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Narmada E Learning (P.) Ltd. Versus Umang Boards (P.) Ltd.

2015 (7) TMI 453 - COMPANY LAW BOARD NEW DELHI

Charges of oppression and wilful misstatement u/s 397 & 398 - Wilful termination of MOU - Impact of Arbitration clause in agreement - Doctrine of Severability - Held that:- This Doctrine of Severability will come into operation when the agreement has come into effect. Here the respondents filed this application saying though this agreement entered into has not been given effect, it has to be referred to arbitration for the reason that MoU has arbitration clause notwithstanding the fact whether i .....

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giving any opportunity to the petitioners to participate in right issue. Looking at this scenario Dhanuka group causing Tulsain group withdraw earlier CP on the MoU with a proposal to set right earlier allotment, thereafter turning around and making allotment to their group at a price far lower than the price at which the shares were allotted to Tuisain group, I am of the view if it is not oppression, what else would become oppression?

In view of the same, I am of the view that the .....

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BR>
The grievances of the petitioners are not covered by either MoU or Arbitration clause of MoU, because the alleged acts cannot be coined as mere violation of the clauses of the MoU, they are, I believe, beyond the ambit of MoU and arbitration clause amounting to oppression against the petitioners, hence I dismiss the relief sought under section 8 of Arbitration and Conciliation Act, 1996. - the petitioners failed to make the parties against whom serious aspersions are made and sought rel .....

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ms of Section 8 of the Arbitration and Conciliation Act, 1996. 2. Before going into the merits on CA No. 143/2014, it is necessary to bring in the facts of the petition in brief so that it would become easy to find out as to whether this CA is to be allowed or dismissed. 3. This dispute is primarily between two groups namely Tulsian group (petitioners) and Dhanuka group (answering Respondents). 4. R1 Company was incorporated in the year 1999 with an Authorized Share Capital of ₹ 4,00,00,00 .....

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premium of ₹ 130/- per shares for a sum of ₹ 616 lakhs, resulting into an effective stake of 13.85%. 5. Before Tulsian group filing this CP, they filed CP No. 92/2011, wherein a settlement was arrived by an MoU dated 11.02.2012. On seeing the said MoU, CLB, on 01-03-2012 disposed CP 92/2011 in terms of the MoU dated 11.02.2012. That MoU says the principal promoter of the company is Dhanuka Group; the company has recently completed expansion plan with an increase of total capital out .....

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Agreement. Since Suresh Gaggar Group (shortly called as Gaggar Group) expressed their desire to come as strategic investor, all these three groups agreed that Gaggar group shall invest INR 400 lacs to acquire 10% share holding in the Company, As on the date of execution of agreement, the position in the company is paid up capital of the company had 31, 75, 902 equity shares of ₹ 10/- each. Out of which, Dhanuka group had 82.34% shareholding, Tulsian group had 13.85% shareholding, and Jain .....

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₹ 60/-, which Active had earlier acquired from the company on 30-10-2010, remaining 1,067 shares held by Active would be transferred to Dhanuka at the same rate. Likewise New Age Import (P) Ltd. would transfer its 14,364 shares to Jain group at ₹ 60/- at which New Age had earlier purchased. As said above, Gaggar group would invest INR 400 lakhs to acquire 10% shareholding, similarly, Dhanuka group either in the name of them or through their men (referred as New Investor) shall have .....

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petitioners believe earlier allotments would not remain in force, the petitioner withdrew the earlier CP. In view of the MOU arrived between the parties, the changes in the shareholding of the company shall be completed on or before 15th June 2012. After which, the parties shall enter into a binding Shareholders Agreement, on execution of the Shareholders Agreement, Tuisian Group and Gaggar Group, each shall have the right to nominate and appoint one Director on the Board of the Company. Therefo .....

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asra No. 243 & 244 Teh, Chomu, District Jaipur shall be used by the company for its expansion, details, and project matrix of which shall be mutually decided by all the three groups. It is agreed between Dhanuka Group and Tulsian Group that Jain Group would continue to remain as a minority shareholders/Group, without any Director on the Board, it is also said that Jain Group will be presented and protected by Tuisian Group. It is also agreed that all the strategic matters like, equity diluti .....

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ofit and loss account and financial statements within 30 days by the end of respective quarter. It is agreed that the affairs of the company shall be carried out and managed with high standards of Integrity, performance in conformity to best Corporate Governance. The important Clause upon which this application hinges is Arbitration Clause-24, which says as follows : ''Any disputes or differences, if any arising between the Groups shall be settled between the parties by the sole mediatio .....

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amount to contempt of court. The petitioners submit that fair value of the share has been stated as ₹ 113 per share (premium of ₹ 103 per share) in clause 2 of the MOU. The petitioners submit that the respondents have not performed any of the oblations, para-wise Clauses of the MOU, apart from this, R1 company allotted 3,77,173 equity shares on 18.10.2012 to a company called Umang Boards (Mumbai) Pvt. Ltd.. an associate and shell company of R2 and R3, at a price of ₹ 46 per sh .....

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ompany also issued 83,695 equity shares on 08.10.2012, at ₹ 46 per share (premium of ₹ 36 per share) to the shareholders of Jain Group by unlawfully showing the loan given by the Jain Group as share application money in its audited annual accounts in the previous years. The petitioners state that Jain Group has not given money towards share application or consent letter or confirmation to make allotment to it; therefore, this allotment is invalid. 8. The petitioners submit that R1 on .....

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. Ltd. and Umang Corporate Park Pvt. Ltd. have availed the funds from such multi layered shell/benami companies, involved in round tripping of the funds of over ₹ 12,000 crores. In addition to this, 4 bodies corporate, now forming part of Dhanuka Group are in addition to these 231 multi layered/benami/hawala companies, having involved in round tripping of black money, foreign funds, as also hawala money of over ₹ 12,000 crores The said 231 companies and its multi-Layered companies ha .....

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e petitioners further submit that R1 had availed Buyers' Credit from overseas branches of 4 banks, of ₹ 354 lakhs, as at 31.03.2012 this was shown as money come on import of raw material and other components used in the normal business and operations of the company but whereas the company showing imported raw-material of ₹ 144.27 lakhs only, which is in contravention to the provision of FEMA, as foreign exchange has been used/ diverted by the respondents for other unlawful purpos .....

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.2012 at ₹ 46 per share to the shareholders of Jain Group by unlawfully and coercively converting the loan given by some members of the Jain Group to the R1 company as null and void, accordingly to rectify the shares register; (5) To direct the respondents to complete the requirements for transfer of 66,629 shares acquired by Tulsian Group and Jain Group from Dhanuka Group in accordance with MOU dated 11.02.2012; (6) To order the accounts of R1 company for the financial years 2010-11, 2011 .....

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ayered benami/shell/hawala companies; (8) To order investigation into the source of funds of the shareholders of Dhanuka Group; (9) To direct appointment one director of petitioners on the Board of R1 company; (10) To direct appointment of independent auditors for R1 company, for financial year 2013-14; (11) To direct appointment of two independent directors and one nominee director of SBBJ on the Board of R1 company; 10. R2 and R3 filed this CA submitting that Company Law Board did not pass any .....

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, as per MoU, they agreed for Arbitration u/s 8 of Arbitration and Conciliation Act, 1996 as and when any of the parties want to dispute the acts covered under the MOU dated 11.012012. Since the petitioners allegations are based on non-compliance of terms of MOU, the counsel says, the same has to be referred to Arbitration in terms of Section 8 of the Arbitration and Conciliation Act, 1996. 11. The counsel without prejudice to the contention above mentioned submits that the Letter of Termination .....

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pany for the previous years. The counsel submits that the petitioners have not attended to any of the general meetings of previous years. The respondents also raised another contention stating that since the petitioners are seeking a relief of investigation into the ownership of 231 & 1500 multilayered Benami/Shell/Hawala companies referred in para 6.23 of the present CP without showing any of them as parties to the parties to the present CP, the petition suffers from non-joinder of necessar .....

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oposition placed above. For having the petitioner in this case sought investigation into the ownership of as many as 1731 companies without adding them as parties to the petition, the respondent counsel submits that this Bench shall dismiss it at threshold. 14. Having the petitioners sought for an enforcement of MOU dated 11.02.2012 there being an arbitration clause in the said MOU, the respondents counsel submits that this petition, in the light of section 8 of Arbitration and Conciliation Act, .....

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elhi) and Everest Holding Ltd. v. Shyam kumar Shrivastava [2008] 16 SCC 774 to say ratio in the cases supra covers the facts in the present case. 15. The respondents counsel also relied upon Pinaki Das Gupta v. Maadhyam Advertising (P.) Ltd. [2002] 38 SCL 170 (CLB - New Delhi) to say when Arbitrator could grant an appropriate relief which is sought before CLB, then such dispute could be referred to the Arbitration. 16. The respondents counsel relied upon P. Anand Gajapathi Raju v. P.V.G. Raju [2 .....

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ration clause of that agreement would still survive. Basing on this proposition, the respondents counsel says the Arbitration Clause in MoU dated 11.02.2012 would remain binding on the parties notwithstanding the fact of termination of MoU dated 11.02.2012. 18. The respondents counsel further relied upon observation made by Lord Macmillan in Heyman v. Darwins (1942) AC 356, which is as follows : ''I venture to think that not enough attention has been directed to the true nature and funct .....

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a tribunal of their own constitution. And there is this very material difference, that whereas in an ordinary contract the obligations of the parties to each other cannot in general be specifically enforced and breach of them results only in damages, the arbitration clause can be specifically enforced by the machinery of the Arbitration Acts. The appropriate remedy for breach of the agreement to arbitrate is not damages, but its enforcement, Moreover, there is further significant difference tha .....

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iled, but the arbitration clause is not one of the purposes of the contract." 19. The respondents counsel also relied upon the judgment in between Today Homes and Infrastructure (P.) Ltd. v. Ludhiana Improvement Trust (2014) 5 SCC 68, Swiss Timing Ltd. v. Organising Committee, Commonwealth Games AIR 2014 SC 3723 to say when the subject matter and parties are covered by Arbitration Clause, this case has to be referred to Arbitration. 20. The petitioner counsel submits that parties settled th .....

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s amounts to contempt of court. 22. The petitioner counsel relied upon Bhushan Power & Steel Ltd. v. Rajesh Verma [2014] 5 SCC 551 to say that non-compliance of a court order amounts to contempt. The petitioner counsel submits that the present CP is for enforcement of order dated 01.03.2012 passed by CLB in CP No. 92/2011 and also for investigation into the affairs of R1 company under section 237 and to bring oppressive acts being committed in relation to affairs of R1 company. The petitione .....

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invoke arbitration clause, provided subject matter is covered by arbitration clause. I do also agree that the principle of Doctrine of Severability is applicable to arbitration clause though the remaining clauses of the Memorandum of Understanding ceased to operate. 24. Now the point for determination is whether the MoU dated. 11.02.2012 has given any effect at all or not. 25. If the agreement itself is not given effect, is it necessary to bind the parties to arbitration or agreement, which has .....

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have been compiled with on or before 15.06.2012. The parties will get a right for becoming directors of the company only after shareholders agreement has come into existence, Here no changes took place as stated in para 1 to 8 of MOU dated 11.02.2012 and no shareholders agreement was executed after 15.06.2012. Apart from this, the very applicants who are respondents in this case - Dhanuka Group - unilaterally terminated this agreement saying it is not binding upon the parties. In a situation li .....

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ot seen the light of the day. In cases supra, the agreement entered between the parties remained in force for some time, both the parties acted upon, here nothing happened except the respondents using this MoU as a device for the withdrawal of earlier CP. 29. This Doctrine of Severability will come into operation when the agreement has come into effect. Here the respondents filed this application saying though this agreement entered into has not been given effect, it has to be referred to arbitr .....

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after disposal of earlier CP, turned around and made further allotments without giving any opportunity to the petitioners to participate in right issue. Looking at this scenario Dhanuka group causing Tulsain group withdraw earlier CP on the MoU with a proposal to set right earlier allotment, thereafter turning around and making allotment to their group at a price far lower than the price at which the shares were allotted to Tuisain group, I am of the view if it is not oppression, what else woul .....

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