TMI Blog2022 (6) TMI 391X X X X Extracts X X X X X X X X Extracts X X X X ..... entail foreign exchange outflow in accordance with the terms of the credit facilities. Therefore, except for specific and limited end-uses, borrowing from non-residents, which is referred to as external commercial borrowing (ECB) is not allowed without prior approval under a stringent regulatory regime. The documents on record provide strong evidence that the remittances were towards the issuance of equity. The contesting Respondents are unable to controvert the genuineness of these documents, which were issued either by the Hospital or by the AD - These documents were disregarded both by the CLB and by this Court without assigning cogent reasons for the same. Besides, these are material and, indeed, vital documents forming part of the record. Consequently, the Review Applicants were non-suited at the threshold. These errors cannot be characterized as minor and are evident ex facie. Therefore, it is not necessary to undertake a fishing expedition to ferret out these errors. The Review Applicants have made out a case of errors apparent on the face of the record to set aside the order sought to be reviewed. In the facts of this case, the documents relied upon by the Revi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A Share Subscription Agreement dated 31.03.2006 (the SSA) was executed by and between the second Review Applicant and Respondents 1, 2 and 3 herein. In terms thereof, the second Review Applicant was required to invest a sum of Rs.5 crore in the Dr. Kamakshi Memorial Hospital Limited (the Hospital). The SSA specified the manner of investment of the above mentioned sum of Rs.5 crore. It also provided that the second Review Applicant would hold 20% of the equity capital of the Hospital and the remaining 80% would be held by the promoters. The SSA contained an arbitration clause. Pursuant to the SSA, the second Review Applicant invested a sum of Rs.2.5 crore in the Hospital. Such investment was made through the first Review Applicant, which was not a party to the SSA. 3. Upon receipt of the sum of Rs.2.5 crore, the Hospital received the said sum under the automatic route for foreign direct investment (FDI) in terms of the Foreign Exchange Management Act, 2000 (FEMA) and regulations framed thereunder. In connection therewith, Foreign Inward Remittance Certificates(FIRCs) were issued by the authorised dealer (AD)/receiving bank. Such FIRCs indicate that the amount was remitted toward ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the order of this Court and in the order of the CLB. The Review Applicants pointed out that neither the CLB nor this Court appreciated the implications of filing a composite petition under Section 111(4) and Sections 397 and 398 of CA 1956 before the CLB. The Review Applicants contended that they were constrained to file a composite petition because the Hospital and its promoters failed or refused to allot shares to the Review Applicants in spite of receiving remittances towards equity shares. In support of this contention, the Review Applicants referred to a communication dated 24.02.2007 from the Hospital to the Reserve Bank of India(the RBI). By such communication, the Hospital informed the RBI that DSLV Ventures, the first Review Applicant herein, had invested a sum of US $ 69,992, which is equivalent to Rs.30,78,948/- through the Indian Overseas Bank under the automatic approval route. A further communication dated 06.06.2007 was also placed in this regard. This communication is also from the Hospital to the RBI. By this communication, the RBI was informed about the investment by the first Review Applicant of a sum of US $ 199,985, which is equivalent to Rs.81,59,388/- th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , findings were recorded to the effect that the Review Applicants are not entitled to maintain the petition because they did not make investments within the time limit set out in the SSA. For all these reasons, the Review Applicants submitted that the Review Application is liable to be allowed. 10. In support of these contentions, the Review Applicants referred to and relied upon the following judgments: (i) Board of Control for Cricket in India and another v. Netaji Cricket Club and others (2005) 4 SCC 741, wherein, at paragraphs 89 to 92, the court concluded that the words 'sufficient reason' in Order 47 Rule 1 of CPC are wide enough to include a misconception of fact or law by a court. In addition, it was held that the law should bend before justice and that review jurisdiction may be exercised to prevent miscarriage of justice. (ii) S.Bagirathi Ammal v. Palani Roman Catholic Mission (2009) 10 SCC 464. (iii) Vikram Singh alias Vicky Walia and another v. State of Punjab and another (2017) 8 SCC 518 , wherein the court summarized the principles pertaining to the exercise of review jurisdiction in paragraph 22. (iv) Sriram Sahu (Dead) through LR's v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainable are set out. The Hospital also referred to and relied upon a judgment of this court in S.Natarajan v. S.V.Global Mills Ltd and others 2016-1-L.W.209. In specific, paragraphs 21 and 34 of the said judgment were relied upon. 12. After setting out the legal position, the Hospital referred to the order of the CLB. The Hospital pointed out that the CLB took into account the fact that it was a composite petition under Sections 111(4) and 397 and 398 of CA 1956. In spite of noticing that it is a composite petition, the CLB held that the petition is not maintainable because the Review Applicants prayed for an inquiry to determine the share holding of the petitioners. According to the Hospital, the scope of Section 111 is confined to matters wherein the company refuses to register a transfer of shares or fails to enter the names of persons in the register of members or wrongly enters the names of persons in the register of members. In order to maintain a petition for rectification, the Hospital contended that the company concerned should have allotted shares to the petitioners. If the names of allottees are not entered in the register of members in spite of share allotment, suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t matter or evidence which, after the exercise of due diligence, was not within his knowledge or could not be produced by him at the time when the decree was passed or order made, or on account of some mistake or error apparent on the face of the record, or for any other sufficient reason, desires to obtain a review of the decree passed or order made against him, may apply for a review of judgment to the Court which passed the decree or made the order. From the above, it is evident that a review application is maintainable under three circumstances. The said circumstances are: (i) when the review applicant discovers new and important matters of evidence which, in spite of the exercise of due diligence, was not within the knowledge of or could not be produced by such applicant at the time when the order was made; or (ii) on account of some mistake or error apparent on the face of the record; or (iii) for any other sufficient reason. The first of these circumstances is clearly inapplicable in this case and it remains to be seen if the case falls within the latter two. 17. This provision has been interpreted in several judgments. It is unnecessary to multiply authorities on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing documents and engaging with documents but refusing to assign much materiality or weight thereto for reasons set out therein. In the former case, if the documents concerned are vital, it could be concluded that there is an error apparent in the order. On the contrary, in the latter case, unless no reasons are indicated for not assigning materiality or weight to the relevant documents or the reasons assigned are ex facie unreasonable, there would be no scope for interference in review jurisdiction unlike in appellate jurisdiction. Upon perusal of the order of the CLB, the order indicates that the petition was unnumbered. In effect, the order dated 25.02.2011 was issued even before the relevant company petition was numbered. It appears that the petition was listed for arguments in relation to the maintainability thereof upon the Registry raising objections. In paragraph 4 of the order, the CLB records that the petitioners therein had relied upon documents evidencing that foreign inward remittances were received towards foreign equity. However, no reasons are assigned as to why the said documents were disregarded in the analysis and findings in the said order. 19.Turning to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ables investment either directly by the investor or through his nominees. Even de hors Clause 1, in view of the two letters from the Hospital to the RBI stating that equity investments were received from DSLV Ventures, it is evident that the Hospital recognised DSLV Ventures as an investor in equity. Thirdly, a company raises funds either in the form of debt or equity. When money is raised as debt, it is a borrowing by the company and not an investment. Consequently, the debt is required to be discharged as per the terms of the relevant loan agreement or even debt instrument such as debenture. By contrast, when a person invests in the shares of a company, it is an investment in the company which entitles such investor to receive shares, participate in shareholder meetings, receive dividends when declared and participate in the surplus, if any, upon winding up. The above finding is patently erroneous also because this fundamental distinction was not appreciated. 21. In paragraph 13, this Court recorded the finding that the investor should make the investment only after the authorised capital is increased by the Hospital, and that the right to file and maintain the petition befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion on the ground that investments were received in part and belatedly. In this regard, Clause 1 of the SSA is set out below: 1.The investor hereby agrees to bring in either by himself or through his nominees up to an amount of Rs.5 crores or equivalent in foreign currencies in stages with proportionate allotment towards subscription of the equity shares of Rs.10/- each of the company (emphasis added) at a premium of not exceeding Rs.15/- per share as follows:- a) 5% on receipt of Rs.1.25 crores on or before 31.03.2006 b) 5% on receipt of Rs.1.25 crores on or before 15.05.2006 c) 5% on receipt of Rs.1.25 crores on or before 30.06.2006 d) 5% on receipt of Rs.1.25 crores on or before 15.08.2006 Such findings were drawn by completely disregarding vital documents. As set out earlier, both by communication dated 24.02.2007 and 06.06.2007, the Hospital informed the RBI that remittances were received from the first Review Applicant towards equity under the automatic approval route. This is corroborated by the three FIRCs annexed by the Review Applicants. The FIRCs are certificates issued by the AD, i.e. the bank receiving the remittances. The authorised dealer is emp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , vital documents forming part of the record. Consequently, the Review Applicants were non-suited at the threshold. These errors cannot be characterized as minor and are evident ex facie. Therefore, it is not necessary to undertake a fishing expedition to ferret out these errors. Accordingly, in my view, the Review Applicants have made out a case of errors apparent on the face of the record to set aside the order sought to be reviewed. 25. The last aspect to be discussed is the conclusion that the dispute is complex and cannot be decided in summary proceedings. Such conclusion was arrived at for two reasons: first, because non-parties to the SSA are parties to the petition; secondly, because the second Review Applicant did not fulfil all its obligations under the SSA. Paragraph 24 of the order of this Court, which contains these findings is set out below: 24. Here is the case, wherein the parties to the agreement and by whom the amount was paid and the parties, who are entitled to become member are in dispute. The other complication involved herein is as to whether such party performs their part of the contract within the time specified in the agreement and he is hence ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts relied upon by the Review Applicants emanated either from the Hospital or the AD and are not denied by the Respondents. Even the execution of the SSA is admitted by all parties. Therefore, it is difficult to fathom as to why a trial is required to adjudicate this dispute. While on this subject, it is pertinent to notice that under sub-section (7) of Section 111, even title to shares and all questions relating to rectification may be decided. Besides, the Review Applicants prayed for statutory relief under CA 1956, such as rectification and relief from oppression and mismanagement, including surcharge of the defaulting directors, which remedies cannot be granted by an arbitral tribunal. Therefore, even assuming that only one or two Review Applicants out of four are entitled to seek such relief, the petition should not have been rejected in this fashion. The key issue to be adjudicated as regards the eligibility of the Review Applicants would be whether the Review Applicants would be entitled to maintain the composite petition if shares had been allotted by the Hospital upon receipt of remittances. Such issue has not been adjudicated. The assertion by the Review Applicants that t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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