CP 12(ND)/2010, CP 40(ND)/2010, CP 50(ND)/2010 and CP 118(ND)/2010. Case: Oswal FM Hammerle Textiles Ltd. Vs Machinen Umwelttechnik Transportanlagen Gesellschaft GmbH (MUT) and Ors.. Company Law Board
| Case Number | CP 12(ND)/2010, CP 40(ND)/2010, CP 50(ND)/2010 and CP 118(ND)/2010 |
| Counsel | For Appellant: Arun Saxena, Nalini and Simran Jyot Singh, Advocates and For Respondents: Arun Kathpalia, Samaksh Goel, Amit Bansal, Jayant Goel, Akshay Bhandari, Advocates and Bhuvneshwar Handa, Chartered Accountant |
| Judges | B.S.V. Prakash Kumar, Member (J) |
| Issue | Income Tax Act, 1961 - Section 92; Indian Contract Act, 1872 - Sections 15, 2(d), 25, 62 |
| Judgement Date | August 13, 2015 |
| Court | Company Law Board |
Order:
B.S.V. Prakash Kumar, Member (J), (New Delhi Bench)
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It is litigation between Indian business group popularly known as Oswal group engaged in Indian market in Cotton Yarns, blended yarns, dyed yarns etc. and Hahnl group based in Austria. This dispute has germinated out a joint venture entered in between these two groups to manufacture shirting fabric with the technical knowhow of an Austrian company called FM Haemmerle Textilwerke GmbH & Co. (herein after referred as FMH). This joint venture is christened as Oswal FM Hammerle Textiles Ltd. (in short referred as "OFMHT", it is not referred as R1, because in petition filed u/s. 111A of the Companies Act 1956, Oswals have shown this company as petitioner) taking brand name of FM Hammerle owned by Hahnl group.
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In this litigation, Oswal group through OFMHT filed CP 12/2010 against MUT and Josef Hahnl for rectification of the share register of it by cancelling 1,90,15,920 (18.11%) shares allotted to IRIS Textile GmbH (herein after referred as IRIS) owned by Hahnl Croup. These shares are presently held by another company owned by Hahnl group called Maschinen Umwelttechnik Transportanlagen Gesellschaft GmbH (herein after referred as MUT), because IRIS transferred these shares to MUT through Assignment and Assumption and Mutual Release Agreements dated 5-12-2008 with the consent of OFMHT, Ashok Oswal and Oswal group companies. IRIS, MUT and FMH, based in Austria, belong to Hahnl group.
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This Oswal Group also filed CP 40/2010 through their own company called M/s. Vardhman Polytex Ltd. (herein after referred as VPL), which has 81.88% shareholding in OFMHT, against OFMHT, IRIS, Josef Hahnl, MUT and Ishwinder Maddh u/s. 397, 398 r/w 402 of the Companies Act 1956 stating that Hahnl group has not been providing Technical knowhow, besides this, they have been trying to take out information confidential to the company to use it for running competing business, therefore sought for removal of Josef Hahnl as director of OFMHT.
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As against the cases filed by Oswal Group, Hahnl group, through MUT (presently shareholder of OFMHT), filed CP 50/2010 against OFMHT, VPL, Ashok Oswal, MD of OFMHT u/s. 397 & 398 r/w 402 of the companies Act 1956 stating that Oswal group holding meetings without notice to Hahnl group and acting prejudicial to the interest of Hahnls and the Company by siphoning the funds of the company and not giving access to the records despite OFMHT is under mandate to provide every information to Hahnl group.
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And Hahnl group also filed another CP No. 118/2010 for investigation of OFMHT accounts u/s 235 & 237(b) of the Companies Act, 1956 alleging that Oswal group played massive fraud in OFMHT by siphoning the funds of it.
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On hearing these Company Petitions, for having this Bench noticed that though there are four Company Petitions trading charges against each other, two from Oswal group, two from Hahnl group, the dispute is primarily relating to the affairs of OFMHT. Though various companies names have come up in these Company Petitions either as parties or as companies somehow connected to the dispute, the dispute being solely in between Oswal Group and Hahnl group with regard to the affairs of OFMHT. I, therefore, being convinced that Common Order is suffice to answer all the points raised in these four cases, have passed this common order as below. There being cross petitions between the same parties, I have referred the names of the parties instead of referring them as petitioners or respondents.
Brief story of this litigation:
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The brief facts of the dispute is, Oswal group wanted to enter into a new line of business - shirting fabric business with FMH, which has name in shirting fabric across the world. Since FMH (FMH Texlilwerke GmbH & Co is an LLP, 100% subsidiary of MUT) is a brand name known to shirting fabric across the world, Oswal group, on 01.03.2006, through its company called Vardhman Polytex Ltd. (VPL), entered into two agreements with Hahnl group on 01-03-2006, because FMH is an LLP owned by Hahnl group through MUT. IRIS also belongs to Hahnl group only. Having IRIS obtained licenses to provide Technical knowhow and marketing assistance to OFMHT, IRIS, on behalf of Hahnl group, and VPL, on behalf of Oswal group entered into a Joint Venture Agreement (JVA) and another agreement called Technical Collaboration and Marketing Assistance Agreement (TCMA) to float OFMHT broadly agreeing that Hahnl group would provide technical knowhow and marketing assistance to OFMHT.
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The primary objective of this JVA and TCMA was to manufacture products based on the technical knowhow which was to be given by Hahnl group under the trade mark of FM Hammerle (FMH). Since various companies are involved in this arrangement, I believe it is right to explain what those companies are to avoid confusion in further discussion.
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FMH is a limited liability partnership company incorporated under the laws of Austria. It is a leading European manufacturers engaged in the business of manufacturing, selling and exporting of yarn and piece dyed shirting fabrics and home textile fabrics, it is the owner of the technical knowhow as well as the trademarks with trade name FM Hammerle". IRIS being the company entered into Agreements with VPL, it had obtained vide agreement dated 2.11.2005 with FMH, for rights to sell or license the Technical knowhow, trade name and trademarks of FMH to OFMHT. Since FMH is 100% subsidiary of MUT, it had given its no objection and consent to FMH on 5-12-2005 to provide technical Knowhow to OFMHT. FMH was the owner of the Technical knowhow to be used in the manufacture of the products and it had absolute authority to grant a license of its technical knowhow for making products. VPL is an Indian manufacturer engaged in the business of manufacturing, selling and exporting 100% Cotton yarn, cotton blended yams, 100% acrylic yarns, dyed yarns, knitted and woven garments. To start the joint venture, IRIS and VPL entered into the agreements as aforesaid and incorporated Oswal P.M. Hammerle Textiles Ltd. (OFMHT) was incorporated as public limited company governed by laws of India.
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The important clauses in the JV Agreement is that IRIS had agreed to grant OFMHT an exclusive license for the territory of Asia to use the technical knowhow, the trademarks and to render its assistance in marketing and manufacturing products. If OFMHT wanted to manufacture the products in a different company of Oswal group, or in an affiliate company of Oswal group, OFMHT had to seek written permission from IRIS to use the license for other company of Oswal group. VPL had agreed and cussed OFMHT to work exclusively with IRIS in the territory of Asia for the manufacture, distribution and sale of products. All products sold under the name of Oswal P.M. Hammerle Textiles Ltd. had to be sold via OFMHT. It was further agreed that the products bearing trademarks of FMH should be sold and distributed in and outside India. In Europe, USA and North Africa and Japan, products would be sold and distributed by IRIS and FMH, in the rest of Asia and in the rest of the world by OFMHT. The registered office of OFMHT is at 341K-1, Mundian Khurd, P.O. Sahabana, Chandigarh Road, Ludhiana, Punjab. It was also agreed that at any point of time during the existence of OFMHT, IRIS and its affiliates' shareholding in the paid up equity share capital of OFMHT should not exceed 24%.
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IRIS and VPL had agreed that its equity participation in OFMHT would be as below:
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IRIS shall acquire equity shares of OFMHT equivalent to Euros 3,360,000 (Three million three hundred and sixty thousand Euros only) in lieu of part payment of Technical Knowhow fees. This amount will be allowed to be capitalized in lieu of part payment of Technical Knowhow fees after signing JVA and TCMA.
(b) The remaining shareholding shall come from VPL which shall not be less than 51% of the paid up equity capital of OFMHT.
(c) If either of the parties is desirous of transferring its shares in OFMHT, the right of first offer shall be given to the other party."
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The Board shall have not less than three directors and not more than 12 directors. Out of these directors, IRIS shall be entitled to nominate one director on the Board on a non-rotational basis. The director nominated by IRIS shall be approved by the Board. Each party shall have the right to appoint an alternate director to act in the place of original director during his absence for a period not less than three months, VPL is entitled to appoint a Chairman and Managing Director of the Joint Venture.
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All Agreements shall be governed by laws of India. In case any dispute arose us to the construction, meaning or effect of this agreement or any clause or provision contained therein, the parties shall endeavour their best to resolve it by mutual discussions. In case any difference in between them is not resolved, it shall be finally settled under the rules of Conciliation and Arbitration of International Chamber of Commerce, Geneva, Switzerland by one or more Arbitrators appointed in accordance with the Rules.
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Likewise, these two parties had also entered into TCMA on the same day that IRIS would grant to OFMHT on an exclusive basis a license to use Technical Knowhow for the territory of Asia for the purpose of manufacturing the products. If OFMHT wants to manufacture the products in a different company of the Oswal group or in an affiliate company of the Oswal group, OFMHT has to seek written permission from IRIS in order to use the license for the company of Oswal group. Likewise, IRIS or any of its group companies or Affiliate Company would not license the knowhow of the products of FMH to any other company of Asia. The technical knowhow shall relate to the process and manufacturing skills relating to the products to give assistance in planning the layout of the manufacturing facility of OFMHT, to give assistance in selection of other equipment to...
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