CA Nos. 271 of 2013 and 113 and 114 of 2014 and CP No. 103 of 2013. Case: Fourcee Infrastructure Equipments (P.) Ltd. Vs General Atlanta Singapore Fund (P.) Ltd.. Company Law Board
| Case Number | CA Nos. 271 of 2013 and 113 and 114 of 2014 and CP No. 103 of 2013 |
| Counsel | For Appellant: Janak Dwarkadas and Sudipto Sarkar, Senior Advocates and Rohan Rajadhyaksha, Rajendra Barot, Essaji Vahanvati, Gaurav Kothari, Manan Mehta, Bhavya Mohan and Sneha Nagvekar and For Respondents: Navroj Seervai, Senior-Advocate, Burzin Somandy, Siddhi Doshi and Tejaswita Nalawade |
| Judges | Ashok Kumar Tripathi, Member (J) |
| Issue | Arbitration Act, 1940 [repealed] - Section 34; Arbitration And Conciliation Act, 1996 - Sections 11(6), 44, 45, 8, 9; Companies Act, 1956 - Sections 397, 398, 402, 403 |
| Citation | 2015 (124) CLA 30 (CLB) |
| Judgement Date | June 27, 2014 |
| Court | Company Law Board |
Order:
Ashok Kumar Tripathi, Member (J), (Mumbai Bench)
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By this order, I propose to deal with the Company Applications being CA No. 271 of 2013 under section 45 of the Arbitration and Conciliation Act, 1996 ('the Arbitration Act') filed on behalf of respondent Nos. 1 and 2/applicants therein, CA No. 113 of 2014 filed by the petitioners/applicants and CA No. 114 of 2014 filed on behalf of the respondent No. 1/applicant herein. In CA No. 271 of 2013, the respondent Nos. 1 and 2/applicants have prayed to pass an order thereby referring the disputes between the parties to the arbitration in terms of the arbitration clause as contained in the articles of association of the respondent No. 1-company and shareholders agreement dated 21st December, 2011. The respondents/applicants have further prayed to dismiss the petition on the grounds stated therein.
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In CA No. 113 of 2014, the petitioners/applicants have sought for the following orders:
(a) To pass an order thereby appointing the professional management organization, such as Alvarez & Marsal to manage the affairs of the company at earliest.
(b) To pass an order thereby directing the promoter group immediately cease to participate in the management and day-to-day operations of the company, including but not limited to in respect of managing the bank accounts of the company, and participating in discussions with customers/vendors of the company.
(c) To pass an order thereby directing the company and the promoter group to schedule and attend a meeting between BSR and Deloitte, no later than three days from the date of this application.
(d) To pass an order thereby appointing a suitable person as an administrator on the Board of directors of the company, with the power to forthwith conduct the day-to-day affairs of the company and to takeover charge of the maintenance of the statutory books and accounting records of the company.
(e) To pass an order thereby restraining the promoter group from acting or holding themselves out to be directors/executive of the company.
(f) To pass an order thereby restraining R-2 to R-8 from holding any meeting of the Board of directors or shareholders of the company and/or passing any resolution/s without the consent of this hon'ble Board.
(g) To pass an order thereby restraining R-2 to R-8, from appointing any other persons as directors on the Board of directors of the company.
(h) To pass an order thereby directing the respondents to provide to Deloitte all information, books and records, including but not limited to the Tally server of the company for the last two years.
(i) To pass an order thereby directing the respondents jointly and/or severally to provide to the petitioners all information as sought for by them in respect of the activities of the company and to provide the petitioner with all the necessary co-operation and information to ascertain the working of the affairs of the company.
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In CA No. 114 of 2014, the respondents/applicants have sought for the following orders:
(a) To pass an order thereby modifying the order dated 17th December 2013 and set aside the appointment of Deloitte Touche Tohmahtsu India (P.) Ltd. and appointing an independent chartered accountant to do an impact assessment of accounts of respondent No. 1-company to respond to the points raised by its statutory auditors for the financial years 2012-13 and 2013-14.
(b) To pass an order thereby directing the interim report dated 2nd April, 2014, submitted by Deloitte is non est, null and void ab initio and ought to be rejected.
(c) To pass an order thereby restraining the petitioners, either by itself, or through its servants, agents, affiliates, officers and subordinates from, in any manner whatsoever, acting in pursuance of and/or in implementation of the said interim report prepared by Deloitte and dated 2nd April, 2014.
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Before, I proceed to consider the aforesaid applications, it seems useful to refer few facts leading to filing the above applications here as under. It is to be noted that for the purpose of easy comprehension, the parties are referred to as per their ranking in the company petition hereinafter:
5.1 The petitioners have filed the company petition being CP No. 103 of 2013 by invoking the provisions contained in sections 397 and 398 read with sections 402 and 403 of the Companies Act, 1956 ('the Act') complaining certain acts of oppression and mismanagement purportedly committed by the respondent Nos. 2 to 7 in the affairs of respondent No. 1-company. They sought various reliefs as well as interim reliefs as contained in the petition.
5.2 Pursuant to the notice, the respondents appeared and filed a Company Application being CA No. 271 of 2013 under section 45 of the Arbitration Act, for reference of the dispute and differences between the parties to arbitration in terms of articles of association ('AoA') and/or the shareholders agreement dated 21st December, 2011.
5.3 The learned senior counsel appearing for the petitioners vehemently opposed the aforesaid application. Further, stating the grounds for urgent hearing the learned senior counsel pressed for grant of ad interim reliefs and to pass ad interim orders in order to protect the interest of the petitioners until the final decision of the petition. However, placing reliance upon the decisions in the cases of Sumitomo Corp. v. CDC Financial Services (Mauritius) Ltd. [2008] 83 CLA 343 (SC): [2008] 82 SCL 495; Hindustan Petroleum Corpn. Ltd. v. Pinkcity Midway Petroleum [2003] 46 SCL 337 (SC); Magma Leasing and Finance Ltd. v. Potluri Madhavilata [2008] 84 CLA 361 (SC): [2009] 10 SCC 103 and Sadbhav Engg. Ltd. v. Montecarlo Ltd. [Civil Application No. 479 of 2013, dated 22nd August, 2013], it was held by me that as per law propounding in these cases, the Company Law Board ('CLB') has no option but to consider the application under section 45 of the Arbitration Act filed on behalf of the respondents, before consideration of the application for ad interim reliefs. Accordingly, the CLB vide this order dated 29th October, 2013 declined the prayer made by the learned senior counsel appearing for the petitioners for hearing in respect of ad interim reliefs pending applications under section 45 of the Arbitration Act.
5.4 Being aggrieved, the petitioners approached the hon'ble High Court by way of filing an appeal being Appeal (L) No. 95 of 2013 under section 10F of the Act, assailing the said order. The hon'ble High Court of Bombay dismissed the appeal being Appeal (L) No. 95 of 2013 filed by the petitioners and refused to grant the interim reliefs vide its order dated 20th November, 2013.
5.5 Against the said order dated 20th November, 2013 passed by hon'ble High Court of Bombay, the petitioners preferred an SLP bearing SLP No. 36327/2013 before the hon'ble Apex Court. The hon'ble Apex Court after hearing the parties counsel passed the following Order:
Issue notice.
Mr. Jagjit Singh Chhabra, learned counsel, accepts notice on behalf of the respondent Nos. 1 to 5, 7 and 8.
Leave granted.
Heard the learned senior counsel appearing for both the sides.
The learned senior counsel for both the sides have agreed that they would extend their co-operation to the CLB in disposing of issue regarding grant of interim relief in CP No. 103 of 2013 so that the issue about interim relief can be decided within three weeks from today.
The CLB shall pass reasoned orders with regard to grant of interim relief or otherwise after hearing the concerned parties within three weeks from the date of the receipt of this order.
We do not express any opinion on the merits of the case and it will be open to the Board to consider all submissions which might be made before it
In view of the above, the impugned order passed by the High Court would not survive and is, therefore, quashed and set aside.
With the aforesaid observations and directions, the civil appeal is disposed of with no order as to the costs.
It is made clear that section 45 application filed by the respondents shall be decided after the above company application is decided by the CLB.
As requested, reply will be filed by the respondents before the Board within 10 days from the date of receipt of this order and rejoinder, if any, will be filed within three days thereafter.
5.6 Pursuant to the order passed by the hon'ble Supreme Court, the CP came up for hearing on 17th December, 2013 on which date, by consent of the parties, the following ad interim orders were passed.
(i) That respondent No. 1 shall not raise any new debt or issue any guarantees without the consent of the petitioners.
(ii) That the respondents shall not alienate, encumber or dispose of any of their movable and or immovable assets, except in the usual course of business.
(iii) That the respondents shall not open any new bank accounts except with the ICICI Bank, as mandated by letter dated 6th December, 2013.
(iv) That the respondents agree that no expense will be incurred by them in the name of respondent No. 1 for an amount of more than INR 35 lakh, without the prior consent of the petitioners.
(v) As agreed, Delbitte Touche Tohmatsu India (P.) Ltd. is hereby appointed for the purpose of doing an impact assessment of accounts of respondent No. 1. The scope and coverage shall include the following, which will enable the company to respond to the points raised by BSR & Co.:
Coverage years:
FY 2013-14
FY 2012-13
Scope:
Revenues/costs - essentially all P&L items
Asset purchases
Asset inventory verification
All balance sheet items
Bank balances/accounts
Overseas transactions and operations
Related parties transactions
Compliance(vi) It is clarified that nothing stated in this order is an adverse reflection on or casts any aspersions on the conduct or appointment of Ernst & Young LLP ('E&Y'). It is further clarified that the above clarification is itself without prejudice to the respective rights and contentions of the parties in Suit (Lodg.) No. 1013 of 2013 is...
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