Company Application No. 92 of 2010 in Company Petition No. 44 of 2010. Case: 1. Jiji Antony and Ors., 2. JRG Securities Limited and Ors. Vs 1. JRG Securities Limited and Ors., 2. Jiji Antony and Ors.. Company Law Board
| Case Number | Company Application No. 92 of 2010 in Company Petition No. 44 of 2010 |
| Judges | Lizamma Augustine, Member |
| Issue | Company Law |
| Judgement Date | October 11, 2010 |
| Court | Company Law Board |
Order:
Lizamma Augustine, Member, (Southern Bench Chennai)
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Company petition filed under Sections 397 and 399 of the Companies Act, 1956, is moved for interim reliefs, seeking to restrain R1 company from proceeding with the issue of shares on rights basis, and Company Application 92 of 2010 filed under Section 8 of the Arbitration and Conciliation Act, 1996, read with Regulation 44 of the Company Law Board Regulations, 1991.
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Arguments were heard on Company Application 92 of 2010 and interim reliefs in company petition. Petitioners jointly hold one-fifth of the shares in R1 company, which is a public listed company. P1 to P3 are the original promoters, and P2 who is the nominee of the original promoters was the managing director till 29.4.2009. R2 is a foreign entity who is a financial investor holding 1,03,82,174 shares of Rs. 10 each (44%) at a premium of Rs. 38 allotted on preferential basis. Currently R9 is the managing director with effect from 29.4.2009. The allegation in the company petition is: the board had approved an expansion plan and rights issue in an illegal manner to jeopardize the interest of original promoters and the intention is to do away with the Petitioners. It is also their contention that the veto right, as per the non-compete agreement dated, 29.4.2009, will apply to rights issue. As per the above agreement, the earlier agreement dated 27.7.2007 stands terminated. Admittedly, the non-compete agreement and shareholder rights of promoter dated 29.4.2009 was entered into with the erstwhile promoters (P1 to P3) and R1 company, as per which Petitioners 1 to 3 agreed to remain non-compete for a period of three years in consideration of a lump sum of Rs. 500 lakh. As per the above agreement, promoters/shareholders shall be entitled to the same special rights. The right which is relevant for this company petition is as is contained in Clause 4(e) Sub-clause (e).
2.1 It provides that the affirmative vote of Regi Jacob (P2) is required regarding '(e) Further issue of shares or other securities of the company/group companies to baring or its affiliates'.
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The above provisions were incorporated as special rights under Clause 157A-3(e) of the articles of association. The Respondents contended that the expansion plans were approved by the board following which a resolution was passed on 25.5.2010 to go ahead with a right issue to fund expansion plans. It is not in dispute that the business plans were circulated to the Petitioners recommending approval of capital raising plan, but their contention is that their objections for rights issue were neither considered nor their dissent recorded in the minutes of the meeting.
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When the company petition was moved for interim relief the first Respondent company filed an application under Section 8 of the Arbitration and Conciliation Act (for short the 'Act') invoking the arbitration Clause 16 in the non-compete agreement and shareholder rights of promoters dated 29.4.2009. By order dated 23.7.2010, this bench directed that the Respondents shall not proceed with the rights issue without the leave of the bench and posted the application and the company petition for hearing.
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I have heard the arguments on company application as well as the interim relief in company petition. According to the applicant/R1 company, the Petitioners in the company petition are seeking to assert certain rights in terms of the agreement dated 29.4.2009 which...
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