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TMI Blog2011 (2) TMI 1280X X X X Extracts X X X X X X X X Extracts X X X X ..... COPET No. 39 of 2009. Out of three petitioners before the Company Law Board, two have preferred COPET Nos. 40 and 41 of 2009 whereas out of eleven respondents, respondent No. 1-Orissa Sponge Iron and Steel Ltd., has filed COPET No. 39 of 2009. The impugned order was passed on the basis of a petition filed under Sections 397, 398 and 399 read with Sections 402 and 403 of the Companies Act, 1956. 2. BNS Steel Trading Pvt. Ltd., Bhushan Energy Ltd. and BBN Transportation Pvt. Ltd. jointly filed the said Company Petition for the following reliefs :- "(a) Direct the respondents to maintain the status quo regarding their shareholdings, fixed assets of the company, and not to change the shareholding pattern of the company by transfer or further issue of shares. (b) Direct that any transfer in the facts and circumstances of the case shall be void. (c) Direct the Respondents not to sell its shares held in the Respondent No. 1 Company without the prior approval of the shareholders. (d) Direct the investigation in the affairs of the company for its financial mismanagement and huge siphoning off the funds. (e) Reconstitute the board of the Respondent No. 1 C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting in loss. Such conduct of the present management/directors is an act of oppression, which may ultimately give rise to winding up of the company. It is stated that the company has issued convertible warrants in terms of shareholders resolution dated 15.10.2007 and the same have been pledged to raise funds but such funds have been diverted by the promoters for their personal use. On this account, it is stated that issuance of such warrants or their conversion may affect capital structure of the company. Some instances of issuance of such warrants and conversion thereof have been narrated in the petitions. It is further stated in the petition that petitioner no. 2, Bhushan Energy Ltd. holds 35 lakhs share warrants of the company convertible into equitable shares. After conversion of these warrants, the holding of all the three petitioners would become 27.53% but the said warrants are not being converted to shares in the name of Bhushan Energy despite of submission of all the requisite documents with the Registrar of Transfer Agent. This conduct of the present management amounts to oppression. The dishonest acts and mala fide intention of the management/ Directors have pushed the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed by Torsteel Services Limited from UTI Bank on 29.7.2005 against the security of Escrow account of payables from OSIL. A corporate guarantee from Torsteel Research Foundation was also provided. On the same day, a sum of Rs. 5.44 crores was transferred to Torsteel Research Foundation in its account in ICICI Bank and the said money was utilized for purchasing the 12,00,000 shares from IPICOL. This transaction is in violation of Section 77 of the Companies Act. (II) In May 2005, OSIL again allotted 11,88,916 number of share warrants to be converted into equal number of shares at the rate of Rs. 68.87 per warrant amounting to Rs. 8.18 crores in favour of Torsteel Research Foundation which was convertible into equity shares within 18 months from the date of allotment. A small fraction of the said amount was paid by Torsteel Research Foundation to convert the warrants. OSIL in order to facilitate Torsteel Research Foundation to convert those warrants into equity shares provided an advance of Rs. 6 crores to Torsteel Services Limited under the pretext of mining development and in turn Torsteel Services Limited provided the same amount to Torsteel Research Foundation for paying the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rectly. The allegation of tainted transactions was based on a further allegation that Torsteel Services Pvt. Ltd. is not engaged in mine development but its only business is in fisheries and therefore, the transaction is a tainted transaction as OSIL has indirectly provided financial assistance. In response to such allegation, the Company Law Board observed that UTI Bank had given the loan being satisfied that the primary security given by the loanee is adequate and may be the Bank had the confidence of recovery of the loan because of association of Torsteel Services Pvt. Ltd. with OSIL. It further found that from the said transactions, it is crystal clear that OSIL has not given any financial support indirectly except perhaps its reputation to the satisfaction of the Bank. It is also held that the said issue cannot be determined in absence of UTI Bank and Torsteel Services Pvt. Ltd. who are not parties to the proceeding. So far as the second transaction of conversion of warrants by Torsteel Research Foundation out of loan of Rs. 6 crores sanctioned by UTI Bank to OSIL is concerned, referring to the letter of UTI Bank, the Company Law Board held that the said amount had been sanct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices Pvt. Ltd. and the said amount was provided as advance by OSIL to Torsteel Services Pvt. Ltd. for mine development. In turn Torsteel Services Pvt. Ltd. provided the very same amount to Torsteel Research Foundation as a loan and the said amount was utilized by Torsteel Research Foundation for conversion of 11,88,916 warrants of OSIL. It was also contended by Shri Kapur with reference to the Bank transactions that all these transactions had taken place in one day. According to the learned Senior Counsel appearing for the appellants, all these transactions only establish indirect financial assistance rendered by OSIL either for acquisition of shares from IPICOL or for conversion of warrants into shares. Reference was also made to the letter of UTI Bank dated 26.7.2005 to substantiate the contention that Torsteel Services Pvt. Ltd. for obtaining a term loan of Rs. 6 crores had offered exclusive charge of Escrow account of OSIL on payables from OSIL as primary security. It was contended by the learned Senior Counsel appearing for the appellants that the promoters of OSIL are also the owners of Torsteel Services Pvt. Ltd. and Torsteel Research Foundation and therefore, it was easi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the documents and the decisions cited at the Bar. 7. A preliminary objection was raised by Shri Chatterji, the learned Senior Counsel appearing for OSIL with reference to Section 10-F of the Companies Act, 1956 and it was submitted that the appellant can only be heard on a question of law and the appellate court cannot reassess the materials placed before the Company Law Board and come to a different conclusion. In response, Shri Kapur, the learned Senior Counsel appearing for the appellants placed reliance on a decision of the Hon'ble Supreme Court in the case of Dale & Carrington Investment (P.) Ltd. v. P.K. Prathapan [2004] 54 SCL 601. Para 35 of the said judgment is quoted below: "Section 10F refers to an appeal being filed on the question of law. The learned counsel for the appellant argued that the High Court could not disturb the findings of fact arrived at by the Company Law Board. It was further argued that the High Court has recorded its own finding on certain issues which the High Court could not go into and therefore the judgment of the High Court is liable to be set aside. We do not agree with the submission made by the learned counsel for appellants. It is settl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the term loan of Rs. 6 crores had been granted in favour of Torsteel Services Pvt. Ltd. on furnishing certain securities. The primary security is the exclusive charge on Escrow account of payables from OSIL. This clearly shows that whatever amount was payable to Torsteel Services Pvt. Ltd. from the Escrow account of OSIL on account of mining development is furnished as primary security. Therefore, the Company Law Board was right in making any observation that UTI had the confidence of recovering the amount of loan granted in favour of Torsteel Services Pvt. Ltd. because of the business to get from OSIL. There is nothing in the letter to show that OSIL had stood as a guarantor or furnished any security directly or indirectly to the Bank for the purpose of the above loan. On the other hand, it is clear from the said letter that Torsteel Research Foundation stood as a corporate guarantee and an office area of 778 sq.ft. belonging to Torsteel Research Foundation at Bajaj Bhawan, Nariman Point, Mumbai had been furnished as a security. I do not find anything from the letter of the Bank indicating direct or indirect involvement of OSIL in facilitating Torsteel Services Pvt. Ltd. in ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Sakal Papers (P.) Ltd. [2005] 59 SCL 414 to substantiate his submission that the requirements of Section 77 of the Companies Act, 1956 are mandatory and no company limited by shares, and no company limited by guarantee and having a share capital, shall have power to buy its own shares, unless the consequent reduction of capital is effected and sanctioned in pursuance of sections 100 to 104 or of section 402 of the Act. Referring to Section 77 of the Companies Act, it was further submitted by Shri Kapur, the learned Senior Counsel that no public company, and no private company which is a subsidiary of a public company, shall give, whether directly or indirectly, and whether by means of a loan, guarantee, the provision of security or otherwise, any financial assistance for the purpose of or in connection with a purchase or subscription made or to be made by any person of or for any shares in the company or in its holding company subject to certain exceptions. According to the learned Senior Counsel, the above two transactions having taken place in contravention of Section 77 of the Act, all such transactions are void. No doubt the aforesaid decision with reference to Section 108 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce to the said judgment that long delay in filing the Company Petition was condoned and therefore, delay of four days in filing C.A. No. 113 of 2009 could not be a ground for rejecting the petition. 9. On perusal of the impugned order passed by the Company Law Board, I find that the said Company Application No. 113 of 2009 was dismissed on merit. Therefore, the above decision cited by Shri Kapur, the learned Senior Counsel appearing for the appellants may not have much relevance in the facts and circumstances of this case. It is the specific case of the appellants in the said petition that on inspection of the records of the Company Law Board, they became aware of the aforesaid alleged two tainted transactions. The date on which the records in the office of the Registrar of Companies were inspected by the appellants has not been mentioned in the petition. On the other hand, the date on which the said C.A. No. 113 of 2009 was filed before the Company Law Board, the appellants came out with an open offer published in the "Business Standard" containing such details which could not have been obtained in four days time. The details mentioned in the open offer must have been obtained fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following grounds: (a) A company petition for oppression and mismanagement under Sections 397 and 398 of the Companies Act is not maintainable if it is filed for an isolated alleged act of oppression. (b) A company petition for oppression and mismanagement under Sections 397 and 398 of the Companies Act is not maintainable if it is filed for ulterior and collateral purposes. (c) An applicant in a petition under Sections 397 and 398 of the Companies Act cannot be allowed to claim reliefs beyond the company petition by way of interim applications which reliefs are not interim in nature but final. (d) A company petition under Sections 397 and 398 of the Companies Act deserves to be statutorily dismissed by the Company Law Board unless it is averred and proved by the applicant that it was a case for just and equitable winding up of the company and the Company Law Board had come to a conclusion that winding up would unfairly prejudice the interest of the shareholders and the same can be remedied by passing directions in respect of such oppression or mismanagement. (e) A petition under Sections 397 and 398 of the Companies Act could not be used for the purposes of enforcing a contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Shantadevi P. Gaekwad [2005] 57 SCL 476. The observation of the Hon'ble Supreme Court in paras 181 and 183 of the judgment relied upon are quoted below: "181. The jurisdiction of the court to grant appropriate relief under Section 397 of the Companies Act indisputably is of wide amplitude. It is also beyond any controversy that the court while exercising its discretion is not bound by the terms contained in Section 402 of the Companies Act if in a particular fact situation a further relief or reliefs, as the court may deem fit and proper, are warranted. (See Bennet Coleman & Co. v. Union of India and Syed Mahomed Ali v. R. Sundaramoorthy). But the same would not mean that Section 397 provides for a remedy for every act of omission or commission on the part of the Board of Directors. Reliefs must be granted having regard to the exigencies of the situation and the court must arrive at a conclusion upon analyzing the materials brought on record that the affairs of the company were such that it would be just and equitable to order winding up thereof and that the majority acting through the Board of Directors by reason of abusing their dominant position had oppressed the minority sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lways exercised restraint in interfering with the affairs of the company, for the affairs of the company are normally its own concern and the concern of its shareholders. It is only when the facts and evidence before the court are such as to persuade it to hold that interference with the affairs of the company is necessary, that it would exercise its powers". Referring to the Company Petition, it was contended that the only action against OSIL in the petition filed under Sections 397 and 398 of the Companies Act is non-conversion of 35 lac warrants into equity shares in favour of the Bhushan Group. With reference to the above two judgments, it was contended that an isolated alleged act of oppression or mismanagement cannot attract the provisions of Section 397 and 398 of the Companies Act and such alleged act is neither for loss nor for benefit of the company. It was also contended that non-conversion of warrants into equity shares does neither arise out of the proprietary right of the Bhushan group as a shareholder of the company nor does it arise out of any shareholders rights. Therefore, any alleged action of refusal to covert the warrants into equity shares is outside the ambi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enable the Acquirer (taken together with the shareholding of the PACs in the target company) to get a substantial ownership in the target company. The Bhushan Group has considerable interest in the Indian Steel Industry including the manufacture of valued added auto grade steel products with an increasing presence in the primary steel sector. The acquisition will enable the Bhushan Group to scale up its business operation by further expanding its presence in the primary steel sector, and providing access to upstream iron ore mines. In addition, the acquisition will also result in synergies for the target company, including the sharing of best practices in manufacturing and quality assurance system and processes, enhanced human capital and managerial talent, and potential and financial operational synergies". In this connection, reliance was placed on the judgment of Bellador Silk Ltd. In re, [1965] 1 All England Law Reports 667. The relevant portion of the judgment relied upon by OSIL is quoted below: "It became obvious during Moss Simmons' cross-examination that he did not really want the relief for which he was asking in the petition and that its real object was to achieve a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd., In re [1992] BCLC 213, where it was held that a petition for co-lateral purposes is not maintainable. It was contended on behalf of the appellants that the clear motive of the respondent is to some how take over the appellant company for its iron ore mines by seeking the conversion of warrants acquired by the respondent from existing shareholders to whom such warrants were issued on a clear understanding that it will not result in change in management and control of the appellant Company. The entire purposes of seeking conversion of warrants into equity shares is to increase the shareholding of the respondents in the appellant company in a manner that it would assist the respondent to change management of the appellant company so that the respondents are able to use the mineral and mining leases of the appellant company for their other competitive business of producing steel and sponge iron in the State of Orissa. This being the collateral purpose, the Company Law Board should have dismissed the company petition on that basis alone. A decision cited by the respondent before the Law Board in the case of Astec (BSR) Plc, In re [1998] 2 BCLC 556 was also relied upon to substant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act is first stopping any change of the shareholding pattern, then seeking to stop the promoters to go away from the Company by selling their shares and force the promoters to sale their shares to the respondents. 16. In relation to Ground No. (c), it was contended on behalf of the appellant that a petition under Sections 397 and 398 of the Companies Act is required to be filed before the Company Law Board in terms of Regulation 14 of the Company Law Board Regulations. The said Regulations prescribe a format for filing such a petition whereas there is no format for filing an interim application under Section 402 of the Companies Act. With reference to the above, it was also contended that the Misc. petition filed under Section 397/398 of the Companies Act did not make out a case of either mismanagement or oppression but by way of Misc. applications, allegations of mis-management and oppression were attempted to be brought in. Reliance was placed on paragraph-135 of the judgment in Sangramsingh P. Gaekwad's case (supra). The said paragraph is quoted below: "135. Despite such categorical admissions in the pleadings, a statement was made across the bar that at the time of filing of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opriation or other improper acts, but such inability on the part of shareholders, who have no access to the books of the company, is by no means a ground for directing an investigation into the affairs of the company or for giving any other relief to a petitioner. The petitioner must set out the facts which constitute acts of mismanagement, misappropriation, fraud or oppression and prove, prima facie, at any rate, that on those facts an investigation is called for. If a petitioner fails to set out the facts and produce satisfactory proof in support of those facts no order for investigation into the affairs of the company can be made, nor can any relief be granted to the petitioner. A shareholder has no right of access to the books of the company, but denial of access to such books is not an act of oppression as has been held by this court in a Bench decision, Rajya Lakshmi (Lalita) v. Indian Motor Co. Ltd. If a petitioner cannot make out a case of mismanagement and oppression, because he was unable to collect materials for the purpose, it is not for the court to direct the directors of the company to offer inspection of the company's books and accounts to enable a petitioner to col ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations should have been dismissed as being beyond the pleadings of the Company Petition. The Company Law Board in the impugned order allowed C.A. Nos. 213, 258 and 295 of 2009 so far as it relates to conversion of warrants into equity shares even though there was no such allegation of oppression in the main petition in relation to the said amendments. The Court's jurisdiction regarding orders to be passed in interim applications was considered in the case of Cotton Corpn. of India Ltd. v. United Industrial Bank Ltd. AIR 1983 SC 1272 and the relevant portion of the judgment is quoted below: "It is indisputable that temporary injunction is granted during the pendency of the proceeding so that while granting final relief the court is not faced with a situation that the relief becomes infructuous or that during the pendency of the proceeding an unfair advantage is not taken by the party in default or against whom temporary injunction is sought. But power to grant temporary injunction was conferred in aid or as auxiliary to the final relief that may be granted. If the final relief cannot be granted in terms as prayed for, temporary relief in the same terms can hardly if ever be granted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... winding up. Without such a finding, the Company Law Board cannot exercise jurisdiction under the above two provisions for the purpose of protecting the interest of the Company from winding up. In this connection, reliance was placed on a decision of the Hon'ble Supreme Court in the case of Five Minute Car Wash Service Ltd., In re [1966] 36 Comp. Cas. 566. Relevant portion relied upon by the learned counsel is quoted below: "This is not, as I read the petition, relied upon as an act of oppression. The allegations of oppression are to be found in paragraph 13, which I have read. Before considering whether these allegations, if proved-as for the present purpose I assume that they will be amount to oppression within the meaning of section 210, I propose to say something about the scope of that section. To succeed in obtaining relief under the section a member of a company must have established that at the time when his petition was presented, the affairs of the company were being conducted in a manner oppressive of himself, or of a part of the members including himself, and unless a petitioner in his petition alleges facts capable of establishing that the company's affairs are being c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 153-C. We agree with the appellant that before taking action under section 153-C, the court must be satisfied that circumstances exist on which an order for winding up could be made under section 162". "We are of the opinion that the averments which a petitioner would have to make to invoke the jurisdiction of sections 397 and 398 of the Act are not destructive of the averments which are required to be made in a case for winding up under section 433(f) on the just and equitable ground, though they may appear to be rather conflicting, if not contradictory. We are in agreement with the High Court that the petition must proceed up to a certain stage which is common to both winding up and invoking the jurisdiction of sections 397 and 398 and though there may be some difference in the procedure to be adopted, it is not such which is irreconcilable and cannot simultaneously be gone into". In the case of Needle Industries (India) Ltd. v. Needle Industries Newey (India) Holding Ltd. [1981] 3 SCC 333, the Hon'ble Supreme Court held that in an application under Section 210 of the English Companies Act, as under Section 397 of our Companies Act, before granting relief the court has to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same cannot constitute the ingredients of a complaint under Sections 397, 398, 402 and 403 of the Companies Act, 1956. Such breach could give rise to an action of breach of contract under Section 73 of the Indian Contract Act, 1972. Relying on the above decision, it was contended on behalf of the appellant that conversion of warrants into equity shares being totally decide the right of a shareholder, could not be brought before the Company Law Board for adjudication. 19. In relation to Ground No. (f), it was contended that Sections 397 and 398 of the Companies Act could not have been used for seeking conversion of warrants into equity shares which had been transferred without following the mandatory provision of the securities Contract Regulation Act specially considering the submission of the respondents that warrants are marketable securities and thus covered by the Companies Act. Referring to the cases of East Indian Produce Ltd. v. Naresh Acharya Bhaduri [1988] 64 Comp. Cas. 259 (Cal.), B.K. Holdings (P.) Ltd. v. Prem Chand Jute Mills [1983] 53 Comp. Cas. 367 (Cal.) and Naresh K. Aggarwala & Co. v. Canbank Financial Services Ltd. [2010] 100 SCL 425 (SC), it was contended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to issue further shares cannot be held to be an oppressive act if the company feels that the takeover would not benefit the company. Reference was also made by the learned counsel to the following portion of the judgment in the case of Shanti Prasad Jain (supra) in support of the above contention: "We have already said that the public company which came into existence in 1957 was not bound by the agreement of 1954 and could offer shares to such persons as it decided to do in general meeting in accordance with section 81. The mere fact that in the meeting of March 29, 1958, it was decided to offer shares to others and not to the existing shareholders would not therefore necessarily mean oppression of the minority shareholders. The majority shareholders were not bound to accept the view of the minority shareholders that new shares should be allotted only to the existing shareholders. It also appears that the Patnaik group was afraid at the time when the new shares were being issued that as they had no money the appellant group would take up the entire new issue and would thus obtain majority control of the Company. This they wanted to avoid and that is why the new issue was resolved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Investor Protection) Guidelines, 2000 (hereinafter called "DIP Guidelines") In pursuance of such a decision, on 8.10.2007 a Postal Ballot Notice was given to all the shareholders asking for their consent regarding certain resolutions passed by the Board. Resolution No. 2 proposed to issue 40 lakh warrants to TRFI Investment Private Limited, a promoter group company on preferential basis with each warrant carrying the right to purchase one fully paid up equity share of Rs. 10/- each of the company at a price of Rs. 225/- per share. The minimum price of such warrants had been fixed in accordance with the SEBI Guidelines and the equity shares to be allotted on conversion were to rank pari passu in all respects with the existing fully paid up equity shares of the company. By the same resolution, it was also decided to issue 20 lakh warrants in favour of one Prakausali Investments (India) Private Limited, an existing shareholder known to the promoters. The consent of the General Body of the shareholders having been obtained, the company issued the warrants to TRFI as well as Prakausali. At a subsequent stage in the Annual General Meeting held on 15.10.2007, the company again resolved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... management in favour of Monnet Group. Therefore, the acts of mismanagement or oppression alleged are not based on isolated incident but are based on series of incidents. It was also contended that even if the act of mismanagement or oppression alleged in the company petition is an isolated one, still then, an application under Section 397 and 398 of the Companies Act will be maintainable. The following observation of the Hon'ble Supreme Court in the case of Needle Industries (India) Ltd. (supra) which is quoted below was relied upon by the learned Senior Counsel: "an isolated act which is contrary to law may not necessarily and by itself support the inference that the law was violated with a malafide intention or that such violation was burdensome, harsh and wrongful. But a series of illegal acts following upon one another can, in the context, lead justifiably to the conclusion that they are a part of the same transaction, of which the object is to cause or commit the oppression of persons against whom those acts are directed." Referring to the Sangramsinh P. Gaekwad's case (supra) also it was contended that an isolated incident may not be enough for grant of reliefs which other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing is available: "That the petitioner No. 2 is also holder of 35 lakh warrants of respondent company converted into equal number of equity shares of respondent company. After conversion of these warrants, the holding of the petitioners would become 27.53%. However, the respondents have not been transferring the said warrants in the name of petitioner No. 2 despite of submission of all the requisite documents with the Registrar of Transfer Agent. This is an act of oppression where the entitlement of petitioner No.2 has been withheld." It was also contended that in the three subsequent Misc. Petitions (C.As.) a direction was issued by CLB that all those Misc. Petitions and the main application shall be taken up analogously and this direction of the CLB was accepted without protest and the procedure adopted by CLB was not assailed by OSIL at any point of time. Therefore, the conduct of CLB in deciding the main company petition taking the pleadings available in the company applications cannot be now challenged on the ground that the pleadings available in the misc. petitions/company applications cannot be taken as part of the pleading of the main company petition. The decisions reli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived. 27. In reply to Ground No. (f), it was contended that shares and debentures are well known means of raising capital. Similarly, instruments, such as also warrants, are not an unfamiliar species in corporate jurisprudence and is recognized in Sections 114 and 115 as well as other sections of the Act. Warrants fall within the class of securities and such instruments are expressly covered by paragraph 13.0 of Chapter XIII of the SEBI Guidelines for preferential issues and thus come within the parameters of SEBI Act. To say that the issue of warrants was not justifiable before CLB is an untenable contention because warrants are in any event within the ambit of the statutory provisions and therefore, amenable to CLB's jurisdiction. It was also contended that warrants were issued under Section 81(1A) of the Companies Act as a mode of further issue of capital on a preferential basis and the same being a subject matter under the Act, the CLB manifestly had adequate powers to grant the necessary reliefs regarding compliance and fulfillment of the Company's obligations. 28. Apart from the above contentions, it was also contended that there is a clear cut and broad distinction between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 398 of the Companies Act whereas it was contended by Shri Kapur, the learned Senior Counsel appearing for the respondents Bhushan Group that depending on facts of the case, a single instance of mismanagement and oppression can attract the provisions contained in Section 397/398 of the Companies Act. It will be worthwhile to refer to the decision of the Hon'ble Supreme Court in the case of Sangramsinh P. Gaekwad (supra) where it was held that Section 397 does not provide for a remedy for every act of omission or commission on the part of the Board of Directors. Reliefs must be granted having regard to the exigencies of the situation and the Court must arrive at a conclusion upon analyzing the materials brought on record that the affairs of the Company were such that it would be just and equitable to order winding up thereof and that the majority acting through the Boards of Directors by reason of abusing their dominant position had oppressed the minority shareholders. The interest of the Company vis-à-vis the shareholders must be upper most in the mind of the Court while granting relief under the said provision. The acts of oppression must be harsh and wrongful. An isolat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e following the mandatory procedures laid down in SEBI (Disclosure and Investor Protection) Guidelines, 2000. In pursuance of such a decision, on 8.10.2007, a Postal Ballot Notice was given to all the shareholders asking for their consent. By Resolution No.2, it was decided to issue 40,00,000 warrants to TRFI Investment Private Limited and 20,00,000 warrants in favour of one Prakausali Investments (India) Private Limited, a third party shareholder. At a subsequent stage it was again decided in the Annual General Meeting held on 15.10.2007 to issue 30,00,000 warrants to TRFI and 15,00,000 warrants to Prakausali on the same terms and conditions. In view of the above, Prakausali became holder of 35,00,000 warrants and these warrants were sold to Bhushan Energy Limited after the lock in period. In turn, Bhushan Energy Ltd. demanded conversion of the above 35,00,000 warrants into equity shares. The denial on the part of the OSIL to convert these 35,00,000 warrants into equity shares is alleged to be an act of oppression and mismanagement. On reading of Sections 397 and 398 of the Companies Act and on reading of the judgments delivered by the Hon'ble Supreme Court in the cases of Sangra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t I have referred to the relevant portion of the Public Announcement made by Bhushan Group. In paragraph-7.2 of the Public Announcement, it is specifically stated that the acquisition of Equity shares will enable the Acquirer (Bhushan Group) to get a substantial ownership in the target company. The Bhushan Group has considerable interest in the Indian Steel Industry including the manufacture of value added auto grade steel products with an increasing presence in the primary steel sector. The acquisition will enable the Bhushan Group to scale up its business operation by further expanding its presence in the primary steel sector, and providing access to upstream iron ore mines. The above declaration clearly shows the intention of the Bhushan Group in demanding for conversion of 35,00,000 warrants held by Bhushan Energy Limited into equal number of equity shares. In this regard, a contention was raised by Shri Kapur, the learned Senior Counsel appearing for Bhushan Group that a similar Public Announcement had also been made by the Monnet Group which intends to take over OSIL. On perusal of the Public Announcement made by Monnet Group, I find that the said Group wants to sail with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e I have already held while dealing with the first contention that conversion of 35,00,000 warrants into equity shares in favour of Bhushan Energy Ltd. shall increase the shareholding of the Bhushan Group and an attempt can be made for taking over the Company and bring over change in management is not unfounded, there is no necessity to deal with the aforesaid decisions in details and it may be possible that the said Company Petition was filed for the purpose of getting the 35,00,000 warrants converted into equity shares thereby increasing the shareholding of the Bhushan Group for which it shall be in a position to make such an attempt to take control of the management of OSIL. Apart from the above, it was contended that SEBI has not extended the validity of the warrants as requested beyond 19th of June, 2009. Therefore, once the period for conversion expires, the warrants cannot be directed to be converted into equal number of equity shares. (III) So far as Ground Nos. (c) (d) and (e) are concerned, decisions were cited by Shri Chatterji, the learned Senior Counsel for OSIL to substantiate his contention that the original Company Petition filed under Section 397/398 of the Compan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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