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TMI Blog2022 (3) TMI 1411X X X X Extracts X X X X X X X X Extracts X X X X ..... d time to file counter in this regard. However, after hearing the parties, the matters were reserved for orders as to whether the petitioner is entitled to any interim relief or not. Parties were directed to file the written submissions. Accordingly, the Petitiomers have filed their written submissions on 13.03.2022 and the Respondents have filed their written submission on 15.03.2022. 2. CASE OF THE PETTTIONER 2.1. The Learned Counsel for the Petitioner submitted that M/s. Sakthi Auto Component Limited (in short 'SACL') is an auto component major and that 77.04% of shareholding in SACL is held by Sakthi Global Auto Holding Limited (in short 'SGAH'), a UK- based company. The ownership/controlling interest in SGAH held by the Petitioner viz. ABT Limited through ABT UK. 2.2. 19.81% of shareholding in SACL is held by M/s. Sakthi Sugars Limited (in short 'SSL'). It was submitted that already SSL has filed CP No. 387/2020 before this Tribunal and the same is pending adjudication. It was submitted by the Learned Counsel for the Petitioner that 19.81% shareholding of SSL has been transferred to Asset Reconstruction Company India Limited (in short 'ARCIL' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion for invoking the pledge, there was gross and deliberate undervaluation of the pledged shares by AAPICO, with the intent to invoke the pledge and appropriate the entire pledged shares to claim control of SGAH. The Learned Counsel for the Petitioner submitted that ABT UK has challenged the invocation before the High Court of UK and the High Court of has found prima facie case for trial and has directed the trial to take place in July 2022. Therefore, it was submitted that whether AAPICO is entitled to control of SGAH itself is an issue which is pending in High Court of UK for adjudication. 2.9. In the meanwhile, it was submitted that the AAPICO's Chief misused the confidential information he had as Director of SGAH/SACL and clandestinely entered into a deal with the lenders to the Portugal operations, and without any form of disclosure to SGAH/SACL/ABT, acquired from the lenders who had the pledge of the Portugal shareholding, the Portugal shares, at a throw away price of USD 24.50 Million (corresponding to INR 173 Crore) and thereby completely usurped control of Portugal operations. 2.10. The Learned Counsel for the Petitioner submitted that SACL's investment in Portu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Learned Counsel for the Petitioner submitted that the Board of SACL on 17.12.2021, which inter alia has an independent observer appointed by the Madras High Court, rejected the requisition as not valid on multiple legal grounds. The Resolution recorded as follows: a. Mr. Yeap Swee Chuan is not authorized to requisition EGM on behalf of SGAH; b. Who is to have control of shareholding and directorship in SGAH is to be decided by UK Court; c. RBI Approval is required for effecting any change in control; d. A criminal complaint is pending against AAPICO in which investigation has been ordered and so pending investigation, AAPICO cannot be allowed to take control of SACL which is the prosecuting company; e. AAPICO cannot seek to enforce Singapore Award until Madras HC upholds its validity; f. CP/387/2020 was pending and no permission had been taken by AAPICO from NCLT; g. That AAPICO cannot unilaterally take law into their own hands, bypass pending legal proceedings and bring about a complete change of control. 2.16. The Learned Counsel for the Petitioner submitted that AAPICO would have had no quorum to conduct the EGM, unless the Promoters attended the EGM. In orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his associates/ affiliates (including the Petitioner herein, as well as the Petitioner in CP 387 of 2020), and the AAPICO Group (the Answering Respondents). It was submitted that the present Company Petition is one amongst several collateral and vexatious proceedings filed by the Sakthi Group through one of its entities, i.e. ABT Limited which is holding a miniscule shareholding of mere 0.85% shares, in order to defeat the legitimate rights of Respondent Nos. 4 and 5, which hold 77.04% shares in SACL through Respondent No. 2 viz. Sakthi Global Auto Holdings Ltd. 3.2. The Learned Counsel for the Respondent submitted that, the AAPICO group, as a 77.04% shareholder which has invested sums exceeding INR 1000 Crore in the Sakthi Group (through SGAH - a Sakthi Group entity at the relevant time) in 2017 and 2018, have the rights of management and control of the SACL Board which are set out in the Amended and Restated Shareholders' Agreement dated 29.09.2018 ("SHA"). It was contended that these rights have been enshrined in the Articles of Association of SACL, and have also been recognised and affirmed by an International Arbitration Tribunal seated in Singapore ("SIAC Arbitration Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... areholder in SACL) on 07.03.2022, abusing the legal process. Pertinently, the Petitioner (a 0.85% shareholder in SACL) had knowledge of the EGM as far as on 15.11.2021 i.e. around 4 months before the filing of this CP seeking urgent interim reliefs. Thus, it was submitted that the present CP is bereft of any explanation on the delay in filing and moving this Tribunal urgently to injunct the EGM seeking reconstitution of the SACL board, when in fact it does not have any rights to have a director on the SACL Board in view of its 0.85% shareholding in SACL. 3.5. The Learned Counsel for the Respondent submitted that Article 12 of the amended Articles of Association of SACL read with clauses 4.1, 4.3 and 4.14 of the 2018 SHA entitle AAPICO to have a right to representation on the SACL Board proportionate to its indirect shareholding of 77.04% shares. These rights have been granted in order to protect the investment made by AAPICO to the tune of about INR 1000 Crore in 2017 and 2018. However, it was submitted that AAPICO has been prevented from exercising its rights, as the Sakthi Group (through nominee directors) continues to, wrongfully and in breach of the SHA, control the SACL Board ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ICO nominee directors; (ii) and to appoint the proposed independent directors ("EGM Requisition"). It was submitted that under the provisions of Section 100 of Companies Act, 2013 the SACL Board was mandatorily required to issue a notice calling an EGM on or before 06.12.2021 (i.e. with 21 days of the EGM Requisition). However, the Board did not do so. Instead, contrary to Section 100, the SACL Board called a Board meeting on 17.12.2021 to (inter alia) "consider" the EGM Requisition. At this meeting, the SACL Board gave several frivolous reasons to reject the EGM Requisition, which were responded to by Mr. Yepa as. SGAH thus became entitled to issue a notice convening an EGM, in accordance with the provisions of Section 100 of the Companies Act. 3.8. Accordingly, it was submitted that due to SACL Board's failure to call the EGM, on 29.12.2021, SGAH issued a valid notice convening an EGM on 25.01. 2022 ("EGM Notice"). It was submitted that the EGM Notice was sent to the members (including the Petitioner) and also directors of SACL and thus it was submitted that the procedure contemplated under the Companies Act, 2013 was strictly followed. It was submitted that adequate notice was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Petitioner or the SACL Board to question the internal management/ governance of another company. Without prejudice to above, Mr. Yeap was duly authorised by SGAH (as per the requirements of English law) to issue the EGM Requisition and take all further actions in this regard. In any event, Section 100 of the Companies Act does not prescribe any such. 2. The issue of control of shareholding and directorship in SGAH (a UK entity) is to be decided by a UK Court in pending proceeding The mere pendency of frivolous proceedings will not suspend the statutory right of a shareholder under law. Aapico is validly registered as the 100% shareholder of SGAH in the records maintained by the Registrar of Companies in UK. This position has not been interfered with by any court or tribunal. The Final Award rightly proceeds on the basis that Aapico is the registered owner of SGAH based on records. 3. RBI approval Is required for effecting any change in control in SGAH (a UK entity) This baseless allegation relates to approvals purportedly in relation to the pledge of SGAH shares, a UK company, created in terms of the Share Charge Agreement dated 01.10.2018. governed by English law. The allega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a 77.04% shareholder. CP 387 was filed in 2019, and was not pursued by SSL for about two years. Aapico filed an 1199/2020) application challenging the maintainability Of the SSL's cp (since SSL does not currently hold any shares in SACL) - which challenge is pending. No interim reliefs have been granted in 7. Allegation that mere pledge of invocation does not make ARCIL the owner of SSL's shares in SACL. As on 31.12.2021, ARCIL is the 19.81% shareholder of SACL and SSL has no shares in SACL. This has been admitted by the Petitioner in the CP at para 1 Of the Synopsis. Any assertion otherwise is contrary to the statutory records of the company. The shares have been admittedly transferred to ARCIL. The judgment of the Supreme Court Of India *in Balakrishna Gupta v. Swadesi Politex is distinguishable on facts and irrelevant to the present case. The Answering Respondents have dealt with this issue extensively in CP 387. 3.12. The Learned Counsel for the Respondent submitted that in paragraph 26.10 of the Company Petition, the Petitioner has wrongly challenged the validity of the transfer of 1 SACL share each, held by SGAH (a UK entity) to four individuals. It was submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ominee directors have the right to continue on the SACL Board with such a miniscule shareholding. A minority shareholder having negligible shareholding and financial stake cannot be allowed to defeat corporate democracy by excluding a 77.04% shareholder from the management. The Learned Counsel for the Respondent submitted that they have demonstrated their right under contract and law to manage and control the SACL Board as a 77.04% shareholder and that the actions undertaken by the Respondents are not oppressive in law. 3.16. The Learned Counsel for the Respondent submitted that the Petitioner has failed to make out a prima facie case of oppression or mismanagement and in fact, irreparable harm will be caused to the Respondents if the EGM is stayed. Thus, it was submitted that given the critical financial situation of SACL, and the continuing corporate law violations being committed by the Sakthi directors - it is imperative that the EGM not be injuncted and the SACL Board be reconstituted with the AAPICO directors, in accordance with the resolution passed at the. EGM and the provisions of the SHA and SACL Articles - as validated by the Final Award. 4. FINDINGS 4.1. Heard the s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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