Petitioner. In view of the fact that the proceedings before the UK is pending as to whether the AAPICO was right in invoking the pledge and claim control of SGAH and also that the Arbitral Award is yet to be enforced by the Hon'ble High Court of Madras, the respondents are permitted to file counter in the main Company Petition within a period of 3 weeks from the date of this order and the Petitioner is also permitted to file rejoinder if any, within a perio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tured herewith: 2.3. The Learned Counsel for the Petitioner submitted that the Petitioner is one amongst 4 valid members of the Company holding shares directly, and also represents the promoter group which held controlling interest through SGAH. 2.4. The Board control of SACL is with the original promotors viz. ABT. It was submitted that SGAH apart from holding SACL, also had operations In USA and China through subsidiary entities. Further, it was submitted that SACL has a wholly-owned subsidiary in Portugal. 2.5. It- was submitted that AAPICO came in as a Joint Venture partner at SGAH level and contributed both equity and loan. In this context, it was submitted that 49.99% equity in SGAH was given to AAPICO, and ABT UK held 50.01% and ABT therefore continued to hold the controlling interest. Hence, it was submitted that ABT continued to be the ultimate holding company of the automotive group. However, in respect of loan funds given by AAPICO, ABT UK's 50.01% shareholding in SGAH was pledged to AAPICO. 2.6. Thus, it was submitted that AAPICO was vested with control of USA operations and AAPICO Chief was also vested with financial control and that they misused s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ucted by Registrar of Companies, if required with the assistance of SFIO. 2.11. The Learned Counsel for the Petitioner submitted that, pending UK Court proceedings, AAPICO has secured an award from Singapore Arbitration Tribunal holding that AAPICO is entitled to 3/4 representation in the Board of SACL and on that basis AAPICO currently has majority in SGAH (holding Company of SACL) even though the same is disputed in the UK Court. In this connection, it was submitted that the award itself notes that UK Court is the proper court to decide on whether AAPICO is entitled to control of SGAH. Thus, it was submitted that the Singapore Award is therefore presently not enforceable since UK Court is yet to finally determine whether AAPICO is at all entitled to control of SGAH. 2.12. The Learned Counsel for the Petitioner submitted that, if AAPICO is not entitled to control of SGAH (Holding Company), naturally, AAPICO is not entitled to control of SACL, which is only a subsidiary of SGAH. 2.13. It. was submitted that AAPICO has moved the High Court of Madras seeking enforcement of the Singapore Award, but High Court is yet to permit enforcement and the same is pending consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ACL had rejected the requisition. Thus, it was submitted that the requisitioned meeting was held by AAPICO themselves on 25.01.2022. 2.17. The Learned Counsel for the Petitioner submitted that all of the aforesaid happened during pendency of the Company Petition No. 387 of 2020 before this Tribunal and without seeking any kind of leave from this Tribunal. Further, it was submitted that no leave of Madras High Court was also taken and that the AAPICO has sought orders from Madras High Court for appointment of an independent observer for this requisitioned meeting, which is unilaterally convened by AAPICO and such order was not granted by the High Court. 2.18. The Learned Counsel for the Petitioner submitted that APICO is guilty of serious acts of fraud and mismanagement apart from orchestrating fraudulent takeovers and causing insurmountable loss to the stakeholders. It was submitted that even when UK Court and Madras High Court are yet to decide on the issues, AAPICO is unilaterally passing resolutions to claim that they control the Board of SACL. If such resolutions are permitted to be implemented, it will render all of the pending legal proceedings infructuous. 2.19. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.3. The Learned Counsel for the Respondent submitted that each interim relief sought by the Petitioner in the CP runs contrary to the reliefs already granted in the Final Award, after an extensive and detailed trial and determination of issues. It was submitted that by resorting to filing such frivolous proceedings, an attempt is being made by a miniscule shareholder holding 0.85% to hold a 77.04% shareholder to ransom - whose rights are clearly set out in the SHA, Articles of Association and have been validated in the Final Award. This has resulted in a situation where the majority shareholder is unable to manage and take control of the SACL Board, while the Sakthi Group (which together with the Petitioner holding negligible shareholding and no financial stake in the company) continues to control the SACL Board. It was apprehended that the Sakthi Group is causing financial losses to SACL, and therefore, the urgency for the AAPICO Group to take control of a company that it is a majority shareholder in. It was submitted that the present proceedings are an unfortunate yet classic dilatory tactic by an Indian promoter to evade contractual and legal obligations towards a foreign in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to appoint directors on the Board of SACL, proportionate to its indirect shareholding of 77.04% in SACL, through SGAH. The Final Award inter alia passed the following directions: 393. Having carefully considered all of the evidence and submissions placed before it, and for the reasons set out above, the Tribunal hereby FINALLY DECIDES, DECLARES AND AWARDS as follows: a. The Respondents are directed to appoint or procure the appointment of such number of directors nominated by Aapico to the board of directors of SACL as is proportionate to Aapico's indirect 77.04% shareholding of SACL. b. The Respondents are prohibited from removing or procuring the removal of any directors nominated by Aapico to the board of SACL such that their numbers wrongfully fall below the proportion reflecting Aapico's 77.04% indirect shareholding in SACL c. The Respondents are directed to amend or procure the amendment of the articles of association of SACL such that the said articles of association are updated to incorporate the relevant terms of the SHA... 3.6. The Learned Counsel for the Respondent submitted that despite the above rights, AAPICO has only one nominee director on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kthi directors and the Petitioner deliberately failed to attend the meeting and no representation was received from the Sakthi directors. The resolutions in the EGM Notice were validly passed. 3.9. It was submitted that it is well settled that no injunction can be granted restraining a shareholder from convening an extraordinary general meeting to remove a director or appoint new directors. In support of its contention, the Learned Counsel for the Respondent placed reliance upon the Judgment of the Hon'ble Supreme Court in the matter of LIC v. Escorts Ltd. Ors., (1986) 1 SCC 264, at paras 99-100, S. Varadarajan v. Venkateswara Solvent Extraction (P) Ltd. Ors at para 24, Jai Kumar Arya Ors. v. Chhaya Devi Anr. at paras 4, 154- 160. 3.10. The Learned Counsel for the Respondent submitted that at the Board meeting held on 17.12.2021 which was called to consider the EGM Requisition, the SACL Board gave several frivolous reasons and raises irrelevant objections to reject the EGM Requisition. While the requisitioning shareholder is not required to give reasons for convening the EGM or respond to any objections that may be raised by the Board, such objections were still ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approval is baseless, vague and a clear afterthought and an attempt to avoid contractual obligations. No provision of law has been shown that requires any such approval. In any event, this issue is irrelevant to the EGM Requisition. 4. A criminal complaint is pending which against Aapico in investigation has been ordered and so pending investigation, Aapico cannot be allowed to take control of SACL which is the prosecuting company This has nothing to do with the validity of the EGM resolution. This is yet another baseless proceeding filed by the Sakthi Group by abusing its corporate structure. After taking huge investments from Aapico, the Sakthi Group are now seeking to stop them from exercising their statutory rights as majority shareholders of SACL in accordance with the SACL Articles, the 2018 SHA and the Final Award by falsely alleging that Aapico has caused losses to SACL (through Sakthi Portugal operations). It is absurd to suggest that a majority shareholder of 77.04% will cause losses to its own company. 5. Aapico cannot seek to enforce Singapore Award until Madras High Court upholds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, the Petitioner has wrongly challenged the validity of the transfer of 1 SACL share each, held by SGAH (a UK entity) to four individuals. It was submitted that the Petitioner is not entitled to challenge the shareholding of any member of SACL, or the validity of any transfer of shares by SGAH (an English company) - which is done as per English law and in compliance with Clause 9 of the SHA. It was submitted that the Petitioner has relied upon Article 29.3 of the unamended Articles of Association, which reliance is incorrect, since Clause 9.2 of the SHA allows transfer of 'Group Shares' (which term includes SACL shares) subject to the condition that the transfer falls within the category of the specified 'permitted transfer . 3.13. The Learned Counsel for the Respondent submitted that the above transfer is a 'permitted transfer' within the meaning of Clause 9.2 of the SHA - which is also incorporated in the Articles of Association of SACL. It was further submitted that the transfer of shares of a public limited company (SACL) cannot be restricted or fettered and such a stand will be ultra vires the Companies Act. The shares of SGAH were duly transferred to f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cordance with the resolution passed at the. EGM and the provisions of the SHA and SACL Articles - as validated by the Final Award. 4. FINDINGS 4.1. Heard the submissions made by the Learned Counsel for both the parties and perused the records. From the facts narrated above, it is seen that the Petition is pressing for certain interim relief to be granted. However, the Respondent Nos. 2, 4 and 5 are strongly opposing for the grant of certain interim relief. 4.2. It.is seen that AAPICO came in as a Joint Venture partner at SGAH level and has contributed both in equity and loan and that as already stated supra, 49.99% equity in SGAH was given to AAPICO, and ABT UK held 50.01% and ABT continued to hold the controlling interest. Hence, ABT continued to be the ultimate holding company of the automotive group. However, in respect of loan funds given by AAPICO, ABT UK's 50.01% shareholding in SGAH was pledged to AAPICO. 4.3. It is an undisputed fact AAPICO has invoked the pledge and claims control of SGAH and consequently, SACL as well. The stance of the Petitioner is that there was a gross and deliberate undervaluation of the pledged shares by AAPICO. Be that as it ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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