TMI Blog2009 (8) TMI 1272X X X X Extracts X X X X X X X X Extracts X X X X ..... While making the payment CEPL, CG Holdings and KCP shall ensure that at least 25 per cent of the amount due is paid in every quarter. CEPL, C. G. Holdings and KCP are at liberty to make use of the fixed deposit held by CEPL with SBI, Erode Main Branch, free of any liens or encumbrances, towards refund of the investments of ORE and Athappan. VML shall not alienate or sell any of its immovable properties till full payment is made to ORE, in terms of this order. In the event of any failure to make the repayment within the specified time, CEPL, CG Holdings, KCP and VML will duly convey the immovable properties of VML, namely, 17.15 acres of land in favour of ORE and 7.80 acres of land in favour of Athappan by executing and registering necessary deeds of conveyance in strict compliance with all applicable laws, as consideration for reduction of capital and surrender of the shares of ORE and Athappan, upon which ORE as well as Athappan will deliver the share certificates and blank transfer forms in respect of their holdings in CEPL and the subsidiaries, if any, in favour of CG Holdings and KCP. CEPL is consequently authorised to reduce its share capital and in the meantime, operation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... registered against KCP and six others pursuant to a complaint of one Thiru Ravichandran, a power agent of CEPL, under the express instructions of Chandran Rathinaswami and R. Athappan after conclusion of the hearing in C. P. No. 65 of 2005 and C. P. No. 76 of 2005 and (b) the contrary directions from other directors of CEPL and ORE, with regard to release of the fixed deposits, as per the legal notices dated August 18, 2008, issued by M/s. Kochhar and Co., and AZB and Partners, respectively. Therefore, the instructions of ORE on behalf of CEPL issued to SBI to continue to maintain the fixed deposits in the name of CEPL, until further instructions from its directors defeats the implementation of the order and at the same time ORE has come forward with C. A. No. 155 of 2008 complaining of non-compliance with the order on the part of C. G. Holdings and KCP. C. G. Holdings and KCP again called upon N. Athappan to surrender his shares and transfer deeds against receipt of Rs. 545.52 lakhs without reference to the fixed deposits in the account of CEPL by a letter dated August 20, 2008, but he remained silent till date. In the meanwhile, Chandran Rathinaswami, caused a notice dated Septe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wyers to represent CEPL before various forums, contrary to the spirit of the Company Law Board order that the affairs of CEPL will be run by C. G. Holdings and its nominee director. ORE, N. Athappan and R. Athappan seeking to frustrate the terms of the order cannot complain of non-compliance with the order by C. G. Holdings and KCP. The only intention of N. Athappan and ORE is to get the funds from SBI and the properties of VML. ORE and R. Athappan together want to frustrate KCP in his attempts to repay the investments, as per the order dated August 13, 2008. Their actions are lacking trust and probity and oppressive to the remaining shareholders and their nominee directors on the board, warranting an order of injunction restraining respondents Nos. 2 to 6 from interfering with the day to day management of CEPL, including by way of writing letters to banks and other third parties. 3. N. Athappan, thereafter filed Crl. O. P. No. 1137 of 2009 seeking directions of the High Court to defreeze the fixed deposits, without however, making either C. G. Holdings or KCP as parties knowing that any order passed therein would affect the rights of CEPL and KCP. N. Athappan is a party to C. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to make use of the fixed deposits kept with the SBI towards the refund of the investments made by ORE and N. Athappan. Nevertheless, KCP unilaterally attempted to deal with the fixed deposit amounts, without sharing contents of his request made to the SBI and contrary to the order, as borne out by his letter dated August 18, 2008, sent to the SBI. ORE was therefore, constrained to call upon SBI, through its counsel in terms of a letter dated August 18, 2008, not to deal with the funds of CEPL, without concurrence of the entire board of directors of CEPL. Accordingly, SBI in its communication dated September 4, 2008, required a common mandate from CEPL, C.G. Holdings and KCP for release of the fixed deposits. 5. ORE is a body corporate incorporated and existing under the laws of Mauritius, thereby constituting a non-resident for the purpose of Foreign Exchange Management Act, 1999. Any transfer of funds or securities from a resident to a non-resident or vice versa would attract the provisions of FEMA. Any transfer of shares from ORE to C. G. Holdings or KCP and/or reduction of capital of CEPL should necessarily satisfy the requirements of FEMA and the Act. The order specifies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on behalf of CEPL. 8. The request of KCP made to SBI in his letter dated August 18, 2008, to release a sum of Rs. 545.52 lakhs in favour of N. Athappan and balance of the fixed deposit amount in favour of ORE is not only contrary to the order but also adversely affects the rights of ORE to realise the amounts as per the order of the Company Law Board. The only object of KCP in settlement of the whole claim of N. Athappan in terms of his communication dated August 20, 2008, is to gain majority holding of CEPL, upon getting the shares held by N. Athappan. KCP is attempting to encash the fixed deposits kept with the SBI, without however meeting the claim of ORE and N. Athappan, contrary to the order. In view of this, KCP must be directed to utilise the fixed deposit amount only to repay a part of the investments made by N. Athappan and ORE and KCP should not be allowed to deal with the fixed deposit amount in any other manner, which would result in grave injury to ORE and N. Athappan. The High Court also in its order dated January 21, 2009, made in Crl. O. P. No. 1137 of 2009 directed the SBI to release the fixed deposit amount in terms of the Company Law Board order. SBI in its re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... horise any officer of this board to sign, execute and tender all documents on behalf of C. G. Holdings and KCP that may be necessary under the Companies Act, 1956, the Foreign Exchange Management Act, 1999 and any other applicable law, 1999 to facilitate repayment of the investment of ORE in accordance with the order. (d) to direct KCP and VML to take necessary action within a period of four weeks to clear the liabilities of VML in respect of its contributions to the employees' provident funds and cause the attachment on the property of VML to be vacated. (e) to modify the order dated August 13, 2008, to clarify that, upon any failure to pay the funds owed to ORE in terms of the order, the property belonging to VML be conveyed pursuant to sale to a willing buyer nominated by the petitioner and permit the petitioner to receive the proceeds of the sale thereof. 10. Shri S. Sivanandaraaj, learned counsel, appearing for N. Athappan and R. Athappan submitted as hereunder : By virtue of the Company Law Board order, CEPL shall returned the investments made by the ORE and N. Athappan together with the interest within a period of 12 months commencing from Novembe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its inability to release the amounts for want of any request to release the funds from CEPL, C. G. Holdings and KCP, compelling N. Athappan to approach the Bench for appropriate orders as claimed in C. A No. 10 of 2009, thereby removing the difficulties faced in implementation of the order. As on date an amount of Rs. 52 crores ought to have been dispersed as per the order, however no amount has been paid till date by C. G. Holdings and KCP in gross violation of the order. 11. C. G. Holdings and KCP have no intention of complying with the order of the Company Law Board. They seek the exit of ORE and N. Athappan from CEPL without complying with the terms of the order. None of the reliefs claimed in C. A. No. 154 of 2008 is in any way related to the implementation of the order. The company application (C. A. No. 154 of 2008) is an attempt for frustrating the order, thereby protracting the litigation and frustrating the respondents. 12. N. Athappan and ORE will continue to remain as shareholders of CEPL until their investments together with interest are returned to them or the properties belonging to VML are transferred to them in terms of the order. The order does not envisage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts of ORE and N. Athappan are returned with interest as per the order, the question of inducting any additional director does not arise. 13. According to the SBI, CEPL by its letter dated February 4, 2009, countermanded its earlier instructions of August 18, 2008, for release of fixed deposits. Furthermore, the fixed deposits were frozen by an order of the Central Crime Branch, Chennai, which came to be subsequently defreezed by an order dated January 20, 2009, of the Madras High Court. CEPL, C. G. Holdings and KCP shall make necessary demand for release of fixed deposits in favour of ORE and N. Athappan and accordingly advised, N.Athappan's counsel by way of a letter dated February 9, 2009. SBI is bound to take appropriate precautions to ensure that no claim is made against it consequent upon release of the fixed deposits. SBI is always ready and willing to abide by the Company Law Board order in regard to release of the funds in favour of ORE and N. Athappan, who may be directed to furnish necessary documents to the SBI for repatriation of such funds. 14. Shri H. Karthik Seshadri, learned counsel, in his rejoinder submitted as under : CEPL, C. G. Holdings and KC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of ORE and N. Athappan cannot be returned, in which event they would get the properties of VML and thereby CEPL would become defunct, which is prejudicial to its interests, C. G. Holdings and KCP. 16. The nominee directors of N. Athappan and ORE cannot convene any board meeting and they are trying to exercise all their rights thereby preventing KCP to take necessary steps freely to honour the terms of the Company Law Board order. KCP is prevented from taking any business decision on account of the interference of the nominees of N. Athappan and ORE. 17. The company applications (C. A. No. 155 of 2008 and C. A. No. 10 of 2009) would amount to review of the Company Law Board order. In view of the communication dated August 20, 2008, of KCP's counsel calling upon N. Athappan to receive an amount of Rs. 545.52 lakhs in full settlement on surrendering his share certificates, the company application, namely, C. A. No. 10 of 2009 should be dismissed, especially when N. Athappan deliberately failed to respond and thereby enable KCP and C. G. Holdings to comply with the order. All the prayers made by ORE in C. A. No. 155 of 2008, seeking modification of the Company Law Board ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a view to complete the expeditious exit of ORE and Athappan from CEPL and till such time statutory compliances shall be taken care of by CEPL. (f) The parties to the litigation are given the freedom to approach the Company Law Board if any difficulty is encountered in connection with the exit of ORE and Athappan from CEPL in terms of the Company Law Board order. 19. The rival contentions of KCP, ORE and N. Athappan are to be appreciated in the light of the aforesaid directions of the Company Law Board. CEPL, C. G. Holdings and KCP are bestowed upon the right to deal with the fixed deposits of CEPL kept with SBI, towards refund of the investments of ORE and Athappan. There is no constraint on the part of CEPL, C. G. Holdings or KCP in utilising the proceeds of the fixed deposits in any particular manner. They have been given freedom to settle the claim of ORE and Athappan from and out of the maturity proceeds of the fixed deposits, while ORE, N. Athappan or R. Athappan does not enjoy any discretion in the matter of utilisation of the fixed deposit amount lying with the SBI. There is no ambiguity in the authority enjoyed by CEPL, C. G. Holdings and KCP in making use of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 76 of 2005 was concluded on January 31, 2008 and the final order came to be passed on August 13, 2008, by which CEPL, C. G. Holdings and KCP have been given the discretion to utilise the fixed deposits with the SBI towards refund of the investments of ORE and N. Athappan. The aforesaid interim order dated January 5, 2006, accordingly stood modified in the light of the final order dated August 13, 2008, thereby granting liberty to CEPL, C. G. Holdings and KCP to deal with the fixed deposits, in terms of the final order dated August 13, 2008. There is no embargo on the part of CEPL, C. G. Holdings and KCP to use the fixed deposits only towards return of the investments made by ORE and C. G. Holdings. The order does not even remotely suggest that the fixed deposits must be used only to settle the claim of ORE and N. Athappan. In the meanwhile, it is observed that a criminal case was registered against KCP, C. G. Holdings, VML and others under various provisions of the Indian Penal Code, based on the report of Thiru Ravichandran, power of attorney for CEPL, for the offences of forgery and cheating to a tune of Rs. 75 crores by violating the joint venture agreement. Thereupon, the Centr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only to this extent. In light of the foregoing, we call upon you not to deal with the fixed deposits except to facilitate the payments to ORE and Nandakumar Athappan contemplated by paragraph 17 of the order and without the express prior consent of the entire board of directors of Cheran Enterprises P. Ltd., which includes Mr. Chandran Ratnaswami, the nominee of ORE, and Mr. Ramaswamy Athappan, the nominee of Mr. Nandakumar Athappan , are contrary to the letter and spirit of the common order dated August 13, 2008, made in C. P. No. 65 of 2005 and C. P. No. 76 of 2005. By virtue of the final order, ORE or N. Athappan cannot pursue with the SBI to release the fixed deposits towards refund of their investments. The action of KCP, pursuant to the final order also needs to be considered, as borne out by a series of correspondence exchanged between KCP, SBI and N. Athappan. KCP requested the SBI on August 18, 2008, to release a demand draft of Rs. 545.52 lakhs in favour of N. Athappan and another draft for representing the remaining maturity proceeds of the fixed deposits in the name of ORE. Shri H. Karthik Seshadri, learned counsel in his communication dated August 20, 2008, conveyed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... malities, which are required to be fulfilled before ORE repatriating any amount of investment, which will be refunded, by CEPL, C. G. Holdings and KCP, which, need appropriate directions, in the light of the exigencies pointed out on behalf of ORE. ORE being an entity of foreign origin cannot hold any immovable property and therefore, this issue must necessarily be addressed and cannot be brushed aside, as premature, especially in the light of mounting of overdue instalments, without being met by C. G. Holdings and KCP. 22. The whole underlying object of the Company Law Board order is that ORE and N. Athappan will exit from CEPL on the terms specified in the order, thereby enabling C. G. Holdings as well as KCP to manage the affairs of CEPL without involvement of ORE as well as N. Athappan. KCP and C. G. Holdings should be in a position to generate adequate funds by operating exclusively CEPL, so as to meet the claim of ORE and N. Athappan. In this situation, I deem it fit that it will be most equitable if ORE and N. Athappan on one hand and C. G. Holdings as well as KCP on the other hand get the maturity proceeds of the fixed deposits with the SBI, in which event the former wil ..... X X X X Extracts X X X X X X X X Extracts X X X X
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