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2018 (9) TMI 679 - HC - Companies LawStatus of a beneficial interest holder - Status of foreign company - make the trustees of the holders of the respective shares involving beneficial interest as absolute owners - Consolidation and deconsolidation of defendant No.2 a foreign entity governed by the laws of Dubai - jurisdiction to institute the suit within the jurisdiction of this Court - Held that:- Admittedly, the defendant No.2 is a foreign entity governed by the laws of Dubai. The plaintiffs are its shareholders. Any dispute between them will have to be resolved under the laws of Dubai. Hence, the contention of the learned Senior Counsel appearing for the plaintiffs that they are stepping into the shoes of the defendant No.2 seeking a relief against the defendant No.1 cannot be countenanced. This is also for the reason that there must be a declaration in clear terms qua the status of a beneficial interest holder before seeking a relief against the defendant No.1. More so, when defendant No.2 itself denies it. In the case on hand, the fundamental and core facts are not in dispute. They are with respect to the consolidation and deconsolidation of defendant No.2 by the defendant No.11. Similarly, a decision of the general body of a ETA Group, the Board of Directors and the participation of the plaintiffs in that are also not in dispute. These undisputed happenings lead to the draft financial statement of the defendant No.11. This draft financial statement confirms two things. One is with respect to the deconsolidation and the other is removal of status over the shares held by the individuals. The decision was to implement it with retrospective effect from 10.01.2014. It is an admitted case that the decision of the ETA Group and the draft financial statement of defendant No.11 would make the trustees of the holders of the respective shares involving beneficial interest as absolute owners. The plaintiffs may have grievance over this, but their remedy will lie elsewhere. That is the reason why one of the plaintiffs after issuing notice on behalf of the defendant No.11 to defendant No.1, has chosen to file the suit along with the other in the status of shareholders. May be it is also for the reason that the defendant No.11 cannot wriggle out of the decision of ETA Group followed by its draft financial statement. If we see the cause of action as recorded above, it is abundantly clear that what has triggered the present suit is the aforesaid facts. After all, the relief that is sought against the defendant No.1 is a mere consequential one. When once the plaintiffs succeed against defendant Nos.2 to 7 then defendant No.1 is bound to give effect to it. For doing so, the remedy for the plaintiffs against defendants Nos.2 to 7 lies elsewhere. When the status of defendant No.2 being the foreign company is not in dispute, no relief either direct or indirect can be sought against it under the Indian Law. We are not concerned with the ultimate relief but the issues leading to it. What we are dealing is nothing but a fight between two groups. Defendant No.2 is controlled by defendant Nos.3 and 5 to 7 whereas, defendant No.11 is by the plaintiffs. This explains the letter sent by the defendant No.11 through the plaintiff No.2 to the defendant No.1 dated 01.06.2017. A perusal of the cause of action as indicated in the plaint would show that it started happening only from the date of deconsolidation. Monies were sent by the defendant No.2 and on its behalf by defendant No.12 atleast till 2011. Though prima facie, the payment made was not in dispute, the entity from which it emerged actually cannot be decided here. The very fact that payments were made by defendant No.12 on behalf of defendant No.2 followed by book adjustment itself would vouch for the fact that such things have happened involving the other entities of the ETA Group as well and atleast defendant No.2 and its subsidiaries. These issues also cannot be looked into by this Court. As against the defendants 8 to 10, the situation stood changed after a decision made in the meeting held by the ETA Group which was given effect in 2016. That is the reason why, the cause of action has been mentioned to be starting from 2016 onwards. Therefore, the alleged role of the defendant Nos.8 to 10 will not give any jurisdiction to this Court. Defendant No.11 who is stated to be in possession of the shares, is situated in Dubai. As the plaintiffs felt the importance of the defendant No.11 who would in all probability support their case, it has been accordingly arrayed. We have to keep in mind the notice dated 01.06.2017 signed by the plaintiff No.2 on behalf of defendant No.11 on the very issue. What has to be seen at this stage is the averments in the plaint along with the documents filed. Therefore, there is no difficulty in accepting the submission made by the learned Senior Counsel appearing for the plaintiffs in this regard. However, in the light of the discussion made above, a mere situs of the share in the first defendant's company alone cannot give jurisdiction to institute the suit within the jurisdiction of this Court. Thus, we find that the reasons assigned by the learned single Judge cannot be sustained in the eye of law, particularly, with reference to the provisions of the Companies Act, 1956/2013, the examination of the books of defendant No.1 qua the declaration made, flow of funds and the allegations of fraud made against defendants 7 to 10.
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