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TMI Blog2013 (5) TMI 574X X X X Extracts X X X X X X X X Extracts X X X X ..... PIGI holds 43.75% of the total paid up equity share capital of WPIPL. While Mr. Vivek Dhir, Appellant No.2, holds 43.75% of the equity shares of WPIPL, Mr. Pankaj Patel held the balance 12.5%. WPIGI is represented by its Chairman, Mr. Aditya Ahluwalia. 3. The case of WPIGI in Co. Pet. No. 102(ND) of 2010 before the CLB under Sections 397 and 398 of the Act read with Sections 402, 403, 406 and 408 thereof was that the Annual General Meeting ('AGM') of the company for the financial year ended 31st March 2010, which ought to have been held on or before 30th September 2010, was not so held. Meanwhile, the shares of Mr. Pankaj Patel, who was arrayed as Respondent No.3 in Co. Pet. No.102 (ND) of 2010 in the CLB had, according to WPIGI, been transferred on 22nd September 2009 jointly to Mr. Vivek Dhir and his wife, Ms. Malini Dhir (Appellant Nos.2 and 3 herein). As a result, Appellant Nos.2 and 3 came to hold 56.25% of the paid up equity share capital of Appellant No.1. This, according to Mr. Aditya Ahluwalia, came to light when he received the draft annual accounts for the year ending 31st March 2010 which showed an increase in the salary of Mr. Vivek Dhir. It may be mentioned that on 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he United States of America ('USA'). He was caught in a hurricane which hit the Eastern coast and, therefore, he sent an e-mail requesting that the meeting be postponed. The meeting was to consider the proposal to go in for a rights issue of 1,49,303 equity shares of the company having a face value of Rs.100 each and offering them to the existing shareholders in 1:1 ratio. It is alleged that the agenda for the Board meeting was sent without giving any details of financial projections and how the figure of 1,49,303 equity shares was arrived at. This meant that if Mr. Aditya Ahluwalia had to subscribe to the rights issue, he would have to infuse Rs. 25 lakhs without any interest. 6. It is not in dispute that there was a joint venture agreement ('JVA') dated 1st May 1999 entered into between the parties, in terms of which Mr. Aditya Ahluwalia had an affirmative vote in matters relating to the company. It was under the same JVA that the shareholding pattern of Mr. Vivek Dhir, WPIGI and Mr. Pankaj Patel was decided. Despite Clause 6.2 of the JVA giving an affirmative vote to Mr. Aditya Ahluwalia at the Board meeting held on 31st October 2012 the resolution for approving the rights issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application filed by the non-applicant/respondent had been allowed and it was held that the board meeting held by the company on 31.10.2012 and all consequential acts thereof not being in accordance with law, the respondent company had been directed to hold a fresh board meeting by giving notice to the parties. Let notice of this appeal be issued to the respondent on the appellant taking effective steps by ordinary process, registered A.D. as also courier returnable on 11.03.2013. Resolutions passed in the fresh board meeting shall not be given effect till the next date of hearing. Order dasti." 11. The Court has heard the submissions of Mr. U.K. Choudhary, learned Senior counsel appearing for the Appellants and of Mr. Virender Ganda, learned Senior counsel for the Respondent. 12. The first question that arises for consideration is whether the CLB was justified in holding that since there was no bar to the affirmative vote in the AoA of the company, Clause 6.2 of the JVA which provides for the affirmative vote must be given effect to. This, in turn, requires the interpretation of Section 9 of the Act which the CLB has understood as not being applicable to private companies. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an agreement, that are not inconsistent with the Act, but are also not part of the AoA, can be said to be applicable. All that Section 9 states is that clauses in the agreement that are 'repugnant' to the Act shall be 'void'. This does not mean that clauses in the agreement which are not repugnant to the Act would be enforceable, notwithstanding that they are not incorporated in the AoA. 16. Mr. Virender Ganda, learned Senior counsel for the Respondent, has placed extensive reliance on the decision of the Supreme Court in Reliance Natural Resources Ltd. v. Reliance Industries Ltd. [2010] 7 SCC 1 (hereinafter referred to as the 'Reliance Natural Resources Ltd. case (supra)) and, in particular, the observations made in paras 56 and 59 thereof. In the said case, a submission was made on behalf of RNRL that, in terms of the 'doctrine of identification', Reliance Industries Limited ('RIL') was identified by "such of its key personnel through whom it workss", and that in that case, the key persons were Smt. Kokilaben Ambani, Mr. Mukesh Ambani and Mr. Anil Ambani, who had entered into a family arrangement which was reduced in writing in the form of a Memorandum of Understanding ('MoU'). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A. Nothing prevented WPIGI from doing so. Unless the AoA was actually amended, WPIGI could not insist on exercise of the affirmative vote. This law has been clearly explained by the Supreme Court in V.B. Rangaraj v. V.B. Gopalakrishnan AIR 1992 SC 453. Referring to the decision in S.P. Jain v. Kalinga Tubes Ltd. [1965] 2 SCR 720, the Supreme Court observed: "it was also a case of a battle between two groups of shareholders led by P & L as they were named in the decision. In July 1954 these two groups who held an equal number of shares of the value of Rs. 21 lakhs, out of a total share capital of Rs. 25 lakhs, in the company which was then a private company, entered into an agreement with the appellant who was a third party and certain terms were agreed to. Various resolutions were passed by the company to implement the agreement. However, neither the Articles of Association were changed to embody the terms of the agreement nor the resolutions passed referred to the agreement. In 1956-57, the company desired to raise a loan from the Industrial Finance Corporation and as per the requirement of the Corporation, in January 1957 the company was converted into a public company and appro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceeded on the basis that under Section 10 of the Specific Relief Act 1963 "specific performance of a contract for transfers of shares in a private limited company could be granted." The decision in V.B. Rangaraj (supra) was held to be "entirely distinguishable on facts." The present case does not involve any restriction on the transfer of shares but the existence of an affirmative vote which cannot be recognized without a corresponding amendment to the AoA. 22. Lastly, it was submitted that even a conduct which is technically and legally correct, may still justify the grant of relief in a petition under Sections 397 and 398 of the Act on the application of the 'just and equitable' jurisdiction. Conversely, a conduct involving illegality may not warrant the grant of any remedy. Reliance is placed on the decision of the Supreme Court in Sangramsinh P. Gaekwad v. Shantadevi P. Gaekwad [2005] 57 SCL 476. Mr. Ganda contended that in the present case it was just and equitable for the CLB to have granted relief to the Respondent notwithstanding the fact that the decision in the Board meeting may have been "technically legal and correct." 23. The above observations in Sangramsinh P. Gae ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id petition concerns the legality of the transfer of 12.5% shares of Mr. Pankaj Patel in favour of Appellant Nos.2 and 3. Therefore, the validity of any of the decisions taken subsequent to the transfer will depend on the outcome of the final decision in the petition under Section 397 of the Act filed by the Respondent. 28. In the circumstances, it is considered appropriate to direct that the interim order passed by this Court on 12th December 2012 to the effect that the resolution passed in the fresh Board meeting "shall not be given effect" is directed to continue for another period of eight weeks or till such time the CLB passes a final order in the petition filed by the Respondent, which decision, in any event, should not be later than 12 weeks from today. If for some reason, the CLB is unable to pronounce its final order in the petition within twelve weeks then, it will be open to either party to approach this Court for further directions. In that event, the interim order passed by this Court will continue till further orders are passed by this Court. 29. It is clarified that this Court has not expressed any opinion on the principal contentions of the parties on the other is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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