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Enercon GmbH Versus Wind World (India) Limited and others

Mismanagement or oppression - CLB has found that, the case of oppression made out by the Mehras against EG is proved and as per provisions of Section 397, 402 and 403 of the Companies Act, 1956 (the Act), buyout by Mehras of the shareholding of EG is necessary. - CLB has directed EG to sell it's share holding to Mehras, laying down certain modalities as regarding appointment of facilitator and for valuation. - Held that:- if one takes overall view of the decision, it clearly appears that the man .....

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e Petitioner : Mr. S.U. Kamdar Senior Advocate, a/w Mr. Zubin Behramkamdin, Mr.Jehangir Jejeebhoy a/w Mr. Vivek Vashi, Ms Kanika Sharma, Mr. Hrushi Narvekar, Mr.Krishnendu Sayta, Ms Shaheda Madraswala i/b M/s Bharucha & Partners, Mr. Sudipto Sarkar Senior Advocate, Mr. Navroz. H. Seervai Senior Advocate, Mr. Zubin Behramkamdin, Mr. Jehangir Jejeebhoy a/w Mr. Vivek Vashi, Ms Kanika Sharma, Mr. Hrushi Narvekar, Mr. Krishnendu Sayta, Ms Shaheda Madraswala i/b M/s Bharucha & Partners For the .....

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ny Appeals are filed by Enercon GmbH. In Company Appeal No.42 of 2013 - Enercon GmbH has challenged the order passed by the Company Law Board in Company Petition No.83 of 2011 (originally numbered as Company Petition No.74 of 2008) filed by Mr. Yogesh Mehra and others. In Company Appeal No.43 of 2013 Enercon GmbH has challenged the order passed by the Company Law Board in Company Petition No.82 of 2011 (originally numbered as Company Petition No.121 of 2007) filed by Enercon GmbH. 3. The Company .....

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rcon GmbH, the 56 percent shareholder in Enercon (India) Ltd. 4. The Company Petition No.82 of 2011 was filed by Enercon GmbH (referred to as EG) against Enercon (India) Ltd. (referred to as EIL) and the Mehra family (the Mehras) and certain other subsidiaries on 11 August 2007. The Company petition No.83 of 2011 was filed by the Mehras against EG, Dr. Aloys Wobben and Mr. Hans Dieter Kettwig on 3 November 2008. By the impugned order dated 14 December 2012, the Company Law Board (the Board) has .....

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of EG is necessary. FACTS 5. EG and Mehras incorporated the Company in question i.e. Enercon India Ltd.(EIL) for manufacturing and marketing wind turbine generators and energy converters in India. EG is a Company registered under the laws of Germany. EG is one of the pioneers in the field of wind energy. Dr. Alloys Wobben holds many patents in the field of wind turbine generators. He is the 100% shareholder of EG. Yogesh, Ajay, Sudarshan, Minakshi, Radhika, Sitakshi, Siddharth Mehra are members .....

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Enercon India Limited , having its registered office at Mumbai, Maharashtra and the Mehras have requested EG and the EG has agreed to supply technical knowhow and assistance for manufacturing, marketing of Wind Turbine Generators and components excluding Wind Turbine Controllers and parts. The authorised share capital of the EIL was to be 22.500.000 Rupees (twenty two million five hundred thousand Rupees), divided into 2,250,000 Equity shares of 10 Rupees (ten Rupees) each. It was provided that .....

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o directors, one of them a nonretiring director. Chairman of the board was to be appointed by EG. Managing director was to be appointed by the Mehras. It was agreed that in case of deadlock the Chairman would have a casting vote. It was agreed that 30 days written notice of meeting of directors would be given to every director in India or outside for meetings of the board. In case of directors residing outside, notice of meeting was to be sent by cable, telex or fax. The board of directors were .....

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'the Know How Receiver' (KHR). It was stated in the agreement that EG has the expertise and knowhow in mechanical engineering and related technologies in respect of wind turbine generators and EIL intends to manufacture, trade and market the same in India. It was stated that at the request of the EIL, EG has agreed to provide the right and the license to use the technical knowhow to the EIL for manufacture of E26 Wind Turbine Generators and if market conditions are conducive then additio .....

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ts. EG was to make an attempt to assist EIL in achieving indigenisation. EIL was under obligation to keep all the information secret and use the same only for the purpose of the agreement. Period of Technical Know How agreement was for 10 years from the effective date or from 7 years from the commencement of production. In the contingency of EG withdrawing its shareholding, EIL was to retain right to manufacture the products in India and the technical knowhow already transferred. 8. The Reserve .....

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lion Equity shares. A further Supplementary shareholding agreement was executed on 19 May 2000. 9. One more Agreement was entered into that is Intellectual Property License Agreement (IPLA) dated 29 September 2006. It was stated in the recital that the technical knowhow agreement of 1994 has since expired this agreement was being entered into. IPLA agreement is now subject matter of an arbitration proceedings. The implications of IPLA in respect of consideration of the subject matter of the pres .....

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t of supply of parts. The Mehras negotiated with one IL & FS to sell its shares of 6% for ₹ 220 crores and informed EG by letter dated 10 August 2007. In view of the intention of the Mehras to sell its shareholding to an outsider the EG filed a Company petition No.82 of 2011. Company Petition No.82 of 2011 by EG 11. The case of EG in the Company petition No.82 of 2011 was as follows : (I) EG is the fourth largest wind turbine manufacturer in the world. It is a pioneer in the invention .....

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ding advisor to the Government of Federal Republic of Germany with respect to the energy sector. Yogesh Mehra does not have any wind energy experience or credentials as the family business of Mehras was textiles. (ii) Around the year 2006 basic differences in approach arose between EG and EIL. EG was interested in cautious project research and development of wind turbines, while Mehras were interested in setting up independent power producing wind farms. Mehras planned to sell their investment t .....

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m EG. Management related information was not given. Inspite of technical knowhow agreements, the finances of EIL were hidden by the Mehras. The EIL is a joint venture between EG and Mehras and the foundation of the EIL was the innovation and inventions of Dr. Aloys Wobben, the chairman of EG. The relations between Dr. Wobben and Mr. Yogesh Mehra were excellent and thus Dr. Wobben put his full trust in him. By the year 2005, it became apparent that EIL was in need of funds and EG was ready to inf .....

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open market and borrowings. Instead of concentrating on manufacturing on wind turbines generators and its research, Mehras were more interested in indiscriminately acquiring land and needlessly created various subsidiary Companies. The Mehras were responsible for EIL committing Sales tax and VAT violations and funds of the Company were also being siphoned of in the construction of towers etc. Yogesh Mehra was misusing his position as Managing director and was not supplying correct information to .....

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ed. Supplies were stopped. With mutual consent in February 2007, supplies were resumed. Stoppage of supply had no effect on production as 120 finished uninstalled machines were being held by EIL. EG came to know from customers of EIL that false invoices were issued and the funds of EIL were siphoned out. Large amount of finances were diverted to construction work. The Mehras being managing directors and in control of daytoday affairs were mismanaging EIL and were acting oppressively. The Mehras .....

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p was oppressive to EG, and also against the public interest. The Mehras already voiced their intention to cash out their investment. A case under Section 397 and 398 of Companies Act, 1956 was made out. Accordingly EG is entitled for a direction to remove Mehras from the position of Managing directors and board of directors. Article 171 and 128(A) need to be amended and right of appointment of directors given to Mehras be deleted. The Mehras should be directed to transfer their shareholding of .....

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Enercon (India) Limited. (c) Direct that the Articles of Association of Enercon India shall stand amended, in particular Article 171, to the effect that rights of appointment of directors and participating in management given to the Mehra Group (Respondent Nos.2 to 8) shall stand deleted. (d) Direct that the Articles of Association of Respondents Nos.9 to 35 being the subsidiary and associate companies of Enercon India shall stand amended to the effect that rights of appointment of directors an .....

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ding but not limited to Respondent Nos.9 to 35 herein to the Petitioner at a fair value to be independently arrived on the basis of the balance sheet of each of the said companies giving the true view of each company. (g) Direct an investigation to ascertain the conduct of the Respondent Nos.2 to 8 in dealing with assets, properties, monies and management of the Respondent No.1 Company. (h) Direct Respondent No.1 to take all necessary and consequential action to the report of the investigation, .....

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EG for interim relief. The Board by it's order dated 24 September 2007 came to the conclusion that the position of the EIL is critical and supplies need to be resumed by EG immediately. EG was authorised to appoint one of its nominees as a joint managing director, subject to EG resuming the supply. Joint managing director was to work together with managing director. Statusquo was directed to be maintained, with regard to all the issues pending then and no action in relation to the dispute w .....

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se efforts had failed and matter needed to be heard on merits. By order dated 19 May 2008, the Board directed that no board meeting to be convened without the leave of the Board. Reply by Mehras to the Company Petition No.82 of 2011 14. On 4 July 2008, a reply came to be filed by the Mehras opposing the Company Petition No.82 of 2011. The case of Mehras in their reply, briefly was as follows : (i) Since the inception, the work of Mehras has been very good and EIL has been successfully managed. T .....

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rary injunction against EIL in the Regional Court at Hamburg, Germany. This fact was suppressed. The Hamburg District Court on 9 April 2008 had vacated the exparte adinterim order. Even in the proceedings before the High Court the order passed by the Hamburg Court was suppressed. Various attempts have been made by EG to bring the functioning of EIL at a standstill so that it can acquire the shareholding of Mehras at lowest price. (iii) The supplies of necessary parts was stopped without reason. .....

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or 6% stock of Mehras from which position the EG unjustifiably resiled. (v) There was no question of inflating the valuation nor any evidence is produced in that regard. The allegation that Mehras concealed state of affairs from the EG is baseless. Finances of EIL were never hidden nor withheld nor there was any window dressing of the accounts. The accounts were maintained by one of the most reputed audit firms. On the other hand, EIL was awarded Best Service Provider award due to the management .....

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Due to the transportation problem and lack of quality infrastructure and other facilities, there has been an inventory builtup but that has nothing to do with the management of the Company. It is only with a purpose of taking the control of EIL by reducing the value that EG did not introduce higher capacity machines in India. The EG was interacting on regular basis with representative of the Petitioners and there was a Balanced Score Card system developed. In affidavit filed on 30 August 2007, .....

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y Petition No.74 of 2008). The case of Mehras, after narrating basic facts, in this petition was in short as under - (i) The EG in its capacity as a majority shareholder committed various acts of oppression. The EIL was being managed by Mehras competently and there was no complaint by EG in respect of the management by the Mehras. The EG with an intention to force exit on Mehras made an attempt when deciding to purchase 6% shareholding of Mehras at 40 million Euros unilaterally changed over to p .....

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of rupees 34 crores sanctioned to EIL by ABN Amro Bank. In view of this withdrawal EIL was placed in serious financial trouble. (iii) The EG unjustifiably relied upon a draft IPLA, which was not a concluded, contract to stop the supplies which was crucial for existence of EIL. EG instituted frivolous and vexatious proceedings in the Court at Hamburg, withholding information important to EIL in respect of its transfer pricing. EG also stopped the access of EIL through the SAP system, which was ne .....

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sumed, EG deliberately supplied the machinery in mismatched manner. (v) EG unjustifiably used the fact of termination of the draft IPLA to address correspondence to various parties to prejudice the interest of EIL inspite of the position that draft IPLA was not a concluded contract. EG arbitrarily directed EIL not to proceed in respect of the export project in Ethiopia resulting in substantial financial loss and threat to levy being imposed by the government. (vi) Inspite of such malicious actio .....

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use funds. The Article 171 should be amended to remove the right of appointment of directors in EG and the power to casting vote under Article 157, and EG should transfer their entire shareholding to Mehras at a fair value. 16. Accordingly the Mehras in the Company petition made the following prayers- a) Direct that Respondent No.1 be obliged to comply with the Agreed Principles executed on September 29, 2006 between Petitioner No.1 on behalf of Respondent No.2 and Respondent No.3 on behalf of R .....

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ial institutions and any other lending agency that the draft IPLA is terminated and not enforce any rights that it may allegedly accrue from its termination; d) Direct that Respondent No.1 act upon its commitment, as made before the banks on December 20, 2007 to infuse further capital of ₹ 112 crores into Respondent No.2; e) Direct that the accounts of Respondent No.2 for the financial years 20062007 and 20072008 be audited as per past practice and standards and that Respondent No.1 extend .....

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h) Direct that Respondent No.1 transfer their entire shareholding 56% in Respondent No.2 to the Petitioners at a fair value to be independently arrived at on the basis of the valuation carried out by any person as appointed by this Board; Reply of EG to the Company Petition No.83 of 2011 of Mehras 17. The EG filed their reply to the Company Petition No.83 of 2011. In the reply EG took various contentions. Most of the averments in the reply were repetitions of the stand taken by EG in their peti .....

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PLA are not within the jurisdiction of the Board. (iii) By order dated 29 January 2009, the Board had directed valuation, which order has become final. (iv) The issues raised by Mehras are purely contractual in nature. The Mehras repudiated the IPLA and sought to infringe the intellectual property rights of EG. The Mehras systematically attempted to revoke the patents held by Dr. Wobben. The Mehras attempted abuse of SAP system by prying into areas they were not entitled to and therefore prevent .....

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ply with the orders of the Board. The conduct of the statutory auditor to EG was not fair and was only to support the Mehras. The Mehras manipulated accounts to falsify credit ratings, high inventory of almost 120 fully finished products was maintained to causing EIL to commit violations of taxing statutes. The Mehras, by keeping EG in dark, created huge debts and committed misappropriation of assets of EIL. The profits of EIL were artificially increased. 18. The averments made in the petition b .....

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ust and confidence between two sets of shareholders which is evident from the fact that each of them have filed the petitions. There was a complete deadlock due to which board meetings were not being held, and parting of ways was in interest of the EIL. The Board suggested that parties to consider parting of ways. Since the parties agreed for appointment of M/s Sharp & Tannan both the parties were given liberty to make submissions before the valuer. On 29 January 2009, matters were taken up .....

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Surana & Associates were appointed as valuers. On 23 July 2009, it was agreed by consent that M/s Ernst & Young, India would be the valuer. On 19 October 2009, Company Application Nos.423, 424, 425, 426 of 2009 were taken up by the Board. Company Application No.423 of 2009 was filed by EG seeking certain directions to the Mehras. The Board directed the auditors of EIL to furnish all the information furnished by EIL to the auditors for the purpose of audit. As regards the allegations of .....

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use the information for any purpose other than valuation and not use it in the correspondence with third parties. Company Application No.67 of 2010 was filed by EG in respect of due diligence of EIL, came up for consideration before the Board on 23 March 2011. The Board noted the order passed by this Court in Company Appeal No.91 of 2009. It noted that undertaking as contemplated by the order passed by this Court was not filed in Company petition. The submission of EG that undertaking was not r .....

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ely heard. The EG contended that the Mehras in conducting the affairs of the EIL had committed acts of oppression and mismanagement and the Mehras alleged that the EG has acted oppressively against the interest of EIL. Both the parties thus alleged oppression / mismanagement on the part of other side and defended their own action. 22. It was argued by EG that Mehras held 15 board meetings and an extra ordinary general meeting without any notice to EG. Various companies were incorporated to frust .....

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usurped and its intellectual property rights were infringed. It was submitted that the proceedings had been brought by EIL against Dr. Aloys Wobben for revocation of 19 of the patents. Mehras attempted to cause EIL to wrongfully obtain parts ignoring the patents of EG. It was contended that EIL abused the SAP server by importing EGs data and peep into it's global operations. It was contended that the Mehras filed criminal proceedings and when the representative of EG visited India, they were .....

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holder be permitted to hold a general meeting and change the composition by removing the Mehras and for modification of the Articles of Association. As regards the contractual obligation between EG and EIL, it was contended that those issues need not be gone into as there are proceedings pending in Civil Courts and courts of competent jurisdiction. 23. It was further contended by EG that the Company petition No.83 of 2011 filed by Mehras is liable to be dismissed in limine because as no cause of .....

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laint made must relate to the affairs of the Company. It was urged that the acts of oppression complained against EG were not in the capacity of shareholders and independent acts of EG as technical knowhow provider could not come under the concept of oppression. As regards the allegation made by Mehras, the EG contended that the issues regarding transfer pricing and other contractual disputes are subject matters of dispute before other forums. It was contended that no shareholder can be forced t .....

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sought to be taken away by EIL. Various decisions were cited as regards the rule that the Board should ordinarily direct buy out in favour of majority. On these and various other grounds EG presented its case. 24. Mehras contended that none of the prayers in Company Petition No.82 of 2011 filed by EG, could be granted as the conduct of EG was unfair and prejudicial. It was contended that the EG had indulged in acts of oppression of sudden stoppage of supplies, mismatch of supplies, withdrawal o .....

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tended that even otherwise they were not averse to including these Vaayu Companies in valuation exercise. It was contended that the role of EG as a technological knowhow provider and the shareholder could not be separated. It was contended that it could not be that the actions of EG as a knowhow provider, since though being prejudicial to the interest of the EIL, could be ignored, since they were majority shareholders. It was contended that the refusal of EG to infuse capital in the EIL when Com .....

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ne as they were never interested in the same. Mehras contended that EG never made any complaint regarding the management of Mehras and only started making complaints as part of their plan to depress the value of shares to force Mehras to exit. Mehras contended that the resolutions were passed as the practice followed by EIL. It was further contended that even if EG exits from EIL, EIL will not suffer as the technology which is available can be marketed and the EIL will not be financially affecte .....

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ious directions. The Board found that the Mehras had made out a case of oppression by the EG and that parting of ways could not be avoided. The Board came to the conclusion that it would be in the interest of EIL and the shareholders that EG should go out of EIL. It held that even though Mehras were in the minority, giving EIL to EG will be rewarding the wrongdoer. The Board further noted that for parting of ways valuation was necessary for which EG had refused to give an undertaking. The Board .....

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rnished to EIL with a copy to the Board. Even if EG failed to give requisite undertaking the valuation was to continue. On receipt of valuation report, the Mehras were to make remittances of the dues to EG within three months. The observer Mr. Acharya was directed to ensure smooth proceedings before the Valuers of EIL till the valuation was completed and EG's dues were cleared. Mr. Acharya was given liberty to mention the matter to apprise the Board and seek further directions if necessary. .....

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pany Appeal No.43/ 2013 challenging the order passed in Company Petition No.82 of 2011. By order dated 18 January 2013, the Appeals were admitted. The order passed by Board dated 14 December 2012 was stayed. The interim orders dated 29 October 2007, 7 January 2008 and 19 May 2008 were continued. In matters arising out of the IPLA, proceedings initiated by EG reached the Apex Court and the Apex Court in SLP No.33252 / 33263 of 2013 on 31 October 2013 expedited the hearing of the present Company a .....

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on of mind and the proceedings need therefore remanded back. Mr.Kamdar, without prejudice to the submissions of Mr. Sarkar, advanced submissions on merits in case the prayer of remand was not accepted. According to him the Mehras petition was liable to be dismissed and EG's petition needed to be allowed. Mr. DeVitre supported the impugned decision of the Board to contend that there is no nonapplication of Board and there is no need for remand and the order of the Board was fully justified. S .....

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on 14 December 2012 running into 171 pages without dealing with various contentions. The learned member has merely reproduced the various contentions of the parties. The case laws cited by the Appellants have not been considered at all. (ii) The Board has dismissed the petition of the EG as not maintainable even though all the ingredients of Section 399 of the Act were satisfied. Inspite of the relevant ingredients missing from the Mehras petition, the same was allowed. The conclusion that the p .....

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e Board requires to be thrown out at the threshold, despite of observing that the Board had no option but to dispose of both the petitions on merits in view of the order of this Court. (iv) Inspite of demonstrating that the actions of the Mehras, the minority shareholders, were oppressive and prejudicial to the interest of majority, the Board not only gave clean chit to the Mehras but awarded them the entire EIL. The Board has not considered the unauthorised alteration of the Articles of Associa .....

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gal modification of Articles of Association; incorporation of Vaayu companies; CARE ratings; Lack of Provisioning as per Standard Accounting Practices; Tax Evasion; Noncompliance with GAAP; meeting and interconnection with Consortium of Bankers; needless financial assistance from various Banks; refusal by Mehras to infuse capital; artificial inflation of profits, distortion of financial gains; diversion of EIL's Resources; vexatious proceedings; setting up parallel SAP Server; reengineering .....

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management of the Company. The requirement of Section 398 of the Act is that the act of mismanagement must be attributable to the shareholders who are in management of the Company and against only such shareholders that the petition making grievance of mismanagement can be filed. (vii) Not only factually EG was never in management and the Mehras were in management, this position is also made clear in the Articles of Association of EIL. Inspite of raising this point which goes to the root of the .....

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nduct must be burdensome and operate harsh and the position must continue till the date of the petition. To constitute an act of oppression there must be actions on one group of shareholder in respect of the affairs of the Company. Therefore Mehras had to demonstrate that the action complained by EG were in their capacity as a shareholder and those actions in the capacity of shareholder were oppressive to Mehras. (ix) The Board confused between the actions of EG in its capacity as a shareholder .....

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putes and that EG had correctly decided not to argue on issues which are purely in the nature of commercial and contractual, proceeded to make observations on merits regarding the very same dispute which were to be decided by the competent Courts. The Board made observations on merits on the validity of IPLA, the purported transaction of technology, stoppage of supplies, all three pending in the concerned courts. (xi) The grievance and reliefs claimed by Mehras were in relation to contractual ag .....

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the Company on just and equitable grounds is made out. The Mehras did not seek winding up of EIL on just and equitable grounds as they are the ones who are in management of EIL. The Board did not address itself to this basic issue, the impugned order therefore, suffers from nonapplication of mind. (xiii) While listing out the proceedings initiated by Mehras and EG, the learned member of the Board did not mention the suit for stoppage of supplies, being Suit No.2667 of 2007, filed by Respondent .....

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uld not have given findings on merits of the same. (xiv) The Board could not have directed transfer of technology to Mehras merely because they were permitted to buy out the shareholding of EG. The Board had no jurisdiction at all to arrive at such finding. Furthermore the issue regarding transfer of technology is being agitated in various courts and is sub judice. (xv) The direction to issue transfer of technology is not only not within the powers of the Board, the direction is issued without c .....

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law and introduced a concept of de jure and de facto control, concepts which are unknown to law in respect of buy outs. (xvii) The Board proceeded on completely erroneously basis to order the valuation. Principles of natural justice were violated by the order of the Board by denying the copy of valuation report to EG and directing payment of consideration as per valuation without giving an opportunity to EG. The Board also gave no justification for choosing the period and date for valuation, tha .....

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estionable. This particular member of the Board has appointed Hari Sankar Acharya in various companies, each time fixing exorbitant fees in his favour. Mr. Acharya has been appointed by this particular member of the Board fixing fees from ₹ 73,000/to ₹ 3,00,000/p.m. The Companies on which he is appointed are located at Bangalore, Mumbai, Hyderabad, Delhi and Ahmedabad and it is not possible to believe that when he would be simultaneously working in all these places. (xx) The order of .....

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i) Firstly, that the impugned orders ought to be quashed and set aside and the petition filed by the EG needs to be restored to the file to be heard by the Board afresh on merits. If this prayer is not acceded to, relief be granted in favour of EG as prayed for in their Company petition as the various acts of the Mehras constituted oppression and mismanagement on their part, and Mehras petition be dismissed. (ii) The Mehras unauthorisedly altered the Articles of Association to enable them to run .....

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Mehras against EG. (iii) Between April 2007 to October 2007, fifteen illegal board meetings of EIL were held by Mehras, without giving notice to EG, which EG came to know first time in January 2008. The Board resolutions dated 26 April 2007 passed without notice to EG, gave sweeping powers to Yogesh Mehra. The powers were given to buyback and enter into other arrangement with customers who were close to Mehras. Powers were conferred to defend or institute legal proceedings on behalf of EIL and .....

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ed to circumvent the order of statusquo passed by the Board on various dates, more particularly the order dated 29 October 2007. (v) The Mehras filed a derivative suit in 2007, which action was in complete contradiction with the purported powers assumed by them under the alleged resolution. If the Mehras had allocated themselves these powers under the resolution then there was no need for them to file a derivative suit, and this clearly indicates that the so called resolution is a backdated and .....

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rther. By order dated 19 May 2008, the Board had directed that without leave of the Board no meeting shall be convened and no circular resolution would be passed. However, in and around 2010, the EG came across material on the internet indicating that the Mehras incorporated various companies, the 'Vaayu' companies at various places. Mehras incorporated Vaayu Companies with similar structure of EIL, with a clear view to defeat the rights of EG. (viii) The Mehras fraudulently funded these .....

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e technology without any authority. The act of incorporating these Vaayu Companies was gross act of oppression of Mehras. (ix) When the EG's representation had come to India and were staying at Taj Mahal hotel, on 1 September 2008, officers of the Economic Offence Wings, in connection with a complaint filed by Mehras, interrogated them for six hours. EG's representative filed Criminal Revision Application in this Court and the stay was granted to further proceedings. However, the Mehras .....

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e property of EIL on the strength of illegal meetings and resolutions and misappropriated the assets of EIL. Inspite of orders of The Board dated 29 October 2007 and 19 May 2008 granting interim orders, the Mehras procured various loans from bank and encumbered assets of EIL in contravention of the orders of the Board. Equitable mortgages on all immovable property for amount of ₹ 63 crores, hypothecation of entire assets of the companies for ₹ 25 crores, hypothecation of certain asse .....

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has to be management of the Company. Since EG was not in the daytoday management of the Company there is no question of entertaining the petition filed by Mehras against the EG. To maintain a petition for oppression there must be two or more groups of shareholders and the acts complained must be by a group acting against the interest of another group. The acts complained must be in the capacity of shareholder and the contractual disputes between the shareholders out of purview of the Board. The .....

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outside the purview of petition under Section 397 and 398, went on to adjudicate them. The relief sought for by Mehras in their petition are clearly contractual and on this reason alone the petition filed by Mehras was not maintainable and should have been dismissed. Even assuming that the petition was maintainable, none of the allegations made by Mehras had any substance and none of them constituted acts of oppression on the part of EG. (xiv) The allegation that EG initiated spate of litigation .....

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ngs only to harass EG. It was Mehras therefore, who instituted numerous frivolous and vexatious proceedings against EG. (xv) There is no substance in the allegations of Mehras that the EG initiated malicious correspondence to third parties so as to affect the business of EIL. These letters were written by EG only to protect it's intellectual property rights and contractual rights which were being misused by the EIL at the behest of Mehras and therefore the EG was justified in addressing such .....

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obligation. Even though the EG was under no obligation to supply after the expiry of the agreement, the EG continued to make supplies under impression that the parties were negotiating a comprehensive agreement. Inspite of this position, Mehras continued to commit defaults in payment and therefore, protective action had to be taken by EG. The question of allegation of mismatch of supply is sub judice in this Court in a Civil suit. The issue of mismatch of supply is a complex issue. (xvii) The M .....

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no response by Mehras. Not giving access to SAP did not amount to any oppression. (xviii) There is no question of jeopardising the fulfillment of EIL for a project in Ethiopia. License granted to EIL was restricted to India and EIL was not entitled to manufacture the turbines outside India. Even assuming it was permissible under the Export Promotion Capital Goods Scheme, it could not have been done without the permission of EG. EG was prepared to infuse funds in the Company however, Yogesh Mehra .....

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eave of the Board inspite of the order passed by the Board. The Mehra's petition requires to be dismissed and EG's petition be allowed. Submissions on behalf of Mehras 31. A summary of arguments of Mr. Fredun DeVitre, on behalf of the Mehras as under (i) The EG has levied unfair allegations against the learned member of the Board that she misconducted herself. The Board has reproduced the written submissions and there is nothing wrong in the same as it is a matter of convenience. Adequat .....

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y interested in delaying the matters. The learned member had taken extensive notes of the arguments. Parties filed their written submissions and thereafter decision was given. The submission that the decision was taken in undue haste is without any basis. (ii) Though the Board stated that the petition by EG is not maintainable and deserves to be rejected at threshold, the Board decided the matter on merits and the discussion by the Board would demonstrate this fact. (iii) The Mehras have at the .....

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EG is that the Mehras have refused the valuation of the contemplated shares then there is no difficulty for EG to accept valuation on earlier date. Even otherwise, Mehras are agreeable if any other appropriate date for determining value of shares can be determined. Mehras have no objection to include Vaayu Companies in the valuation. (iv) The Board, on 29 January 2009, passed an order regarding a finding that parting of ways between two groups of shareholders was inevitable however, the same was .....

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areholders Agreement, Technical KnowHow Agreement. The parties agreed that the Board of Directors would consist of four directors, two directors from each shareholder group and in case of deadlock, chairman was to have casting votes. The EG did not at any time prior to filing of the petition choose to exercise its rights to appoint any alternate director and a Joint Managing Director as it was entitled to under the Articles. (vi) The daytoday management was carried on by the Mehras with the cons .....

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ture was set up there was no grievance or objection raised by EG in respect of functioning of EIL. Various subsidiary companies were set up as the main business of EIL was of manufacturing and marketing of wind turbines by undertaking turnkey projects. Accounts of these companies was included in the accounts of EIL. A SAP system was set up and EG had all time access to the transaction in India. Thus EG was in full knowledge of the functioning of EIL. (vii) No objection or any protest was made by .....

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information. Mr. Yogesh Mehra would also visit Germany atleast twice a year. Statutory auditors would scrutinise the accounts. Minutes of the meetings were also sent. This functioning was recorded in the letter dated 23 February 2007 which was never denied by EG. (ix) The EG from time to time by addressing letters acknowledged and appreciated the work done by Mehras in regard to EIL. Letters were issued on 1 December 2005, 2 October 2006, 6 October 2006 for the year 2006, thereafter 2007 to 201 .....

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gy in special components. Royalty payable was also fixed. The meetings were held by the parties in their capacity as a shareholder. In the various correspondence that ensued EG described itself as acting in capacity as a majority shareholder. (xi) Around 2006, Dr. Wobben, in view of attempt to find an amicable solution, expressed that he was willing to consider selling his shareholding to concentrate more on research. Dr. Wobben had also appreciated the work of Mehras. The Dr. Wobben offered a s .....

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main shareholder of EIL which is clear from the correspondence. The Board therefore, correctly held that stoppage of supplies by EG was in its capacity as a shareholder. The Mehras then sent such information which was sought for by EG. Supplies were resumed in March 2007 since information sought for was furnished. Again correspondence received in reference to the discussions that took place on 24 February, 2007 were as parties had agreed for termination of partnership in EIL. Due diligence was .....

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tice to EIL and Mehras. When EG filed it's petition there was no mention of withdrawal of guarantees by EG. Mehras had pointed out that withdrawal of corporate guarantee without prior notice did serious damage to the EIL. The Mehras on the other hand, had given personal guarantees to the tune of approximately ₹ 540 crores. After filing the petition EG withdrew the SAP access / connectivity of EIL falsely claiming authorization for the access. This caused tremendous problems in the func .....

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efused to provide transfer pricing information after 20052006. EIL being Indian subsidiary of foreign principal was required to produce material before tax authorities which was unjustifiably withheld despite repeated reminders causing problems for EIL and oppression to minority shareholders. The EG also refused to infuse capital in EIL. The director appointed by EG agreed in the meeting dated 20 December 2007 that they would increase the capital, but EG did not honour the commitment made by it& .....

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e Courts directing EG to file an undertaking that they will not use the information received from Mehras except for certain contingencies specified therein, EG refused to give such undertaking. When the Board refused to pass any order regarding appointment of a fresh valuer since EG refused to give an undertaking, EG filed an appeal in this Court which was rejected, Special Leave Petition filed by EG was also dismissed by the Apex Court. After the completion of hearing EG made an application cal .....

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business of EIL to close and in order to depress the value of the shares. (xvii) There is no substance at all in EG's allegations of oppression and mismanagement by Mehras. There was no unauthorised alteration of Articles of Association as alleged. Amendment to Article 170(a) was carried out in the year 2003 when there was no dispute between the parties. EG was kept fully informed of all the meetings. Amended Articles were forwarded to EG. They were also annexed by EG to its petition stating .....

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endment cannot be termed as oppressive as powers exercised by Mehras pursuant to these amendments was for the benefit of EIL and could not be termed as oppressive. Similarly, there is no basis for the allegations that the Board resolutions dated 26 April 2007 were illegal and amounted to oppression. EG raised a grievance regarding board meeting of 26 April 2007 for the first time in Company application which was filed on 27 February 2008. (xviii)The issue regarding the Board resolutions was conc .....

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rain formation of new subsidiaries was rejected by the Board. The Vaayu companies were set up as part of the business of EIL and the Mehras had offered to include Vaayu companies in the valuation exercise. No evidence has been placed on record to show that Vaayu companies were conducting business in competition with EIL. (xx) The EG has made needless allegations against statutory auditors which were working for 14 years since inception, without any objection from EG. No allegations could have be .....

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ehras bonafide pursued remedies available to them in law. (xxii)The contention of EG that allegations against EG were not maintainable as they were not in day to day management is incorrect. Section 397 does not have a concept of minority or majority shareholders. Being in fact in control and in law being in control, are settled legal propositions. The directors can act oppressively by doing nothing to defend the interest of the Company when certain action is warranted. Section 397 also contempl .....

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also in capacity of majority shareholders. The nominee directors of EG on the board of EIL chose not to further the interest of EIL. All the actions of Mehras were in the interest of EIL. (xxiii) The Mehras have been in day today management of the Company for 20 years. There have been no objections or protests regarding management of the Company. Mehras have adopted manufacturing of turbines to suit Indian conditions. EG has distanced itself from the Company and did not take part by appointing n .....

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ts, should not be interfered. The allegations of EG regarding the valuation process is baseless. The Board has directed that the valuation should be done by independent auditor. (xxv) Even assuming no case of oppression has been made out there is a severe deadlock and since the impugned judgment of Board puts an end to the dispute in an equitable manner it is not necessary to interfere with the same. Both the appeals therefore, are without any merit and deserve to be dismissed. DISCUSSION 32. Fi .....

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e decision is rendered is opaque and it is given in an extremely hurried manner. Thus, the decision of the Board is assailed on the ground of suffering from serious lacunas, and that there is lack of fairness in decision making process. In the preceding paragraphs the pleadings of the parties and the submissions made both before the Board and in this Court have been enumerated which will show that various complex issues arose for consideration. The grievances made by EG are serious and cannot be .....

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ent administration of Companies Act. Until 1 February 1975, the Board functioned as a delegate of the Central government. By the Companies Amendment Act of 1974, the Board was empowered with certain functions, which were earlier with the Courts. Later on it was found necessary to increase the strength of the Board so that the Board could decide all the matters which were transferred from the Court, by forming benches. To enable it to discharge the quasijudicial functions more effectively, it was .....

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Amendment Act, 1988 as regards the powers and functions of the Board. This amendment was preceded by setting up of a committee who submitted its report. The committee noted that there was need for a quasijudicial Tribunal, independent of the executive authority of Central government, not only to ensure that the affected party is heard but also the decisions are seen to be taken judiciously and without interference. The committee recommended that the Board should be an independent quasijudicial b .....

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de of Civil Procedure 1908 while trying a suit, in respect of disclosure and inspection of documents, enforcing attendance of witnesses, compelling production of documents, examining witnesses, granting adjournments and reception of evidence on affidavit. Every bench of the Board is deemed to be a Civil Court under Section 195 and the proceedings before it are deemed to be judicial proceedings. The Board in exercise of its powers and discharge of functions is guided by principles of natural just .....

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ion 397 and 398 of the Act, any member of a company can apply to the Board in case of oppression and mismanagement in respect of the affairs of the Company by the other member or members. Under Section 397 any member can approach the Board complaining that the affairs of the Company are conducted prejudicial to public interest or causing oppression to any member or members. The Board can remedy the situation by putting an end to the oppression if it is of the opinion that the Company's affai .....

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control of the Company which is likely to affect the affairs of the Company prejudicially. The Board, if it is of the opinion that the affairs of the Company are being conducted in a manner prejudicial to the interest of the Company and public interest or any change has been brought about resulting in prejudice, the Board can pass such orders as it deems fit. Substantial body of law is developed in England and in this country regarding the concepts of Oppression and Mismanagement in a Company. .....

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rchase of share or interest of member by other members. The Board can, in case of purchase of shares consequent reduction in share capital, terminate, set aside and modify any agreement between the company and it's managing director, director, managing agents, secretary, treasurer or the manager on equitable terms, after giving notice to the concerned parties. The Board can set aside any transfer, delivery of goods, payment, other acts relating to property by and against the company. The Boa .....

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lter and overwrite the articles of association. The Board can appoint an officer of the Court to look after the affairs of the Company. The appeal to the High Court under section 10F from the order of the Board is only on questions of law. 39. Bare perusal of these provisions would show that the powers conferred on the Board are very wide. Board can change the control of the Company by directing buy out of the interest of the members of the Company. The Act confers substantial powers on the Boar .....

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and the implications of the outcome, that the litigants expect that they will be dealt with fairly by the Board. The orders of the Board have farreaching effect on the affected parties. The Board which was once an authority to oversee the provisions of the Act working under the supervision of the Central government, is now, by various amendments, a body with the attributes of a judicial body. The strict parameters of conduct as applicable to a judicial body are desirable to be followed by the B .....

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grievances made by the EG needs to be considered. 42. The first grievance made by the EG is that the Company petition No.82 of 2011 filed by EG was dismissed as not maintainable inspite of observing that in view of the directions of this Court there was no option but to dispose of the petition on merits. It is the contention of the Mehras that though the Board did state that the petition is dismissed as not maintainable, but in fact, the Board has dealt with the petition of EG on merits. 43. The .....

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able in view of any statutory embargo and deserved to be thrown at threshold and there was no question of looking at the case on merits. Second, it was dismissed holding that no pleadings are made in the petition to found a charge of oppression and mismanagement and therefore the petition is not maintainable as being bereft of any particulars. Thirdly, though it is mentioned that the petition is not maintainable, it is decided on merits. 44. There is a specific meaning to the phrase 'not mai .....

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eserved to be thrown out at the threshold'. The Board's conclusion on EG's petition therefore reads that it was 'not maintainable' and 'deserved to be thrown out at the threshold'. It is not expected of the Board to use such important phrases casually. It is not expected of the appeal Court to look for meanings and hear debates on what the learned member actually meant. Even though the above three positions cannot coexist, I will now consider whether the learned membe .....

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t. The right to approach the Board under Section 397 and 398 is conferred subject to conditions laid down in Section 399 of the Act. In the case of company having share capital, the right to apply under Section 397, 398 is on not less than 100 members and not less than 1/10th of total number of members whichever is less, or members holding not less than 1/10th of issued share capital. In case of company not having share capital right is conferred on not less than 1/5th of total number of members .....

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irement under Section 399 was not fulfilled the EG's petition could have been dismissed at the threshold, as stated by the Board. The petition therefore was maintainable and the finding of the Board taken in the first sense is therefore, completely perverse. 46. Now to the second aspect, that is to examine whether the petition was not maintainable as no cause of action was pleaded by EG to invoke section 397, 398 of the Act. It may be possible to not entertain the petition which is bereft of .....

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ns sought from the Government. The petition gives particulars of the Petitioners, it gives the qualifications of the Petitioners to file the petition. It gives the particulars of Respondents, number of equity shares held by them and percentage of shareholding. Thereafter the petition narrates detailed factual background, which led to the dispute between the parties. It then proceeds to list genesis of cause of action and allegations of oppression and mismanagement by Mehras are made in detail. I .....

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s arose regarding the financial practices and as a part of ongoing legal discussions. Mehras offered to sell their shareholding and thereafter went back on their commitment. It is urged that the valuation produced by Mehras was highly inflated. The EG further alleged malafide conduct on the part of Mehras to conceal state of affairs from it. It is alleged that high inventories and stock in transit were maintained. Thereafter it is alleged that the Mehras recklessly proceeded to deny the IPL and .....

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s to be considered, no reasonable person would ever come to a conclusion that it had no particulars whatsoever and therefore it was not maintainable and required to be rejected at threshold without scrutiny on merits. All the adequate particulars which would constitute a cause of action for invoking these sections and the legal requirement of the Petitioners holding the requisite number were satisfied. The petition therefore, could not, in any circumstances be described as not maintainable for l .....

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is a mere error and in fact the Board has dismissed the petition of EG on merits. If the petition is dismissed on merits after having considered all the aspects, then the use of the phrases 'not maintainable' and 'deserved to be thrown out at the threshold', is utter casualness. These phrases have a specific meaning in law and the learned member is expected to know them. Use of these phrases has brought about vagueness in the impugned decision. If Mr. DeVitre's submission is .....

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matter on merits, by analysing the reasoning of the learned member on the grounds of challenge. 50. It has been highlighted by EG in their submissions that following grounds were urged by them in support of their case, and most of them were not adverted to by the Board. a. Board resolutions passed by Mehras. b. Modification of Articles of Association. c. Incorporation of four group companies. d. Incorporation of Vaayu companies. e. CARE rating. f. Standard accounting practices. g. High inventori .....

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the learned member is expected to have dealt with these issues. 51. One of the central contention that was raised by EG was that a petition for mismanagement cannot be filed against the members who are not in management. It was their contention that the petition filed by Mehras was under Section 397 and 398 of the Act. According to them EG was never supposed to be in management of EIL and also factually EG was not in the management and Mehras since inception have been managing the Company. Reli .....

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s an important point. Surprisingly there is no consideration of this major argument advanced by EG. 52. EG had urged that Mehras had unauthorisedly altered Articles of Association and it was one of their main ground to allege oppression. It was urged by them that alterations were made by Mehras in the Articles of Association with a sole purpose of acquiring more power and reducing the role of EG in EIL. It was EG's case that they came to know of such unauthorised alteration only after filing .....

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ment was carried out without notice to EG when Section 31(1) of the Act, mandates that it should be done by special resolution so also section 189(2) was relied upon. It was urged on behalf of EG that not only the amendment unilaterally conferred substantial powers on Mehras but the same was done without giving notice to EG and following procedural requirements. Reliance was placed on the decision of the Apex court in the case of M.S. Madhusoodan and another Vs Kerala Kaumudi (P) Ltd. and others .....

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information and therefore, the grievance made regarding no notice, was without any substance. The EG had challenged the stand taken by Mehras as factually incorrect and not contained in the petition. Therefore, the question that needed to be considered by the Board was whether the action of Mehras in carrying out the amendment amounted to oppression as it was without notice and without following the due mandatory procedure or factually any special procedure was not necessary in view of the prac .....

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his head of oppression which is pressed into service by EG with seriousness. 54. Similarly, another ground of oppression urged by EG has not met the scrutiny it deserves at the hands of the learned member. That ground was the assertion of illegality of both resolutions dated 26 April 2007. According to EG this board resolution passed without notice to EG gave wide and substantial powers to Yogesh Mehra. The powers were conferred to defend and institute legal proceedings and decide various matter .....

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ion was backdated to circumvent the interim order passed by the Board on 29 October 2007. 55. It was urged by EG that if the board resolution gave powers to Mehras to institute litigation on behalf of EIL then there was no need for Yogesh Mehra and Ajay Mehra to file Suit No.2667 of 2007 in a derivative capacity. Mehras countered this allegation by submitting that notice need not have been given to EG because it was not a practice followed in the company for various years. Mehras also sought to .....

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f the resolution. The learned member also observed that there is no pleading in respect of the board resolution in the company petition, even though Company Application No.629 of 2010 was pending before it to be decided. The serious charge levied by EG regarding fabrication of resolution was rejected in one line that there is no evidence to that effect. Again the learned member has failed to address herself to a major issue. 56. One more ground that was raised by EG to levy charge of oppression .....

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nies to siphon off the funds and defeat the rights of EG. According to them this was to misuse the technology which was previously licensed and sublicensed the proprietary technology. It was urged on behalf of Mehras that the prayer made by EG in Company application No.426 of 2009 not to form any new subsidiaries without the leave of the Court was rejected. It was their contention that nothing is shown by EG as to how these companies are carrying on competing business and Mehras offered that the .....

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y were formed to further subcontract proprietary technology, were some of the issues which arose for consideration. The learned member found it not necessary to delve deeper in this controversy as according to her once Mehras offered that the Vaayu companies be included in valuation exercise, the issue lost its seriousness. However, the learned member completely lost sight of the fact that this was a ground on which oppression was alleged by EG and therefore, it was incumbent on her to decide th .....

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ther since the auditors not being party to the proceedings, no allegations could have been made, as contended by Mehras, was also one of the points for consideration, if detailed inquiry was held by the learned member. The learned member came to the conclusion that EG refused to give undertaking inspite of the directions of this Court dated 27 November 2009 and therefore it was disentitled from any equitable relief under the Act. Again this issue is simplistic as that. What was the nature of und .....

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the parties had levied charges against each other as to who was to blame for delay in valuation exercise, which aspect was not adverted. Drawing conclusions in favour of one party without discussion is not decision making. 58. Another grievance made by EG was that Mehras instituted malicious criminal proceedings against EG's representatives, employees and independent professionals. EG made a grievance that these persons were subjected to harassment with a view to ensure that they did not co .....

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s of oppression listed in paragraph 50 were some of the major heads of oppression alleged by EG, which are unfortunately dealt with by the learned member in most perfunctory manner. The grounds raised by EG cannot be stated as frivolous to deserve the summary treatment meted out by the learned member. Each of the heads of oppression as alleged, constitute a serious charge and required a detailed discussion. What one finds is that the learned member has simply upheld the explanations of Mehras an .....

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vitiate the proceedings, and the relief granted in favour of other party, which is an outcome of such decision also therefore, will not be sustainable in law. I therefore find merit in the claim of EG that its petition was not decided on merits at all. 60. Now turning to grant of relief in the petition filed by Mehras. Serious grievance was made by Mr. Sarkar and Mr. Kamdar that not only the petition filed by EG has been rejected without any reasoning and without addressing to the vital points, .....

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ne of their acts which were alleged as oppressive by Mehras were not in the capacity as a shareholder but were in the capacity as a technology provider. It was Mehras contention that EG stopped supplies, withdrew corporate guarantees and addressed correspondence to third parties prejudicial to EIL's interest and these acts according to Mehras were in the EGs capacity as shareholder and were some of the main grounds of oppression. 62. I have considered the submission. As regards the stoppage .....

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of stoppage of supplies by EG was true and it was without justification and that EG was obliged to supply to EIL. The learned member also came to the conclusion that EG deliberately supplied material which was not required, causing mismatch which caused substantial loss to EIL. These were clear findings on the merits of the contractual dispute, which the learned member had reminded herself not to enter into. This is a clear error on the part of the learned Member. 63. Main question that arose w .....

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troy EIL. Various contentious issues raised by the parties have not been addressed to. It was EG's contention that EG was not obliged to provide financial support and the obligation was cast on Mehras and inspite of repeated requests critical financial information sought for was not supplied by Mehras to EG. It was their case that financial status was not candidly shared with EG. EG believed that the accounts of the Company were tinkered with to defraud the bankers and Mehras themselves with .....

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sing SAP which severely impaired the ability of EIL to function. On the other hand, it was EG's contention that they had to take this preventive measure as Mehras were trying to unauthorisedly access restricted data. On this issue also there were various facets, as to whether the data uploaded had a backup; whether in fact attempts were made by Mehras to access unauthorised data; whether EG acted in selfdefence; and what was the exact manner in which the information was uploaded and shared. .....

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undertaken and a conclusion was reached that the EG has acted oppressively by addressing correspondence against EIL. 66. The issues which were not dealt with as outlined above were not minor. Thus, not only the learned member dismissed the petition of EG in the manner detailed above, but even while upholding the charge of Mehras of oppression by EG, she did not take into consideration various grounds raised by EG and proceeded to draw conclusion without any discussion. This is apart from the fa .....

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of valuation as 31 March 2006 and 31 March 2007, as the dates have been nearest to filing of petition. Reliance was placed on the decision of Profinance Trust SA v. Gladstone [2001 EWCA CIV 1031] and Re London School of Electronics [1986] Ch.211. Perusal of these cases indicate that it is in the discretion of the court, in the interest of justice, which date of valuation figures which is fair to both the parties is to be arrived at. Therefore there had to be discussion on the date of valuation. .....

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ough Mr. DeVitre sought to urge that the impugned decision has broadly touched all the reliefs claimed in these Company applications, it is expected of the learned member to deal with each of the applications which were framed for specific reliefs. In absence of dealing with the applications individually their disposal in such a summary manner cannot be accepted and cannot be considered as a disposal on merits. This is also one of the grounds on which EG has sought that the matter be reconsidere .....

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nclusions. Based on these conclusions further conclusions are drawn and thereafter operative order follows. Large body of material was before the Board, some issues were outside its jurisdiction to consider, how the learned member reached these conclusions is not stated. 70. It is clear from what is enumerated earlier that the nature of dispute is serious. It is not only a dispute between two private entities but also has larger ramifications. There are issues of cross border commerce, investor .....

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ind energy. The Mehras are also leading businessmen. The dispute between them over the control of EIL will have bearing on the production of wind energy in India. This is only to emphasise that the dispute to be dealt with by the learned member was not minor but had wider implications. Both the sides had raised various grounds and submitted voluminous pleadings and written submissions, with record in running into not less than forty volumes. Voluminous written submissions were presented by both .....

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e the learned member detailed oral arguments were advanced by the parties. The parties presented their written submissions. Submitting the detailed written submissions has now become a common practice in the matters involving voluminous record. Generally the hearing, even in this Court, takes place on adjourned dates, as sometimes it is not possible to give day to day hearing. Many times at the request of the counsel or for some other reason, day to day hearing cannot be held. In such a situatio .....

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one has to assimilate what is narrated in the written submissions. 72. In the present case the learned member closed the arguments on 27 November 2012. Detailed written submissions were filed on 11 December 2012 at 1.00 p.m. The learned member passed the impugned order of 130 pages, within 72 hours of filing written submission, on 14 December 2012 at 10.30 a.m. Having gone now through the record and considered the various issues raised by the learned counsel, to my mind it does not seem to be p .....

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s simply cut and pasted the submissions of the parties in the decision. It was contended by Mr. DeVitre that such is a usual time saving methodology adopted by the Courts and there is nothing improper about the same. I have perused the impugned decision alongside the comparison table placed on record by Mr. Sarkar. Perusal of this clearly shows that many places findings given by the learned member are the same as the written submissions of Mehras. They indeed seem to be copied and pasted. The Co .....

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s is not a ground of challenge in itself but it is coupled with the submission that this extremely short time span has resulted in a complete nonapplication of mind and has left many of the issues unaddressed. The discussion in the earlier paragraphs will show that the charge of nonapplication of mind is wellfounded. The decision does seem to have been rendered in a hurried manner and liable to be set aside. 75. The structure of the impugned decision is also confusing. The learned member from pa .....

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lf of EIL and Mehras, the decisions cited by them and several facts and figures. Sometimes conclusions are drawn and operative order follows. It is difficult to ascertain where the arguments end and where the reasoning starts. 76. Both the parties had relied upon number of judicial pronouncements interpreting the various positions of law. The topic of oppression and mismanagement is of cardinal importance in the field of corporate management and has been subject to detailed scrutiny by various h .....

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at. They do so by analysing the factual position of the decision so cited and how to apply the law therein to their case. It is true that on many occasions the advocates cite more decisions than necessary, but the judgments of the superior courts, which have relevance, have to be taken into account while deciding the case. The learned member has brushed aside the decisions cited in one line in paragraph 85. The learned member observes I have considered the rival submissions and the case laws cit .....

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ting to distinguish or to comment upon the same. If a shareholder is directed to exit from a company, which is a serious consequence, this is not the way that the board should treat him. Naturally the counsel for EG have made a serious grievance and they cannot be faulted for the same. 77. The learned member thereafter tabulated the litigation launched by Mehras and EG against each other. This tabulation was for the purpose of ascertaining the impact of litigation and whether the litigations wou .....

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ions. On the other hand, Mr. DeVitre submitted that the learned member has only reproduced the chart given by the EG. Had this been a standalone ground nothing much would turn on this, as there can be no fault with the presiding officer reproducing the table which is already placed on record. But as one goes along analysing the impugned decision and finds various such seemingly innocuous lapses falling in a pattern substantiating the charge of nonapplication of mind and lack of fairness in decis .....

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urts have been specifically listed. However when it came to Mehras chart, 47 Revocation petitions have been clubbed under one serial number as Revocation petition. It is not the question of what would be the impact of instituting such litigations on the charge of oppression, but the point here to note is that the way the chart has been reproduced by the learned member gives a completely distorted picture of the cases filed. If filing of cases against each other was a head of oppression, then the .....

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re were in fact forty seven petitions. 78. The learned member then proceeded to reiterate that EG was right in not arguing issues which are not commercial and contractual disputes are pending. The member records that the petitions have been heard in pursuance and compliance with higher courts order and EG has presented arguments on merits and rightly except issues which are admittedly commercial and contractual disputes and which are pending in different forms. Then the member states that she ca .....

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valiant effort to give a shape and substance to the reasoning of the learned member, submitted that learned member has not reproduced the submissions but that is how she has dealt with the matter. It is not possible to accept this explanation. Each paragraph opens with referring to a submission of the counsel. These submissions is simplicitor reproduced from written submissions. As stated earlier, stoppage of supplies , mismatch of supplies , refusal to infuse capital , withdrawal of bank guara .....

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out at the threshold. The learned member rejected the contention of EG based on order dated 29 January 2009 holding that this order was merely interlocutory. The learned member also held that the Mehras specific allegations remained uncontroverted and thereafter proceeded to decide who would buy out the shareholding of the other group and appoint a valuer and a observer. 80. The appointment and choice of the observer made by the learned member is rather disturbing. The learned member has appoin .....

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on one particular individual. What is relevant is the suo motu choice of the observer made by the learned member in the context of the unsatisfactory decision making. It is based on this choice that the grievance of being unfairly dealt with is made by EG. Therefore, this deliberate choice of a particular observer cannot be taken so lightly, as sought to be done by the Mehras. The learned member, suo motu appointed Mr. Acharya to assist the functioning of EIL. The learned member granted immunit .....

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er has appointed Mr. Acharya as an observer on a Company at Banglore with remuneration of ₹ 70,000/, for a company at Mumbai at ₹ 1 lakh, for a Company at Hyderabad with ₹ 3 lakhs, another Company at Hyderabad for ₹ 2 lakhs and Company at Ahmedabad for ₹ 3 lakhs. The grievance has been rightly made that Mr. Acharya is appointed as facilitator of Companies situated at Bangalore, Mumbai, Hyderabad, Ahmedabad on per month basis and it is not possible for him to simulta .....

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elied upon the observations of this Court in Shah Pulp & Paper Mills Ltd. v. Pravinchandra Hirji Shah (Company Appeal No.1 to 2011 in CLB Company Petition No.60 of 2006 dated 17 May 2013) and the decision of the Culcutta High Court in Dharam Godha v. Universal Paper Mills Ltd. (2012) 172 Comp Cas 169, and the decision of Gujarat High Court in the case of Vraj Integrated Textile Park Ltd. & ors. v Yogesh Chandrakant Bhavsar, [Company Appeal No.4 of 2013 in Company Petition No.65 of 2012 d .....

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Mr. DeVitre that though the learned CLB though has stated that petition of EG is dismissed as not maintainable has in fact dismissed it on merits after considering all aspects. He submitted that even the petition of Mehras has been considered in all aspects and an equitable order has been passed. He submitted that in any case there will have to be parting of ways and therefore, the only question that would remain is who should buy out whom and that question can be decided by this Court. He submi .....

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prejudice to their request for remand. It is not EG's primary contention that irrespective of the manner the CLB has disposed of their proceedings, this Court should consider the entire matter on merits. Remand is the main prayer of EG. Therefore, I will have to consider the request for remand made by EG and it cannot be brushed aside merely because the entire record is now available in this Court. 84. The findings of fact will have to be arrived at by the Board. It is the Board which is th .....

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lication of mind to vital issues, cannot be simply be ignored and the appeal be considered on merits even though there are no factual finding. Tolerance of such decision making will send a wrong signal. 85. Furthermore it is not only the question of inter se rights of the parties but there is a wider angle. That is the perception of a litigant about the administration of justice. The concern that justice should be administered in a fair and transparent manner and after following principles of la .....

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is would imply that adequate reasons are given why an order is passed in favour or against a party. No impression be given that the issue was predetermined and something was amiss in the decision making. Though extent to which principles of natural justice will apply will vary from Tribunal to Tribunal, there can be no compromise on the adherence to concepts of procedural justice. One of the cardinal requirement is that the decision rendered must be a reasoned decision. An unreasoned decision ma .....

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