TMI Blog2013 (3) TMI 844X X X X Extracts X X X X X X X X Extracts X X X X ..... 00 divided into 50,00,000 equity shares of ₹ 10 each which has been issued, subscribed and paid-up fully. The petitioner's Bhavsar group and the R-2's Chiripal group were issued and allotted respectively about 20.66 per cent and about 79.34 per cent equity shares in the issued, subscribed and paid-up capital of the R-1-company. The R-1-company was incorporated as a SPV (Special Purpose Vehicle) with the primary objective to provide the textile units with world class infrastructure as envisaged by the GoI's Scheme launched for establishing Integrated Textile Parks during the 10th and 11th Five Year Plans. IL FS (R-5) was appointed as the Project Management Consultant ('PMC') by the Ministry of Textiles ('MoT'). The Bhavsar group and the Chiripal group had their representatives on the Board of directors of the R-1-company over and above the nominee directors. 2. The petitioner, Yogesh Chandrakant Bhavsar who is a promoter director and shareholder of the R-1-company (holds 10,000 equity shares of ₹ 10 each fully paid-up) along with supporting consenting members holding 20.66 per cent of the total paid-up capital of the company has alleged tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loss to the R-1-company: Thus, causing loss amounting to ₹ 29,98,98,512 to the R-1-company: 5. It was reiterated that the contention that lands were leased/allotted at throw away premium/prices Is further established from the fact that most of the lessees/allottees mortgaged by way of equitable mortgage their said respective plots with various banks as security and obtained loans/credit facilities for almost ten times the premium paid by them for the plots, that various lessees/allottees have obtained loans/credit facilities against equitable mortgage of their respective plots. My attention was drawn to the following table in respect of some of the lessees/allottees at p. 54 of the petition containing the details of huge variation in the value of these plots as under: 6. Further, it has been alleged that the R-1-company has created a mortgage by deposit of title deeds on 24th December, 2011 in favor of R-19 (IDBI Bank Ltd.) and R-20 (State Bank of Bikaner and Jaipur) for term loans of ₹ 36 crore, (₹ 19.70 crore from the R-19 and ₹ 16.30 crore from the R-20), the creation of the said equitable mortgage and granting of the said term loans f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... phoning off of funds to the tune of ₹ 29,98,98,512; and also to pp. 54 and 55 showing and alleging gross irregularities in granting huge loans by the financial institutions. The counsel for the petitioner also drew my attention to the other alleged acts of oppression and mismanagement as contained in the CP. However, since the respondents have chosen not to attend this hearing despite proper service shown by the petitioner as per affidavit filed with the Bench showing service of the petition as well as the mentioning date, the Petition was allowed to present his case but no ad-interim orders are being given ex parte. Ad-interim order pressed today shall be considered on the next date of hearing. The petitioner is required to serve this order on respondents through registered post and file an affidavit for compliance. Adjourned to 8th October, 2012 at 2.30 PM for consideration of ad-interim order. Order dasti. Order Date: 8th October, 2012 Order R-3, 4, 7, 8, 9, 19 20 have not attended. Respondents seek four weeks time to file reply to the CP allowed. Rejoinder is sought to be filed within five days of receipt of reply. Allowed. Adjourned to 23rd November, 2012 at 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er further pointed out the discrepancies in the Board meetings with respect to the number of the Board meetings and other variations. Drawing my attention to the Affidavits of the Government, nominees (R-6 and R-7) and PMC (IL FS R-5) it was argued that they had received notices only for four Board meetings whereas the respondents had produced minutes for 31 Board meetings including one meeting by circulation. Further, my attention was drawn to manipulation and fabrication in the minutes of the Board meeting dated 5th September, 2011 as certain agenda items at 13(d) and 13(c) were added later running into several pages which were not there in the minutes enclosed to the affidavit of the Government nominee, original of which was also shown by the Counsel for the Government nominee to the respondents. Other meetings, including the meeting dated 5th September, 2011 were alleged to not, in fact, having been held as there was no proper proof of despatch of notices for the meetings, the postal receipts produced were post dated and in respect of post office which does not even exist. It was pointed out that the purported letters dated 20th June, 2011 and 1st September, 2011 addressed to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not shown on the share certificate and even revenue stamp of ₹ 2 per certificate was also not there. Similar was the situation with regard to other shareholders as well. 13. Further, the counsel for the petitioner argued that it is not understood as to how for the same consideration plots as well as shares can be issued to these respondents. Falsity of the statements in affidavits were pointed out. Considering the Affidavits of R-11 to R-18 when compared with Affidavit of R-1 the discrepancies were pointed out as under: It has been pointed out that the respondent Nos. 11 to 18 have acquired shares not by way of allotment alone but by way of transfers also for which consideration goes to the transferor and not to the R-1-company. It was contended that the allottees of the plots would be allotted shares against payment made by them for the plots and construction of buildings is a totally got up story and is made up to take away valuable immovable properties of the R-1-company totally free of cost without making due payment. 14. Respondents' case is that in the entire company petition and rejoinder, the petitioner has made baseless and bogus allegations against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initiated by R-1-company disputing the illegal and unauthorised transfer of land by the petitioner before Gujarat Revenue Tribunal, Ahmedabad. It was contended that the allegations of the petitioner that the allotments are illegal, null and void, without considerations, gross and blatant siphoning away of huge funds of R-1-company and of the ₹ 40 crore by the Central Government as grant, are completely false, bogus, baseless and untenable. It was pointed out that the notices of the meeting of the Board of directors of R-1-company who are at Ahmedabad, were always sent by ordinary post. It was argued that the petitioner's prayer for declaring the company as a glorified partnership and prayer for division of land cannot be granted, his entire case is based on some oral understanding without any basis. It was pointed out that the petitioner is not a rank stranger, he is a director who has fiduciary duties. 15. To support their contentions the respondents relied upon the case law Bellador Silk Ltd., In re. Ch. D. [Chancery Division] 14th January, 1965, 667; Kamal Kumar Dutta v. Ruby General Hospital Ltd. Civil Appeal No. 3471 of 2006 [Arising out of SLP(C) Nos. 11017-1101 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p A-Land. (b) group B-Common Infrastructure, (c) group C-Buildings for common facilities, (d) group D-Factory buildings for production purposes, (e) group E-Plant 8 machinery. The total Project Cost for the purpose of this Scheme includes the cost on account of components of ITP, as listed under groups A, B, C and D above, provided the ownership of the factory buildings vests with the SPV. The SPV will, however, have the option of seeking financial support from Government of India for components under groups B and C only, if factory buildings are individually owned. 18. Ministry of Textiles is required to appoint a panel of professional agencies, which have considerable experience and expertise in the area of infrastructure development, as Project Management Consultants (PMCs) for implementing the Scheme. For Release of Funds: a prescribed schedule is to be adopted for release of GOI assistance to the SPV. Separate accounts are required to be kept by SPV for the funds released by GOI, which have to be subject to audit by the Comptroller and Auditor General of India. In the event of an SPV withdrawing from executing a project before utilising the Government assistance, the SPV is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... October, 2012 prima facie reveals that: (a) No meeting of the Board of directors of the R-1-company was held on 28th December, 2011, the purported minutes of the alleged Board meeting alleged to have been held on 28th December, 2011 seem to be concocted and fabricated because: p. 66 of the affidavit in reply shows that the agenda of the said meeting which should have been circulated along with the notice has been received in the office of the R-6 on 30th December, 2011 as is evident from the inward markings/stamps on the copy, it also bears a date of 2nd January, 2012 for further endorsement, this falsifies the statement in paragraph 11(f) of the affidavit in reply that the notice of the purported Board meeting of 28th December, 2011 was received on 19th December, 2011. Though the notice is served on 30th December, 2011, the Government Nominee Shri Ashok Hazra is shown to have attended the said meeting on 28th December, 2011. (b) Item No. 4 of the agenda is Due diligence report for the quarter ended on 30th September, 2011 . If the notice/agenda was received on 19th December, 2011 it could not have as its annexure a Due Diligence report dated 27th December, 2011. (c) It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riting to every director for the time being in India and at his usual address in India to every other director. At least seven days notice in writing shall be given to directors specifying the time and place of the meeting . Giving of a notice of at least seven days is mandatory for convening a Board meeting. A notice dated 3rd October, 2012 convening a Board appears to be bad in law, null and void and without authority and any business transacted at such Board meeting is likely to be set aside. (k) The petitioner has also alleged that no general meeting of the company was held on 6th July, 2011 or on 5th March, 2012 increasing the authorised share capital, R-6 has not received any notice of meeting of Board of directors to consider and decide to increase the authorised capital from ₹ 5 crore to ₹ 6 crore and then from ₹ 6 crore to ₹ 37 crore, if any allotment of shares was done pursuant to the increase in authorised share capital from ₹ 5 crore. to ₹ 6 crore and then from ₹ 6 crore to ₹ 37 crore, the same would have been passed in meetings of Board of directors, during the period from 15th June, 2011 to 12th October, 2012, the off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioner, Petitioner has stated that he never applied for it. Further, it is noted that R-7 and R-5 have pointed out to delay in implementation of the project. However, a Finance Committee is formed comprising R-2, R-3 and R-5 (IL FS). The respondents have failed to show the functioning of Finance Committee and how many meetings were attended by R-7. (viii) R-8 (independent director) has chosen not to file any reply so far despite repeated opportunities provided. (ix) It is noted that R-5 (IL FS)'s reply is evasive and short. It is stated that petitioners are only against the R-I and R-2 on the issue relating to the conduct of the Board meetings of the R-1-company, its management and on the matters relating to the allotment of the lands to various individuals and the companies, R-5 is neither having any specific averment or specific allegation made against it, therefore, R-5's prayer for its deletion from the said company petition. It points out that R-5 has been engaged by Ministry of Textiles, Government of India (MoT) to act as Project Management Consultants (PMC) for identifying the locations for setting up the Industrial Textile Parks based on a scientific as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disbursement of loan shall commence from the first day of succeeding month of first disbursement of the loan and thereafter on first of every month, interest at the rate of 12.75 per cent shall be payable. Interest is payable from the date of disbursement. The Banker as well as the respondents have failed to disclose as to how much amount has been repaid and since when. In respect of the loan disbursed by SBBJ, the copy of the loan document does not even disclose any repayment schedule. Nor has the Banker or the respondents given any detail of repayment of loan as to from which date and how much. There is no detail of movable and immovable assets over which the bankers have joint pari passu charge. The petitioner's allegation that the R-1-company is not even servicing the interest component on huge loans seems to be correct. It requires verification from the Accounts of the R-1-company. (xi) My attention was drawn to the mismatch in the figures and false statements in the counter affidavits and additional affidavits of the respondents. It is noted that the respondents have failed to give satisfactory replies to the falsity of the statements made in their affidavits. (xii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and buildings for common facilities. (xvii) There is no answer as to how much and from which date the R-1-company is collecting service and user charges. Responses give indicate that as on date the R-1-company does not have any idea as to how much is to be recovered from whom and from when. (xix) It is noted that up to January 2009 MoT had released grants amounting to ₹ 24 crore. Minutes of the Board meeting dated 26th March, 2010 annexed to Government nominee's affidavit (R-7's) reveal that ....she also highlighted about various common infrastructure facilities which are yet to be established and Ministry would not inaugurate the park units and unless all common infrastructure facilities are properly established . Further, these minutes record that .... Mr. Jaiprakash Chiripal stated that the company is facing the difficulty for getting the loans as banks are reluctant to sanction on the grounds that how SPV would repay the loan. (xx) There is no answer as to how these units, allegedly of the Chiripal group, obtained loans amounting to ₹ 1,54,72,50,000 from Banks on the leased lands allotted at throw away or Nil price to some units. 21. In respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relief is wholly equitable in nature, the party invoking the jurisdiction of the court has to show that he himself was not at fault and that he himself was not responsible for bringing about the state of things complained of and that he was not unfair or inequitable in his dealings with the party against whom he was seeking relief . The petitioner seeking equitable relief must come with clean hands and good conduct. The Supreme Court has held that the maxim, he who comes into equity must come with clean hands does not mean that every improper conduct of the applicant disentitles him to equitable relief. The maxim may be invoked where the conduct complained of is unfair and unjust in relation to the subject-matter of the litigation and the equity sued for. The CLB would do well to consider the severity of the allegations of oppressive conduct and the prejudice caused to the petitioner vis-a-vis the respondents since the primary purpose of the remedy provided by the sections 397 and 398 is to protect minority shareholder from the oppressive conduct of the majority shareholder. If a person acts in a manner prejudicial to the interest of the company as well as the shareholders acti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers. No Board meeting/AGM/EGM shall be valid without the presence of the Special Officer-cum-Observer, the Government nominee, the PMC, and representative(s) of the banker(s), no resolutions, if passed, shall be implemented without mentioning before the CLB. The decisions taken must be in the interest of the R-1-company and must be taken after detailed discussion with the directors/members of the R-1-company. For each decision reasons in detail in writing must be recorded. The reasons recorded and the decisions taken shall have to be immediately communicated to the Bench and to both the parties, to all the Directors and the Shareholders. Shri Acharya shall ensure that Rawla Co. (Auditors being appointed in this matter) and the company Secretaries (Hitesh Buch Associates being appointed in this matter) get all due assistance and information/documents from the R-1-company to enable them to complete their assignment on time. Shri HS Acharya is hereby granted complete immunity from any kind of civil and criminal proceedings already launched or to be launched anywhere in the country against the company and its directors for all acts done prior to and subsequent to the date of appoin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e shall not be less than ₹ 1 lakh for each year ending under verification), other expenses including traveling expenses and lodging expenses shall be borne by the R-1-company. Rawla Co. shall endeavour to submit their report to the CLB with a copy to the petitioner and the respondents within a period of eight to ten weeks from the date of receipt of this order. 26. Hitesh Buch Associates the company secretaries (Shri Hitesh Buch's Mobile No. is 09825443440) are also hereby appointed to verify the R-I's statutory records, accounts books and documents as to give their report on compliance of the procedure as well as the statutory provisions of the Act by the R-1-company from inception till date. Specific comments be made on holding of, Board meetings/AGM/EGM, Allotment of shares, taking of loans and filing of statutory returns of the R-1-company with the RoC. The company Secretaries shall be given due assistance by the R-1-company. The company secretaries are required to file their report to the CLB with a copy to the parties within eight weeks from the date of receipt of this order. The R-1-company is required to pay to Hitesh Buch Associates ₹ 50,000 fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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