Bombay High Court
Supermax Personal Care Private ... vs Vidyut Metallics Private Limited ... on 30 November, 2015
Bench: S.J. Kathawalla
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
COMPANY APPEAL (L) NO. 10 OF 2015
IN
CLB COMPANY APPLICATION NO. 296 OF 2014
IN
CLB COMPANY PETITION NO. 13 OF 2012.
Supermax Personal Care Pvt. Ltd. ... Appellant
vs.
Vidyut Metallics Pvt. Ltd. and Ors. ...Respondents
Mr. Ravi Kadam, Senior Advocate with Mr. A. Bookwala, Senior Advocate,
along with Mr. Ashish Kamat, Mr. Ankit Lohia, Mr. Ranjit Shetty, Ms.
Aastha, Mr. Rohan Agrawal instructed by M/s. Udwadia Udeshi & Argus
Partners, for the Appellant.
Mr. Aspi Chinoy, Senior Advocate, along with Mr. Mustafa Doctor, Senior
Advocate, Mr. Rohaan Cama, Mr.Rohan Dakshini, Ms. Shweta Jaydev, Mr.
Prakhar Parekh and Mr. Ashwin Bhadang, instructed by M/s. Federal &
Rashmikant, for the Respondent Nos. 1 and 2.
Mr. Prashant Chawan with Mr. Navdeep Vora i/by M/s. Navdeep Vora and
Associates, for MIDC.
CORAM: S. J. KATHAWALLA, J.
Judgment reserved on: 21st April, 2015,
26th October, 2015,
16th November, 2015.
Judgment pronounced on: 30th November, 2015
::: Uploaded on - 01/12/2015 ::: Downloaded on - 01/12/2015 23:58:55 :::
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JUDGMENT:
1. The present Appeal is filed by the Appellant- Super Max Personal
Care Pvt. Ltd. ("SPCPL") against the Order dated 2 nd February, 2015,
passed by the Company Law Board, Western Region Bench ["the
impugned order"] on the ground that the Company Law Board ("CLB")
inter alia granted ingress to Respondent No. 2 Mr. Rajinder Kumar
Malhotra ("RKM") into Plant No. 2 of the Respondent No. 1 - Vidyut
Metallics Pvt. Ltd. ("VMPL"), which is in possession and control of
SPCPL since the year 2010/11, without SPCPL being a party to the
proceedings pending before the CLB, and which is the subject matter of an
Arbitration Petition pending before this Court arising out of a Business
Transfer Agreement ("BTA") dated 30 th December, 2010. Even in the
written submissions tendered in Court by SPCPL, it is categorically
mentioned that, "The Appellants' case is of possession of Plant 2 by virtue of
the BTA dated 30th December, 2010 and the Supplementary BTA dated 18 th
March, 2011 (Appeal Pgs. 12-13)."
2. It is very necessary to point out at the outset, that SPCPL has in the
above Appeal alleged that pursuant to the BTA and the Supplementary
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BTA it is in possession and control of VMPL's Plant 2 since 30 th
December, 2010 / 18th March, 2011 and is carrying on its business
operations from the said Plant No.2. The contents of the Appeal are
reiterated and confirmed by Mr. Sanjay Jagtap ("Jagtap"), Head Legal and
Secretariat of SPCPL in his Affidavit-in-Support of the above Appeal. The
said Jagtap who is now alleging that SPCPL is in possession and control of
Plant No. 2 of VMPL since 30 th December, 2010/18th March, 2011, had as
late as 14th March, 2013, filed an Affidavit on behalf of VMPL in Civil
Application No. 2023 of 2012 in Writ Petition No. 4358 of 2001 in this
Court, wherein he has stated that, "I deny that SPCPL has been put in
possession of the suit property (i.e. Plant No. 2) or that they are now
carrying on the business from the suit property'' (Para 20 of the Affidavit)
and "I deny that SPCPL are in occupation and possession of the suit
property...." (para 21 of the Affidavit). Similarly, Respondent No. 9
herein Mr. Subhash Chaudhari ("Chaudhari"), General Manager -
Corporate Legal of SPCPL, who had orally contended before the CLB on
2nd February, 2015, when the impugned order was passed that SPCPL was
allegedly in possession of VMPL's Plant No. 2 had filed an Affidavit on
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28th February, 2012, as the Authorised Signatory of VMPL in Civil
Application No. 2023 of 2012 in Writ Petition No. 4358 of 2001, wherein
he has categorically stated that, " I deny that SPCPL are in occupation
and possession of the suit property" (i.e. Plant No. 2) [Para 10 of the
Affidavit] and "I deny that the Petitioners (VMPL) have created third
party interest over suit property or that they have parted with possession of
the suit property to SPCPL....." [Para 12 of the Affidavit].
When it was pointed out that the stand now taken by Jagtap and Chaudhari
on behalf of SPCPL are contradictory to the statements earlier made by
them on oath before this Court on behalf of VMPL, SPCPL not being in a
position to offer any legitimate explanation, unabashedly submitted
before this Court that the earlier statements made by Jagtap and
Chaudhari were made on behalf of VMPL and not on behalf of SPCPL, and
reflected VMPL's position, thereby suggesting that false statements are
made on oath by Jagtap and Chaudhari as per their convenience and
depending on the party/Company on whose behalf such statements were
being made. SPCPL has also sought to explain that the said statements
were made at the instance of the Directors/Promoters of VMPL, without
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realising that Chaudhari himself was a Director of VMPL at the relevant
time and the said statements were obviously not made at the instance of
RKM because before the said Affidavits were filed by Jagtap and
Chaudhari, RKM had on 2 nd/3rd February, 2012, already filed a Company
Petition before the CLB under Sections 397-398 of the Companies Act,
1956 alleging acts of oppression and mismanagement by the then Directors
of VMPL i.e. Shri Paresh Vyas (Vyas) and Chaudhari. This clearly
demonstrates that these days, litigants show scant respect for Courts and
the rule of law. They not only brazenly take a stand contradictory to that
taken earlier on oath, but subsequently, and equally brazenly, also attempt
to justify the same on a false and illegal premise.
3. One more fact which needs to be brought out to the forefront in this
Appeal is that though SPCPL has repeatedly tried to assert in the present
proceedings that it is an independent legal entity which has nothing to do
with the disputes between the members of Malhotra family, the present
dispute is essentially one of the many proceedings arising out of a long
standing feud between Rakesh Malhotra (the son) on the one hand and
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Rajinder /RKM (the father) and his entire family on the other. Rakesh
Malhotra ("Rakesh") who in fact has admitted in the proceedings filed
before the Hon'ble Supreme Court of India that he is in charge and control
of SPCPL, has, as pointed out hereinafter, as late as on 4 th September,
2014, in an Affidavit filed in the proceedings before the High Court of
Justice, Queen's Bench Division Commercial Court in England, furnished
a Schedule of Properties in which VMPL's Plant No. 2, Peeco Plant and
the staff quarters are all stated by him to be in the possession of VMPL.
Of course, SPCPL which is left with no answer to the said statement made
on oath by Rakesh, has in the present Appeal stated that the said Affidavit
is not filed by SPCPL and does not bind SPCPL and also that the said
Affidavit appears to have been on the basis of inadequate information
available with Rakesh. In view of Rakesh admittedly being in charge and
control of SPCPL, the said statement/explanation by SPCPL, to put it very
mildly, is preposterous and unacceptable.
4. It is also very necessary to set out at the outset that RKM has in his
pleadings and through his Counsel repeatedly submitted that Vyas and
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Chaudhari, the ex-Directors of VMPL after being transferred as
employees/consultants of SPCPL, which is admittedly controlled by
Rakesh, at the instance of Rakesh, turned completely hostile to RKM,
because of which RKM had no alternative but to file Company Petition No.
13 of 2012 and seek removal of Vyas and Chaudhari as Directors of VMPL
and appoint new Directors in their place and also to seek protective orders
qua the assets/properties of VMPL. Despite Orders dated 2 nd February,
2012 and 7th November, 2012 passed by CLB inter alia restraining Rakesh
and the ex Directors (Respondents) from disposing off, transferring,
encumbering or creating any charge on the assets /immovable properties
of VMPL and directing the parties to maintain status quo in respect of the
immovable properties of VMPL, neither Rakesh nor the ex-Directors
impugned the said orders or contended that the immovable
assets/properties of VMPL are in possession of SPCPL, pursuant to the
BTA, as is now alleged. Instead, as submitted by RKM, his son Rakesh
left no stone unturned in trying to prevent him from removing Vyas and
Chaudhari, the ex-Directors of VMPL, but failed to succeed despite taking
the issue right upto the Hon'ble Supreme Court. As submitted by RKM,
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Rakesh thereafter realised that the hostile ex-Directors (Vyas and
Chaudhari) through whom he was exercising control over VMPL's assets
and properties shall no longer be able to wrongfully retain charge of
VMPL's assets. Rakesh therefore arranged for SPCPL to make a false claim
for the first time that it is in possession and control of Plant No.2 of VMPL
pursuant to the BTA of December, 2010 and Supplemental BTA dated 18 th
March, 2011, which is nothing but a mala fide attempt to somehow
exercise control over VMPL's assets, and properties. According to RKM,
the above Appeal therefore clearly constitutes an abuse of the process of
this Court.
4.1 SPCPL has denied and disputed that SPCPL has made a claim of
being in possession and control of Plant No. 2 of VMPL at the instance of
Rakesh. SPCPL has submitted in the above Appeal filed on 3 rd February,
2015 that :
"4 (a) .... The Appellant is a professionally led and managed
Company and none of the members of the Rakesh Malhotra family
are on the Board of Directors of the Appellant"; and
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"5 (o) The Appellant herein came to learn of a significant family
dispute within the R.K. Malhotra Family between R.K. Malhotra
and his younger son Mr. Rajiv Malhotra on one side and Mr.
Rakesh Malhotra on the other. The Appellant would ordinarily
not be concerned with any disputes between the family
members. However, over the last few months Respondent No.
1 and its shareholders at the behest of Respondent No. 1 herein or
otherwise started to interfere with and obstruct the business of the
Appellant".
4.2 In the above Appeal SPCPL through Sanjay Jagtap filed an Affidavit
in Sur-Sur Rejoinder dated 26th March, 2015 wherein, whilst dealing with
the stand taken by RKM, that SPCPL is a Company fully controlled and
managed by Rakesh (Respondent No. 5), it has stated as follows:
" 4. In respect of the allegation that the Appellant is a Company
fully controlled and managed by Respondent No. 5, I state that
the Appellant is a professionally run and managed Company and
that Respondent No. 5 is not even on the Board of Directors of
the Appellant, neither is he involved in the management of the
day to day affairs of the Appellant."
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4.3 In paragraph 6.5 of the written submissions dated 21 st April, 2015
filed by SPCPL, it is stated as follows:
"Much has been sought to be made out on purported failure on the
part of the Appellant to deny that Respondent No.5 (Rakesh) is in
control and management of the Appellant. Respondent No. 1
(VMPL) sought to rely upon various affidavits filed in the course
of pleadings before this Hon'ble Court. However, what Respondent
No.1 (VMPL) failed to point out is the fact that on a conjoint
reading of paragraph 5 (r) at Appeal : Pg. 12 read with Exhibit-K
Appeal : Pg. 564 at paras 1 and 3 Appeal: Pg. 576, it is clear that
the Appellant approached this Hon'ble Court clearly on the basis
that theAppellant is a professionally run and managed Company
and none of the Directors of the RKM Family are on the Board of
Directors of the Appellant. The Appellant has also in paragraph 5
(o) at Appeal: Pg. 11 of the present Appeal clearly stated that the
Appellant was not concerned with the family disputes between
members of the RKM Family...."
4.4 In the Arbitration Petition filed by SPCPL in January, 2015 and
annexed by SPCPL as Exhibit-K to the Appeal, SPCPL has stated as
under:
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"16. The Petitioner has come to learn that the RKM Family is
involved in a significant family dispute betweenRKM and his
younger son Rajiv Malhotra on one side and Mr. Rakesh
Malhotra on the other side. Whilst it is a purely family dispute
and ordinarily the Petitioner should not be at all concerned
about it, the Petitioner started getting very anxious and
apprehensive about the same only when the disputes between the
family reached the Petitioner's doorsteps and started interfering
with the Business of the Petitioner. Over the last few months,
the Respondent whether at the behest of RKM or otherwise has
started to significantly interfere with and obstruct the Business of
the Petitioner".
It is pertinent to note from the purported instances set out by SPCPL in
the said paragraph 16 of the Petition that the alleged obstruction
commenced only from 31st December, 2014.
4.5 This Court after hearing the Learned Advocates appearing for the
Parties and after going through all the papers, placed the matter on Board
on two occasions to put its queries to the Advocates for the Parties and get
their response to the same. In view of the above stand on the part of
RKM on the one hand that Rakesh has put up SPCPL to make a false
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claim of being in possession and control of Plant No.2 from the year
December 2010/March, 2011, and SPCPL on the other hand contending
that SPCPL is in no way concerned with the disputes between RKM and
Rakesh, and that Rakesh is neither on the Board of Directors of SPCPL or
concerned with the day to day affairs of SPCPL, one of the queries put to
the Advocate for SPCPL by this Court was whether SPCPL had financed
Rakesh qua any of the litigations that were fought against RKM before the
CLB and/or before this Court or before the Hon'ble Supreme Court, and
in the event of SPCPL having financed Rakesh to pursue the litigation
against his father, whether the Board of Directors of SPCPL has passed
any Resolution approving the same. This Court had also clarified that if
any such litigation of SPCPL is financed by SPCPL, the same would
amount to SPCPL having made a false representation to the Court in their
Appeal/affidavits as set out hereinabove.
4.6 After seeking time from this Court on two occasions, the Court
was informed by the Counsel appearing for SPCPL that the entire litigation
fought by Rakesh against RKM (i.e. since the year 2012) has been financed
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throughout by SPCPL and there is no Board Resolution on record of
SPCPL qua the litigation costs having been borne by SPCPL on behalf of
Rakesh.
4.7 It is therefore clear that the entire cost incurred throughout by
Rakesh in the fight between RKM and Rakesh is borne by SPCPL and
shown by SPCPL in its accounts as legal expenses of SPCPL. This fact
therefore clearly demonstrates that incorrect statements have been made
by SPCPL in the Appeal, in the affidavits filed on behalf of SPCPL therein
and in the Arbitration Petition relied upon by SPCPL in the Appeal, to give
an incorrect impression to the Court that SPCPL has not approached the
Court at the instance of Rakesh, after Rakesh failed to succeed in
preventing the removal of Vyas and Chaudhari as Directors of VMPL; that
SPCPL is not controlled by Rakesh (though Rakesh has himself admitted
this fact in his SLP before the Hon'ble Supreme Court); that SPCPL is not
concerned with the family disputes between Rakesh and RKM and had no
alternative but to approach the Court only because, since December 2014
RKM/VMPL started interfering with the business of the Appellant; and
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that SPCPL is a professionally led and managed Company where Rakesh is
not a member of the Board of Directors of the SPCPL and is also not
concerned with the day to day affairs of SPCPL.
4.8 These facts once again expose the dishonest conduct of SPCPL
in not being fair and honest with the Court but instead misrepresenting
facts which are incorrect to its knowledge, only to seek favourable reliefs as
sought by it in the proceedings.
5. Since the disputes between Rakesh on the one hand and his father
RKM and his entire family on the other qua various Companies which are
hereunder referred to as the "RKM Indian Companies", has a chequered
history, it is necessary to set out hereunder the relevant facts which have
led to the filing of the present Appeal, which Appeal this Court has, with
the consent of the Parties, decided to dispose of at the stage of admission
itself.
5.1 The Super Max Group was a family-owned Group of Companies
founded by RKM in the year 1949 and its business was and is that of
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manufacturing and selling razor blades and related products
internationally. The Super Max Group Companies were held through a
number of foreign holding Companies and ultimately forms part of the
Lichtenstein Foundation.
5.2 RKM was and is also the effective owner of 5 Indian Companies (the
RKM Indian Companies) which either manufactured products for the
Super Max Group, or owned land/plant, or intellectual property rights
which were used by the Super Max Group for its business. These RKM
Indian Companies included VMPL -- the Respondent No.1 herein. RKM
holds 47.3% of VMPL's equity. Of the rest, 53% is held by Transauto and
Mechaids Pvt. Ltd. and 0.01% by Rakesh. Mrs. Veena Malhotra, wife of
RKM holds 1 share of Transauto and RKM holds the rest. VMPL till date,
is therefore effectively held and owned by RKM.
5.3 As a matter of policy, the Directors of the said RKM Companies
comprised of employees and/or ex-employees of the Companies and no
member of the Malhotra family was appointed as Director of any of the
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RKM Indian Companies.
5.4 In 2008-2010, RKM decided to restructure and hand over control of
the Super Max Group, to his eldest son Rakesh. Accordingly, on 4 th
November, 2010 a Share Subscription Deed ("SSD") was executed
between the parties mentioned therein. The said SSD was subsequently
modified by a Supplemental Share Subscription Deed dated 4 th March,
2011 ("SSSD"). As part of that restructuring, SPCPL was registered as a
new Company with Rakesh in charge of its management. A Foreign Pvt.
Equity Investor - ACTIS, subscribed to 25 -30 % of the Holding Company
against payment of US $ 225 Million : 1018 Crores. Of this, an amount of
US $ 53 million (approx. Rs. 240 Crores) was to be paid by SPCPL to the 5
RKM Indian Companies as consideration for the transfer/lease/utilization
of their Business Assets. Of this amount, VMPL was to receive Rs. 110
crores.
5.5 On 30th December, 2010, a BTA was executed between VMPL and
SPCPL for transfer of VMPL's business to SPCPL. The BTA provided
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that VMPL's Plant No. 1 was to be leased to SPCPL. The BTA did not
provide for lease/transfer of the Plant No. 2 to SPCPL. Instead, the BTA
specifically provided that VMPL was to undertake toll manufacturing (job
work) for SPCPL at its Plant No.2. Under the BTA, all the equipment and
employees of VMPL were transferred to SPCPL. Accordingly for carrying
out the job work arrangement, the said equipment was to be leased back by
SPCPL to VMPL and the said employees were to be seconded back by
SPCPL to VMPL.
5.6 RKM in the aforestated manner handed over control of the 5 RKM
Indian Companies to his elder son Rakesh and trusted him totally. A
Supplementary BTA as well as the Job Work Agreement, the Staff
Secondment Agreement and the Equipment Lease Agreements were all
executed on 18th March, 2011. Vyas and Chaudhari, who were the two
Directors of VMPL had now become employees/Consultants of SPCPL.
However, since they had been the Directors of VMPL since 1993 and
2001 respectively, RKM believed that they would continue to protect the
interest of VMPL and therefore allowed them to continue as Directors of
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VMPL. Similarly, the Directors of the other RKM Indian Companies
remained unchanged. However according to RKM his son Rakesh
misused the trust reposed in him by RKM and used his influence over the
Directors of the RKM Indian Companies including VMPL (now
employees/Consultants of SPCPL) to exclude RKM who held 99.99% of
the shares of the five Companies. According to RKM, the Directors of the
5 Companies acting upon Rakesh's instructions refused to give RKM, who
was the effective owner of the said 5 RKM Indian Companies, information
and access to records, registers and accounts. Through these pliant
Directors, Rakesh also sought to utiize the funds, assets and properties of
the five Companies (including VMPL) for the benefit of SPCPL/himself.
5.7 On 2nd/3rd February, 2012, RKM either directly or through
Companies belonging to him, filed four Company Petitions in the CLB at
Mumbai and one at Chennai, on the ground of oppression and
mismanagement, inter alia for removal of the hostile Directors from the
RKM Indian Companies. Company Petition No. 13 of 2012 was one of
the Petitions filed by RKM under Sections 397 and 398 of the Companies
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Act, 1956, against the Respondents therein including Vyas, Chaudhari and
Rakesh (Respondent Nos. 2, 3 and 6 therein). In paragraph 11 of the
Petition, RKM has categorically stated that, "It may be noted that Mr.
Rakesh Malhotra, the elder son of Mr. Rajinder Kumar Malhotra (the
Petitioner) and Respondent No. 6 herein, is in de facto charge and management
of SPCPL". By the said Company Petition, RKM inter alia sought orders
and directions for convening an Extra Ordinary General Meeting of VMPL
for removal of the then Directors, Vyas and Chaudhari and appointment of
new Directors in their place. Further appropriate directions and orders
were also sought under Section 402 of the Act concerning the various
alleged acts of oppression and mismanagement, including directions for
true and fair disclosure of various payments made and liabilities incurred
by VMPL with effect from 18th March 2011, and compensation in respect
of losses incurred on account of such acts. A general order was sought for
termination and modification of all agreements that may have been
executed by VMPL after 18 th March, 2011. A temporary order and
injunction was sought against Vyas and Chaudhari (the then Directors of
VMPL) from: "selling, transferring, encumbering or charging or otherwise
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disposing of or alienating any of the assets of the Company,including the
immovable properties more particularly described in Annexure 2 hereto" and
inter alia against Vyas, Chaudhari and Rakesh to maintain status quo with
regard to the properties and assets of the Company including but not
limited to bank accounts, mutual fund holdings and immovable properties.
It is pertinent to note that in Annexure 2 to the Petition, Plant No. 2 of
VMPL was also included.
5.8 RKM along with the Petitioners who had filed the said four
Company Petitions before the CLB, Mumbai, mentioned the matters
including Company Petition No. 13 of 2012 with regard to VMPL, before
the CLB on 9th February, 2012 when the following ad-interim order was
passed:
" (i) The Respondents shall not utilize, invest or deal in any
manner the funds, monies and securities of the Company
(including bank account) except for the purpose of making
statutory payments that may be required to be made to any
government authorities and salaries of the employees in the
ordinary course of business until further orders.
(ii) The Respondents shall not dispose off, transfer, encumber
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or create any charge on the assets of the Company including
the immovable properties until further orders".
Interestingly, neither Vyas nor Chaudhari (employees/consultants of
SPCPL) who continued to be the Directors of VMPL, nor Rakesh who
admittedly was managing the affairs of SPCPL took a stand similar to the
stand now taken through SPCPL, namely that all the assets of VMPL
including Plant No.2 are transferred to and/or in control and possession of
SPCPL by virtue of the BTA dated 30 th December, 2010 and the
Supplementary BTA dated 18th March, 2011.
5.9 Instead, Rakesh obtained an ex-parte ad-interim anti-suit injunction
from the Commercial Court of the Queen's Bench Division of the Royal
Courts of Justice in the U.K. RKM and the other Petitioners in the
Petitions filed by the Indian Companies thereafter approached the English
Court and contested the matter. After hearing the parties, the injunction
granted in favour of Rakesh by the UK Court was dissolved by a Judgment
dated 30th October, 2012.
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5.10 In view thereof, the proceedings before the CLB in the said
Company Petitions stood revived. However, before entering upon the
defence by way of filing the written statement/reply in the Company
Petitions filed by the Indian Companies, Rakesh Malhotra filed Company
Applications in the respective Company Petitions under Section 45 of the
Arbitration and Conciliation Act ("the Act") and prayed that the
disputes be referred to an Arbitrator in terms of clauses 43.1 to 43.2.6 as
contained in the SSD dated 4th November, 2010.
5.11 By an Order dated 7th November, 2012 passed by the CLB, the CLB
in its Order recorded an undertaking on behalf of the parties to maintain
status quo in respect of the shareholding, the constitution of the Board of
Directors and the fixed assets of the Company, as on that date, and also
continued the interim order dated 9 th February, 2012. Even at that time
Vyas and Chaudhari, ex-Directors of VMPL and Rakesh who admittedly
is in control of SPCPL did not take a stand before the CLB that all the
assets of VMPL have been transferred to and/or are in possession and
control of SPCPL.
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5.12 By an Order dated 31st January, 2013, the CLB dismissed Rakesh's
Application for reference to arbitration under Section 45 of the Act and
also permitted RKM to reconstitute the Board of Directors of the said
Companies.
5.13
On 6/7th February, 2013, Rakesh filed Company Appeals in this
Court impugning the Order allowing RKM to reconstitute the Board of
Directors of the said Company (including the Board of Directors of
VMPL). The Appeals were admitted and the impugned Order dated 31 st
January, 2013 was stayed. In view thereof, the removal of the Directors of
the said four Companies including VMPL and the appointment of new
Directors in their place could not be given effect to.
5.14 On 12th/20th August, 2014, this Court (Coram: G.S. Patel, J.)
dismissed Rakesh's Company Appeals and also refused to extend the stay
on the removal of Rakesh's suborned Directors/appointment of new
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Directors. In paras 134 to 138 of its judgment, the Court recorded that:
(i) Rakesh had betrayed the confidence reposed in him by
RKM, had engineered a coup d'etat, hijacked the RKM
controlled Indian Cos., and deployed their funds to further
the interests of entities controlled by him.
(ii) That although RKM owned and controlled 99.9 % of
the Shares of the said Indian Cos., the said Directors acting
as puppets of Rakesh, had continued in control of the RKM
Indian Cos. and had continued to be "obdurate &
obfuscatory". That as a consequence the said RKM Cos.
were exposed to considerable financial risk, severe financial
distress and even possibly ruin.
(iii) That considerable harm and profound prejudice was
likely to occur if these state of affairs were allowed to
continue.
(iv) That it would be wholly inequitable to allow such a
state of affairs to continue and there could not possibly be
any equity in Rakesh's favour in a situation like this.
The interim orders dated 9 th February 2012 and 7th November 2012 were
continued.
5.15 Against the said Judgment and Order dated 12 th/20th August, 2014,
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Rakesh preferred a Special Leave Petition before the Hon'ble Supreme
Court of India. Rakesh applied for a stay of the said Judgment and Order
dated 20th August, 2014, inter alia on the grounds set out below:
"A. Because the Petitioner is in control of the newly formed
Indian Company called Supermax Personal Care Pvt. Ltd.
And that if the present order is allowed to continue, the
Respondent shall take control of the other Indian Companies
and cancel all Agreements mandated to be entered into by the
SSD and the business of the Petitioners' Company will come to a
standstill."
"D. Because removing the interim protection would result in
irreversible situation inasmuch as permitting an immediate
change in the Constitution of the Board of Directors of the
Respondent Companies. Since these Companies have
contractual obligations with or to the SuperMax Companies,
should any of the existing contracts be terminated, the
consequences to the SuperMax group would be crippling."
Thus Rakesh, as Petitioner in the SLP, has categorically admitted that he
is in control of SPCPL and if RKM shall take control of the Indian
Companies (including VMPL) and cancel all agreements mandated to be
entered into by the Share Subscription Deed (SSD) the business of
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SPCPL will come to a standstill. It will again not be out of place to
mention here that Rakesh who admitted before the Hon'ble Supreme
Court to be in control of SPCPL, did not take a stand in the said SLP that
the question of alienating, encumbering, parting with possession of the
assets of VMPL or maintaining status quo in respect of the fixed assets of
VMPL as ordered by the CLB on 9 th February, 2012 and 7th November,
2012 respectively, and continued by the Learned Judge of this Court by
his impugned Order dated 12 th/20th August, 2014, does not arise, since
under the BTA dated 30th December, 2010 all the assets of VMPL
including Plant No.2 were transferred to SPCPL and/or the same were in
possession and control of SPCPL, as now alleged.
5.16 By its Order dated 10 th September,2014, the Hon'ble Supreme
Court granted Rakesh leave to appeal but declined stay of the Order
passed by this Court dated 12th/20th August, 2014.
5.17 At an Extraordinary General Meeting of VMPL held on 21 st
December, 2012, a Resolution had been passed removing Vyas and
KPPNair 27 coappl-10/2015
Chaudhari as Directors of VMPL and appointing in their place Mr.
Punnilal Chhabria and Mr. Gordhandas Daulal Arora respectively ("the
newly appointed Directors"). The newly appointed Directors of the
Company had refrained from acting as Directors and Vyas and
Chaudhari (employees/consultants of SPCPL) had continued to be the
Directors of VMPL in view of the pending Appeals in this Court.
However, after the Judgment and Order dated 12 th/20th August, 2014 was
passed, the newly appointed Directors immediately addressed a letter
dated 25th August, 2014 to Vyas and Chaudhari calling upon them to
forthwith seize and desist from acting as Directors of the Company and
on and from 27th August, 2014 to hand over to them the entire charge of
the Company along with all its records (statutory, financial and otherwise)
including all original documents of all assets owned by VMPL.
5.18 In response to the said request made, the newly appointed
Directors received a letter dated 26 th August, 2014 from Vyas stating that
he was replying on behalf of himself and Chaudhari and that they were
unable to meet on 27th August, 2014 as it was not possible to reschedule
KPPNair 28 coappl-10/2015
their prior commitments. He suggested that the parties meet on 5 th
September, 2014.
5.19 RKM by his Advocate's letter dated 30 th August, 2011, called upon
Vyas and Chaudhari through their Advocates to immediately (not later
than 2nd September, 2014) hand over the entire charge inter alia of VMPL
along with its records (statutory, financial and otherwise) as required. No
response was received to the said letter. RKM therefore by his Advocate's
letter dated 19th September, 2014 whilst recording that the Hon'ble
Supreme Court had refused to grant interim relief to the Respondents in
the aforesaid SLP, once again requested Vyas and Chaudhari through their
Advocates to ... "at least now co-operate with our clients and hand over the
assets and records (statutory, financial and otherwise) of the Companies so that
the interest of the Companies can be properly protected".
5.20 In the meantime, the newly constituted Board of the Company
addressed a letter dated 11th September, 2014 to the ex-Directors Vyas
and Chaudhari inter alia recording that no documents were handed over
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even on the proposed date i.e. 5 th September, 2014 as suggested by Vyas
and Chaudhari.
5.21 By their Advocates letter dated 22 nd September, 2014, Vyas,
Chaudhari and Rakesh in reply to the above mentioned letters, purported
to contend that they continued to be Directors of VMPL and that their
removal as Directors was in violation of the Judgment and Order dated
12th/20th August, 2014, passed by this Court.
5.22 In response to the said letter dated 22 nd September, 2014, RKM by
his Advocate's letter dated 26th September,2014, pointed out that Vyas,
Chaudhari and Rakesh were taking a deliberately false and mischievous
stand by purportedly contending that they continued to remain as
Directors of VMPL. By the said letter, RKM also pointed out that VMPL
had received a few assessment orders and recovery notices from the
Income Tax Department and that VMPL was required to file its Income
Tax Return on or before 31st September, 2014, for which purpose they
needed the 'User ID' and 'Password' of the Company's on-line payment
KPPNair 30 coappl-10/2015
account, also for issuance of TDS Certificate, and to complete statutory
compliance.
5.23 The newly appointed Directors of VMPL by a letter dated 7 th
October, 2014, requested Vyas and Chaudhari to make arrangements to
hand over charge of VMPL's property viz. Peeco Plant (Wagle Estate),
Panama Headquarter (Thane) and Plant 2, VMPL (Thane) and to remove
their security guards from the said plants/properties.
5.24 On 11th October, 2014, certain persons deputed by the newly
appointed Directors went to the Company's Panama Head Quarter and
the Peeco Plant premises along with their security guards to take charge of
the same. However, they were denied entry by the security guards
employed by Vyas and Chaudhari.
5.25 By a letter dated 10th October 2014, Vyas, Choudhari and
Rakesh through their Advocates replied to the RKM Advocate's letter
dated 26th September, 2014. By the said letter, they purported to contend
KPPNair 31 coappl-10/2015
that the Petitioner was erroneously interpreting the orders passed by this
Court and the statements made by them in the Special Leave Petition filed
before the Hon'ble Supreme Court of India. They also refused to give the
Petitioner the 'User ID' and 'Password" with regard to the Company's
on- line account. In fact, on 13 th October, 2014, Vyas and Choudhari, in
the name of VMPL purported to issue a public notice in the Times of
India newspaper stating that they continue to be the Directors of VMPL.
5.26 According to RKM, notwithstanding the fact that the Judgment and
Order of this Court dated 12 th/20th August, 2014, was clear and
unambiguous, only by way of abundant caution, RKM filed a praecipe
before this Court seeking clarification of its Order dated 12 th/20th August,
2014. The said application was disposed of by an Order dated 14 th October,
2014 wherein this Court observed that it was made amply clear in its
Order of 12/20th August, 2014 that it was not staying the change in the
Constitution of the Board of Directors of the Company and the only
restraint was against the CLB Respondents i.e. Rakesh, Vyas, Chaudhari
and others from utilizing the Company's funds or from disposing of or
KPPNair 32 coappl-10/2015
encumbering their assets. The Respondents made an application for a stay
of the said clarificatory order, which was not granted.
5.27 On 17th October, 2014, RKM by his Advocate's letter once again
called upon Vyas and Chaudhari to hand over charge of properties
(moveable and immovable) of the Company including all its records
(statutory, financial and otherwise) to the Petitioner and to withdraw the
said public notice issued by them on 13 th October, 2014 in the Times of
India.
5.28 Instead of complying with the requisitions made in the aforesaid
letter, Vyas and Chaudhari by their Advocates letter dated 27 th October,
2014, continued to falsely contend that the clarificatory order dated 14 th
October, 2014, was passed by this Court without jurisdiction and that
they were in the process of filing proceedings in the Hon'ble Supreme
Court against the said Order and were therefore unable to comply with
the requisitions contained in the said letter. Again, Vyas and Chaudhari
had not taken the stand that the question of handing over charge of
KPPNair 33 coappl-10/2015
immovable properties of VMPL did not arise since pursuant to the BTA
and Supplemental BTA all the immovable assets of VMPL are
transferred and/or in possession and control of SPCPL, as now alleged.
RKM responded to the aforesaid letter dated 27 th October, 2014 by his
letter dated 29th October, 2014.
5.29
In the circumstances VMPL filed Company Application No. 296 of
2014 in the CLB Petitions, inter alia to restrain Vyas and Chaudhari from
holding themselves out as Directors of VMPL and to direct them to hand
over charge of the properties and records of VMPL to the newly appointed
Directors. In the said Application, Rakesh and the ex-Directors of VMPL
were represented by the same Advocate.
5.30 By Orders dated 20th November, 2014 and 5th January, 2015, made
in Company Application No. 296 of 2014, the CLB restrained Vyas and
Chaudhari from acting and holding themselves out as Directors of VMPL;
and recorded a finding that Vyas and Chaudhari were wilfully disobeying
the orders and not handing over charge.
KPPNair 34 coappl-10/2015
5.31 According to RKM, realizing that the ex-Directors would no
longer be able to retain control/change of the funds and assets of VMPL,
on 12th January, 2015, Rakesh caused SPCPL to file Arbitration Petition
(L) No. 55 of 2015 against VMPL. By the said Petition SPCPL falsely
purported to contend that it was not concerned with the disputes between
the Malhotra family. The reliefs sought in the Arbitration Petition related
to restraining VMPL from interfering with the business of the SPCPL,
from obstructing the water supply from the Peeco Plant to Plant Nos. 1
and 2. VMPL filed its Affidavit-in-Reply dated 27 th January, 2015 in the
said Arbitration Petition. However, till date no ad-interim/interim reliefs
are granted in favour of SPCPL.
5.32 At the hearing of the said Company Application No. 296 of 2015
on 2nd February, 2015, Vyas and Chaudhari who had till then refused to
hand over charge on diverse grounds, now confirmed/accepted that they
had ceased to be Directors of VMPL from November,2014. However, the
said erstwhile Directors for the first time now orally alleged that SPCPL
KPPNair 35 coappl-10/2015
(which is admittedly controlled by Rakesh) was allegedly in possession of
the assets of VMPL under the Business Transfer Agreement of 2010.
VMPL in response had pointed out to the CLB that only its Plant No. 1
had been leased/transferred to SPCPL under the BTA of December, 2010.
In the circumstances, the CLB passed an Order dated 2 nd February, 2015,
directing the said ex-Directors to hand over charge of the properties and
assets of VMPL to the present management and Directors of VMPL and
restrained the Respondents from causing any obstruction/interference in
the ingress of the present Management and Directors to the properties/
factory premises/manufacturing units and directed local administration
and police authorities to ensure implementation of the order if any
interference/resistance was reported to them by the present management
of VMPL. The CLB however excluded from the purview of the order,
assets which had been transferred to SPCPL under the BTA.
5.33 On 3rd February, 2015, SPCPL filed the present Company Appeal
impugning the Order of the CLB dated 2 nd February, 2015. In the present
Appeal, SPCPL has alleged that it was in possession of VMPL's Plant No.
KPPNair 36 coappl-10/2015
2. In the Appeal no particulars were stated as to how and when SPCPL
had allegedly come into possession of VMPL's Plant No.2. However, in
paragraph 6 of its Rejoinder Affidavit, SPCPL stated how it allegedly
claimed to be in possession of Plant No. 2 as follows:
" I say and submit that pursuant to the BTA and other
relevant agreements, all the assets of the Respondent No. 1
(including Plant Nos. 1 and 2) came into possession of the
Appellant inter alia by virtue of the transfer of all the
erstwhile employees of Respondent No. 1 who were operating
Plant 1 and Plant 2. Thereafter these employees continued to
possess and operate both these plants for the appellants. The
Appellants therefore possessed both these plants and no
further transfer of possession was required. Thus pursuant to
the BTA and the Supplemental BTA, possession of both Plant
1 and Plant 2 along with other properties mentioned therein
stood transferred to the Appellant".
The other agreements referred to in para 6 of SPCPL's said Affidavit,
were set out in paragraph 5 of the Rejoinder Affidavit i.e. (i) the Job Work
Agreement, (ii) the Secondment Agreement & (iii) the Equipment Lease
Agreement - all executed between VMPL and SPCPL and all dated 18 th
KPPNair 37 coappl-10/2015
March, 2011. In fact, the same three agreements dated 18 th March, 2011
had also been referred to in para 5 (g) of the Company Appeal as having
been executed to take forward the job work arrangement between SPCPL
and VMPL under the BTA and the said three Agreements had also been
annexed as Exhibits-E, F and G thereto at pages 489, 514, 530.
6.
As stated hereinabove, the case set up by SPCPL in the present
Appeal is that pursuant to the BTA and Supplemental BTA, it is in
possession and control of Plant No.2 since 10 th December, 2010/18th
March, 2011. In support of its case, SPCPL has, in its Appeal inter alia,
stated/submitted as under:
(i) That as part of the restructuring of the Supermax Group around the
year 2010-2011, the entire business of shaving products, including all the
business assets, which includes Plant No. 1 and Plant No. 2 was to be
transferred to SPCPL.
(ii) That on 30th December, 2010, VMPL entered into a BTA with
KPPNair 38 coappl-10/2015
SPCPL wherein VMPL agreed to sell, assign and transfer all its business,
including all the business assets, licenses and employees to SPCPL.
(iii) That subsequent to the BTA, SPCPL and VMPL also executed a
Supplemental Agreement to the BTA dated 18 th March, 2011 to carry out
certain amendments/changes to the BTA.
(iv) That since the Deed of Conveyance was not executed by one
Harbanslal Malhotra & Sons Ltd. in favour of VMPL qua the land and
Plant No. 2 standing thereon, although VMPL operated its business from
Plant No.2, VMPL did not legally own the Plant No.2.
(v) That since the business was to be transferred to SPCPL pursuant to
the BTA, SPCPL and VMPL entered into an arrangement of job work to
enable SPCPL to carry out the business from Plant No.2. For the said job
work arrangement, SPCPL and VMPL executed a Job Work Agreement
dated 18th March, 2011. To take this arrangement forward, ancillary
agreements i.e.. a Secondment Agreement and the Equipment Lease
KPPNair 39 coappl-10/2015
Agreement, both dated 18th March, 2011 were also executed between
SPCPL and VMPL, copies of which are annexed to the Appeal.
(vi) That this arrangement was to follow till such time VMPL would
effectively execute a Conveyance with respect to the land pertaining to
Plant No. 2 in its favour, from Harbanslal Malhotra & Sons Ltd. pursuant
to the Consent Terms dated 20 th December, 2002 and transfer the same to
SPCPL.
(vii) That the Lease Agreement in respect of Plant No. 1 or the Job
Work Agreement with respect to Plant No. 2 was therefore entirely an
interim arrangement, and the following provisions of the BTA amply
reflect this intention.
"1.1.3 "Business" shall mean the global business of
manufacturing, marketing, sales, distribution and related business
activities in respect of shaving products, shaving accessories, shaving
preparation and post-shave products (foam, gel, balm, lotion,
creams) and the specific adjacent male grooming categories carried on
by the Transferor or as a 'going concern', including the Business
Assets : the Business Liabilities, the Records and all Employees.
KPPNair 40 coappl-10/2015
1.1.4 "Business Assets" shall mean all assets relating to the
Business including the following:
(i) the right to use the immovable properties set out in Annexure-1
Part A ("VMPL Plant 1");
(ii) All leased and licensed immovable properties set out in
Annexure -1 Part B ("Rental Properties");
(iii) The right, interests and benefits in respect of all Contracts;
(iv) All plant & Machinery and other fixed assets currently
operated within the Business as set out in the fixed asset register
maintained by the Transferor, the summary of which is
annexed as Annexure-1 Part D;
(v) all Business IPR including but not limited to the (i) licenses
with respect to (a) all computer software being used in
connection with the Business, as set out in Annexure-1 Part E
and (b) the payroll software being used in connection with the
business, as set out in Annexure-1 Part F; (ii) trademarks
owned and applied for by the Transferor, as set out in
Annexure -1 Part G; (iii) goodwill of the said Business; and
(iv) Business Information held by the Transferor which in any
way relate to the Business, if any (v) all patents, designs
(registered or unregistered). Copyrights, technical information
used in respect of the Business, including drawings, sketches
and blue prints, designs, product manuals, specifications, data,
processes, operation sheets, quality control and inspection data,
KPPNair 41 coappl-10/2015
instructions and other such information, details of which are set
out in Annexure - 1 Part H; (hereinafter referred to as
"Business IPR");
(vi) all the current assets of the Transferor including (i) all accounts
receivable or portions thereof, and other rights to payments of
the Transfer (billed or accrued) in respect of the customers
attributable to or arising out of the Business (''Account
Receivables") i.e. sold and money to be received as set out in
Annexure-1 Part 1; (ii) all inventory wherever located,
including all raw materials, work-in-progress, finished goods
and products, spare parts, packaging materials, factory
supplies, perishable tooling, maintenance, repairs and other
supplies that are owned by the Transferor or subject to a lease
or license in each case, to the extent used in, or to the extent
related to, the Business (" inventory"), including such
Inventory held at any location controlled by the Transferor,
such Inventory previously purchased and in transit and any
such Inventory paid for but not yet purchased and in transit
and any such Inventory paid for but not yet delivered or
received by the Transferor that is engaged, deployed, employed
or used in and forming a part of the Business, details of which
are set out in as set out in Annexure -1 Part J;
(vii) all the movable assets, resources, facilities, utilities and services
of the Business including without limitation all movables office
KPPNair 42 coappl-10/2015
equipment telephone instruments, electronic installations,
printers, fax machines, furniture and fixtures, computers,
mobile phones, and such other
tangible movable property, which are owned and used by the
Transferor in respect of the Business and more particularly
described in Annexure -1 Part K (hereinafter referred to as
"Movable Property");
(viii) all transferable Licenses for carrying on the Business details of
which are set out in Annexure - 1 Part I.
(ix) the benefit of all refunds in connection with any Other Taxes
arising from or in connection with, the Business prior to the
Transfer Date, and relating to a specific liability transferred to
the Transferee;
(x) the benefit of all the insurance policies held by the Transferor
which relate to the Business, as set out in Annexure-1 Part M
("Insurance Policies");
(xi) the benefit of all rights and claims arising from, or coming into
existence as a result of, the carrying on of the Business
(including, without limitation, the benefit of all outstanding
insurance claims in Schedule 7 of the Disclosure Letter ) by the
Transferor; and
(xii) the aggregate of cash (whether in hand or credited to any
account with any banking financial, acceptance credit, lending
or other similar institution or organization) and its cash
KPPNair 43 coappl-10/2015
equivalents, including all interest accrued thereon, as shown by
the books of the Transferor in connection with the Business.
1.1.25 "Licenses'' shall mean all licenses, permissions
authorizations (public or private), consents, approvals, certificates,
permits or other evidence of authority issued by a Regulatory
Authority relating to or utilized in connection with the Business or
any part thereof or the Business Assets, including any and all
consents and approvals required to be obtained from any Regulatory
Authority under any applicable Laws for the Transferor to sell,
assign and transfer, or procure the sale, assignment or transfer of
the Business, to the Transferee.
1.1.33 ''Records'' shall mean and include the files, books, records,
customer and supplier information and other documents relating to
the Business, in the possession or control of the Transferor, in
whatever form and upon whatever media they may be recorded, as set
out in Annexure-4.
1.1.36 "Slump Sale" shall mean and transfer of the Business, as
an inseparable whole, as a going concern on an as is where is basis for
a lump sum consideration without value being assigned to the
individual assets and liabilities as defined in the Income Tax Act,
1961''.
(viii) That in the BTA, VMPL had also specifically represented and
warranted to SPCPL that Plant No. 1 and Plant No. 2 , amongst others,
KPPNair 44 coappl-10/2015
comprise all the land and building leased, controlled, occupied or used by
or in connection with the business. Article 10 of the BTA also stipulates
various obligations of VMPL subsequent to the transfer, i.e. to aid and
assist SPCPL before various authorities for completion of filing and other
necessary formalities in order to give effect to the transfer of the business
from VMPL to SPCPL.
(ix) That even under the Subscription and Shareholders' Deed dated 4 th
November, 2010 ("SSD'') as amended by a Supplemental Deed dated 4 th
March 2011 ("Supplemental SSD''), pursuant to which the aforesaid
restructuring took place and the BTA and the Supplemental Agreement
dated 18th March, 2011 were entered into, the Malhotra Parties which
includes RKM were required to, simultaneously with the termination of
the Job Work Agreement Secondment Agreement and/or Equipment
Lease Agreement, deliver inter alia a lease agreement executed by VMPL
(as lessor) in favour of SPCPL (as lessee) in respect of Plant No. 2 and a
letter agreement in relation to the renewal of the aforesaid lease.
(x) That in view thereof, it is an admitted position that the intention of
KPPNair 45 coappl-10/2015
the parties was to transfer the Business and the Business Assets in its
entirety to SPCPL and to the exclusion of VMPL.
(xi) That VMPL has filed an Affidavit-in-Reply dated 27 th January, 2015
before this Court. In the Affidavit-in-Reply VMPL has inter alia admitted
that SPCPL was in possession and control of Plant No.2. Such admissions
are also found in the other pleadings filed by VMPL.
7. In support of its above case, SPCPL in its Affidavits and written
submissions further submitted as follows:
(a) That the Affidavits filed by the Officers of SPCPL and the bills and
photographs produced by SPCPL show that SPCPL is in possession of
Plant No.2.
(b) That VMPL itself has in Petition No. 13 of 2012 filed before the
CLB alleged that it is not carrying on any other business and all its assets
have been transferred to SPCPL, which clearly establishes that it is SPCPL
KPPNair 46 coappl-10/2015
which is carrying on its business from Plant No.2 and is in possession and
control of the same.
(c) That a conjoint reading of Clauses 1.13, 1.1.4, 6.6, Annexure-8-
Clause 5.3 and Clause 9.1 of the BTA, makes it apparent that all assets
and properties used by VMPL as part of its business were agreed to be
transferred by VMPL in favour of SPCPL which includes Plant No.2.
(d)
That post execution of BTA, all employees and assets of VMPL
including Plant No.2, stood transferred in favour of the Appellant . As
such post the BTA, SPCPL stood possessed of Plant No.2 and its
employees started operating Plant No.2.
(e) That it is clear from the terms relating to transfer of Licenses
(Clauses 1.1.4 (vii) read with Annexure-1 Part L (Appeal Page 178) that
licenses inter alia in respect of Plant No.2 were to be transferred to
SPCPL.
(f) That Respondent Nos. 1 and 2 have failed to make any submissions
with regard to the need for the employees and equipment in respect of
Plant No. 2 being transferred to the Appellant under the BTA and
purportedly leased back/seconded under the BTA. The employees were
KPPNair 47 coappl-10/2015
obviously transferred to SPCPL, since Plant No. 2 was to come to SPCPL.
(g) That till August/September, 2013, VMPL had no knowledge of the
terms of the Job Work Agreement, the Secondment Agreement and the
Equipment Lease Agreement. This is in consonance with SPCPL's
submission that the Agreements were not acted upon and that post the
BTA the Appellant continues to be in possession of Plant No.2.
(h) That VMPL or RKM has not identified a single individual who in
fact exercised control or possession over Plant No.2 or supervised any of
the seconded staff of Plant No.2.
(i) That VMPL did not make any demand for job-work charges and the
entries sought to be relied upon by VMPL in respect of conversion
charges are merely book entries reflected in the profit and loss statement
and do not show any receipt of payment of the said charges.
8. As regards the impugned Order it is submitted on behalf of SPCPL
as follows:
(i) That the impugned Order violates natural justice and that failure of
natural justice cannot be cured at the appellate stage as held in L.K. Ratna
KPPNair 48 coappl-10/2015
vs. ICAI1 .
(ii) That the impugned Order inasmuch as it provides for police
assistance, seeks to pass directions in the nature of execution without the
CLB having any express execution powers to do so, and thus the same is
beyond the jurisdiction and control of the provisions of Sections 402, 403,
634 and 634A of the Companies Act, 1956.
(iii)
That the effect of the impugned Order is to set aside the
Agreement (BTA and Supplemental BTA) under which SPCPL claims
possession.
(iv) The impugned Order ought not to have been passed without
SPCPL being heard by an appropriate forum.
(v) The CLB ought to have deferred the hearing of the Company
Application since the Arbitration Petition filed by SPCPL under Section 9
of the Arbitration and Conciliation Act, 1996 was pending before this
Court.
(vi) That as held in Superintendent and Remembrance of Legal Affairs ,
West Bengal vs. Anil Kumar Bhunja & Ors. 2, it is trite law that
AIR 1987 SC 71
(1979) 4 SCC 274
KPPNair 49 coappl-10/2015
determination of whether a person is in possession of a property is a mixed
question of fact and law and involves determination of control over the
property.
(vii) That the above Appeal therefore deserves to be allowed.
9. Mr. Chinoy, Learned Senior Advocate appearing for VMPL/RKM
has after referring to the sequence of facts/events set out in Paragraph 5
hereinabove, submitted as follows:
9.1 That the present Appeal is nothing but one more ploy of Rakesh who
admittedly controls SPCPL to deprive VMPL and his father RKM who
holds 99.99 per cent of the shareholding of VMPL, to inter alia take
possession of the assets of VMPL including Plant No. 2 from the ex-
Directors Vyas and Chaudhari, having been unsuccessful in stalling the
same right upto the Hon'ble Supreme Court.
9.2 The present Appeal is filed by SPCPL at the instance of Rakesh and is
a part of Rakesh's mala fide (and judicially stigmatized attempt) to
somehow wrongfully continue to exercise control over the assets and
properties of VMPL and the same clearly constitutes an abuse of the
KPPNair 50 coappl-10/2015
process of the Court.
9.3 That under the BTA dated 30 th December, 2010, while VMPL's
Plant No. 1 is listed and included in the definition of "Business Assets" in
Clause 1.1.4, VMPL's Plant No. 2 is not included. Therefore, VMPL's
Plant No. 2 is not amongst the business assets required to be transferred by
VMPL to SPCPL. Moreover, the BTA specifically deals with Plant No. 2
in Clause 1.1.13(d) and requires VMPL to carry out "toll manufacturing"
(job work) thereat and supply the products to SPCPL. Such specific
provision made in the BTA for Plant No. 2 necessarily excludes any
contrary inference/submission on the basis of the General Clauses of the
BTA.
9.4 That therefore Clause 6.2.2 (f) and 6.7 of the BTA which are relied
on by SPCPL are not applicable to VMPL's Plant No.2. The said two
Clauses only refer to VMPL's obligation to execute further documents if
required to effectively transfer the "Business Assets" which term is
defined in Clause 1.1.4., and which does not include VMPL's Plant No. 2.
9.5 That therefore Clauses 2.1, 5 and 9 and Annexure-8 of the BTA
KPPNair 51 coappl-10/2015
which are relied on by SPCPL also have no relevance. They are general
provisions regarding transfer of the business and do not alter the above
position or in any way detract from the specific provision made in Clause
1.1.13 (d) regarding Plant No.2.
9.6 That under the BTA, whilst VMPL is to carry on toll
manufacturing/job-work at its Plant No.2 and supply such products to
SPCPL, its plant and machinery as also all its employees stood transferred
to SPCPL.
9.7 That thereafter to implement the above Toll Manufacturing/job
work arrangement, (a) the Job Work Agreement was executed which
recorded that VMPL as a job handler agreed to manufacture and supply
certain stipulated products to SPCPL, against payment of stipulated
amounts as conversion charges. (b) The Staff Secondment Agreement was
executed under which the employees who had stood trnsferred to SPCPL
under the BTA, were made available/deputed back by SPCPL to VMPL for
operating VMPL's Plant No. 2 against VMPL paying a Secondment Fee to
KPPNair 52 coappl-10/2015
SPCPL. (c) The Equipment Lease Agreement was executed whereunder
the plant and machinery /equipment of Plant No. 2 which had stood
transferred to SPCPL under the BTA, was leased back by SPCPL to VMPL
against VMPL paying lease rental for the same.
9.8 That RKM was aware about these three Agreements which were to
be executed between VMPL and SPCPL. However, copies of the same
were made available to VMPL by the hostile ex-Directors of VMPL in the
course of the Company Appeal proceedings in this Court in 2013. The said
Agreements are in accordance with the BTA which requires VMPL to
carry out toll manufacturing at its Plant No. 2 and supply the
manufactured products to SPCPL. However, the commercial/payment
terms under the three agreements have been skewed in favour of SPCPL by
the said hostile ex-Directors acting at the instance of Rakesh, with the
result that VMPL has made substantial losses while carrying out such job
work inasmuch as the lease rentals and the staff secondment charges
required to be paid by VMPL to SPCPL are higher than the conversion
charges received by VMPL from SPCPL.
KPPNair 53 coappl-10/2015
9.9 That it was under the said Secondment Agreement that SPCPL
employees were deputed/made available to VMPL for operating/manning
its Plant No.2. However, clauses 2.1 to 2.5 of the Secondment Agreement
make it clear that Plant No. 2 is in the possession and control of VMPL and
that Plant No. 2 is being operated by VMPL and that the staff
deputed/seconded from SPCPL to VMPL are operating Plant No. 2 under
the supervision and control of VMPL.
9.10 That the job manufacturing activities at Plant No. 2 were and are
being carried on by VMPL and not by SPCPL. The said activities were
being carried on and the deputed employees were operating Plant No. 2
under the supervision of Vyas and Chaudhari, the ex-Directors of VMPL
till February, 2015. Accordingly the fact that SPCPL's employees, who
were seconded/deputed to VMPL under the Secondment Agreement, are
operating VMPL's Plant No.2, or that SPCPL has been paying the
wages/statutory dues of such seconded employees, or that such
deputed/seconded employees wear the uniform of SPCPL, or the affidavits
filed by such deputed employees, does not and cannot mean that SPCPL is
KPPNair 54 coappl-10/2015
either in possession or control of VMPL's Plant No. 2, as falsely alleged by
SPCPL.
9.11 That a completely false and malafide submission is belatedly made
by SPCPL, in the List of Dates and written submissions that the said three
Agreements i.e. Job Work Agreement, Secondment Agreement and
Equipment Lease Agreement, have not been acted upon. The said three
Agreements have been referred to and relied upon by SPCPL itself in the
present Company Appeal (and have been annexed as Exhibits-E, F and G)
as Agreements entered into to "take forward" the job work arrangement
under the BTA and have also been referred to and relied upon in SPCPL's
Affidavit-in-Rejoinder. However, inasmuch as the terms of the said three
Agreements clearly negate/are destructive of SPCPL's false case/allegation
of being in possession of VMPL's Plant No. 2 by virtue of its
deputed/seconded employees operating VMPL's Plant No.2, in the List of
Dates tendered in Court by SPCPL it was sought to be falsely contended
for the first time that, " In Appellants submission these Agreements have not
been acted upon..." . The same false and mala fide allegation/contention has
KPPNair 55 coappl-10/2015
also been repeated in the written submissions filed by the Appellants on 21 st
April, 2015. Not only is this comment/allegation of SPCPL, in the List of
Dates and written submissions, contrary to the case/pleadings of SPCPL,
but is indicative of the fact that SPCPL is making this baseless/false
submission as it is aware that its false case of being in possession of Plant
No.2, is negated/contradicted by the bare terms of the said job work
Agreement and the said Secondment Agreement. The said allegation that
the Agreements were not acted upon is also belied by the fact that VMPL's
ledger folio in SPCPL's books of account (produced and handed over in
Court during the hearing), has regular debits for payment of "Equipment
Lease Charges" and "Secondment Charges" by VMPL to SPCPL and
payment of conversion charges - as per the Agreement by SPCPL to
VMPL.
9.12 That significantly the presence of its employees in VMPL's Plant No.
2 and the fact that they are operating the same, is the only basis on which
SPCPL alleges that it is in possession of the said Plant No. 2 from March,
2011. As stated above, that baseless/false case is fully answered by the BTA
and the staff Secondment Agreement.
KPPNair 56 coappl-10/2015
9.13 That there can be no better evidence to belie the case of SPCPL
being in possession of Plant No. 2 since 30 th December, 2010/18th March,
2011, than the Affidavits of Jagtap and Chaudhari dated 14 th March, 2013
and 28th February, 2012 respectively, filed on behalf of VMPL in C.A. No.
2023 of 2012 in Writ Petition No. 4358 of 2001, wherein they have
categorically denied that SPCPL is in occupation or possession of the suit
property (Plant No.2) and asserting that VMPL has not created any third
party interest over Plant No.2 or parted with possession of Plant No.2, and
also the List of Assets dated 4 th September, 2014, submitted by Rakesh in
the UK Court wherein he has affirmed on oath that VMPL's Plant No.2,
Peeco Plant and staff quarters are in possession of VMPL.
9.14 That the CLB's order dated 2 nd February, 2015, falls squarely
within its powers/jurisdiction under Section 403 of the Act as it in effect
directs the removed/ex-Directors of VMPL to hand over charge of the
Company's properties and assets to its newly appointed Directors/present
management. The question therefore of the impugned Order being in
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violation of natural justice, or the said Order having dispossessed SPCPL
does not arise. By no means the impugned Order can be said to be passed
beyond the jurisdiction and control of any provisions of the Companies
Act, 1956. The case-law relied upon by SPCPL also lends no assistance to
them.
9.15 That the above Appeal therefore deserves to be dismissed with
compensatory costs.
10. Before dealing with the above contention of SPCPL that pursuant
to the BTA and Supplemental BTA, SPCPL is in control and possession
of Plant No. 2 of VMPL since December 2010/18 th March, 2011, I would
like to make it clear that in a case where a written contract is available
before the Court and if the terms of the contract are cogent and clear, the
Court is not required to read into /examine the intention of the parties
ouitside the contract. Though it is possible that the parties may have
intended to ultimately transfer Plant No.2 in favour of SPCPL, the BTA
and Supplemental BTA make it clear that the business of VMPL as
defined under clause 1.1.3 of the BTA is transferred in favour of SPCPL,
but all the assets of VMPL are not transferred to VMPL. Though VMPL's
KPPNair 58 coappl-10/2015
Plant No. 1 is included in the "Business Assets" required to be transferred
to SPCPL as per clause 1.1.4 (a) and under Clause 1-1.13(b) is required to
be leased to SPCPL, VMPL's Plant No. 2 which is referred to/described
in Clause 1.1.42 is not included in the "Business Assets" required to be
transferred to SPCPL (Clause 1.1.4). In fact, though Clause 1.1.4 (viii) of
the BTA included in "Business Assets" all the transferable licenses
including licenses pertaining to Plant No. 2 , the same was consciously
deleted in the Supplemental BTA. Moreover, the BTA specifically deals
with VMPL's Plant No. 2 in Clause 1.1.13 (d) and specifically provides
that VMPL shall carry out Toll Manufacturing (job work) at its Plant No.
2 and supply the products to SPCPL.
11. As correctly pointed out by Mr. Chinoy, such specific
provisions made in the BTA for Plant No. 2 necessarily exclude any
contrary inference/submission on the basis of the General Clauses of the
BTA. In any event, Clause 6.2.2 (f) and 6.7 of the BTA which are relied
on by SPCPL are not applicable to VMPL's Plant No.2. The said two
clauses only refer to VMPL's obligation to execute further documents, if
required, to effectively transfer the "Business Assets", which term is
KPPNair 59 coappl-10/2015
defined in Clause 1.1.4 and does not include VMPL's Plant No. 2.
Instead, as stated earlier, it is specifically provided in Clause 1.1.13 (d) that
VMPL is to carry on its job work at Plant No. 2 and supply the products
to SPCPL. Also Clauses 2.1, 5, 9 and Annexure-8 of the BTA and the
other provisions which are relied on by SPCPL are general provisions
regarding transfer of the business and do not alter the above position or in
any way detract from the specific provision made in Clause 1.1.13 (d)
regarding Plant No.2.
12. Therefore, in my view, SPCPL has been unable to show a single
provision from the BTA or the Supplemental BTA whereunder Plant No.
2 is either transferred to SPCPL, or the control and possession of Plant
No. 2 is handed over to SPCPL.
13. SPCPL's allegation/case that it has been in possession of VMPL's
Plant No. 2 since December 2010/March 2011 is further belied by the
following:
13.1 Under the BTA whilst VMPL is to carry on toll manufacturing/job
work at its Plant No.2 and supply such products to SPCPL (Clause 1.1.13
(d) of the BTA), its plant and machinery as also its employees stood
KPPNair 60 coappl-10/2015
transferred to SPCPL (Clause 1.1.4 (iv) & Cl. 6.2.3 of the BTA).
Therefore, in order to implement the above Toll Manufacturing/job work
arrangement, three Agreements were executed by VMPL with SPCPL viz.
(a) the Job Work Agreement dated 18 th March, 2011, wherein it is
recorded that VMPL as a job handler agreed to manufacture and supply
certain stipulated products to SPCPL, against payment of the stipulated
amounts as conversion charges; (b) The Staff Secondment Agreement
dated 18th March, 2011 which was executed under which the employees
who had stood transferred to SPCPL under the BTA, were made
available/deputed back by SPCPL to VMPL for operating VMPL's Plant
No. 2 against VMPL paying a Secondment fee to SPCPL; and (c) the
Equipment Lease Agreement dated 18th March, 2011 whereunder the
plant and machinery /equipment of Plant No. 2 which had stood
transferred to SPCPL under the BTA, were leased back by SPCPL to
VMPL against VMPL paying lease rental for the same (hereinafter
referred to as the "three Agreements"). All the three Agreements which
were executed much after the execution of the BTA and simultaneously
with the Supplemental BTA are referred to and relied upon by SPCPL
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itself in the above Appeal. The relevant clauses of the three Agreements
which show VMPL's control and possession of Plant No. 2 are
reproduced hereunder:
(i) Secondment Agreement dated 18th March, 2011 between VMPL
and SPCPL:
"2.1 "VMPL shall exercise day to day supervision and control over
the deputed employees..."
2.2 " All the deputed employees shall be deputed solely at VMPL's
premises located at Plot No. 153, TPS 1. The deputed employees shall
during their deputation perform the tasks allotted to them by the
representatives of VMPL and shall act under the supervision,
direction, instructions and guidance of VMPL" .
2.3 " VMPL shall be liable for the acts and omissions of the deputed
employees...."
2.4 "The deputed Employees shall follow the working hours specified
by VMPL."
2.5 " VMPL shall ensure that the deputed employees are adequately
instructed with respect to the tasks to be performed by them and are
provided adequate supervision and guidance so as to enable them to
perform the tasks assigned to them"
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(ii) Job Work Agreement dated 18th March, 2011 executed
between VMPL and SPCPL:
"..... .... .... .... ........
AND WHEREAS VMPL HAS AGREED TO CARRY OUT
AFORESAID JOB HANDLING FOR SPCPL AS
ENUMERATED BELOW:
JOB HANDLING
ig ACTIVITIES BY VMPL AT ITS
VILLAGE NAUPADA TAL. & DIST. THANE".
(iii) Equipment Lease Agreement dated 18th March, 2011
executed between VMPL and SPCPL:
"...Now therefore, in consideration of the reciprocal promises
and obligations a d mutual covenant between the parties recorded
hereinafter, the parties hereto, are entering into this Deed which
witnesses as follows:
The lessor hereby grants lease and the lessee takes on lease
(lease) with effective control and possession, the
equipment for the fixed period with effect from the
commencement date subject to the terms and conditions,
covenants and agreements herein contained and part of
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the lessee to be observed and performed provided that all
of the equipment shall be located solely at the lessee's
premises located at Plot No. 153, TPS No.1, Village
Naupada, Taluka & Dist. Thane
Admittedly Plant No. 2 is located at Plot No. 153, TPS No. 1, Village
Naupada, Taluka and District Thane. The relevant Clauses from the
Secondment Agreement set out hereinabove make it clear that Plant No. 2
is in possession and control of VMPL; that Plant No. 2 is being operated by
VMPL and that the staff deputed/seconded from SPCPL to VMPL are
operating Plant No.2 under the supervision and control of VMPL. In the
Job Work Agreement dated 18 th March, 2011 it is inter alia clearly agreed
between VMPL and SPCPL that job handling activities will be carried out
by VMPL AT ITS PREMISES i.e. at Plant No.2 thereby admitting that
Plant No. 2 is and would be in possession of VMPL and not SPCPL. Again
it is mentioned in the Equipment Lease Agreement that the equipment
leased by SPCPL shall be in the premises of VMPL, i.e. Plant No. 2, which
again shows that SPCPL had agreed that Plant No.2 would remain in
possession of VMPL. It is therefore clear that the activities under the Job
KPPNair 64 coappl-10/2015
Work Agreement were being carried on under the supervision of the ex-
Directors Vyas and Chaudhari by the deputed employees at Plant No.2.
In the circumstances, as correctly submitted by Mr. Chinoy, the fact that
SPCPL's employees who were seconded/deputed to VMPL under the
Secondment Agreement are operating VMPL's Plant No.2 or that SPCPL
has been paying the wages/statutory dues of such seconded employees or
that such deputed/seconded employees wear the uniform of SPCPL or the
affidavits filed by such deputed employees, does not and cannot mean that
SPCPL is either in possession or in control of VMPL
14. The allegation made in the Appeal of SPCPL that the job work
arrangement was to follow till such time VMPL would effectively execute
conveyance of the land pertaining to Plant No. 2 in its favour from
Harbanslal Malhotra & Sons Ltd., or that the job work agreement with
respect to Plant No. 2 was entirely an ad-interim arrangement for logistical
reasons, is nowhere to be found in the BTA or in the Supplemental
Agreement pursuant to which SPCPL claims that it is in possession and
KPPNair 65 coappl-10/2015
control of Plant No. 2 of VMPL.
15. Again, as stated earlier, SPCPL has in its Appeal relied on the
Job Work Agreement, Secondment Agreement and the Equipment Lease
Agreement, all dated 18th March, 2011 and has also annexed copies of the
same as Exhibits 'E', 'F' and 'G' to the Appeal. In the said Appeal, SPCPL
has nowhere stated that the said Agreements were not to be implemented
or were not infact implemented. However, at the time of advancing
arguments, SPCPL realised that the incorrect case advanced by it viz. that
Plant No. 2 of VMPL is transferred to SPCPL and/or is in control and
possession of SPCPL since December 2010/18 th March, 2011, was
completely negated/contradicted by the BTA and more particularly the
said three Agreements. SPCPL therefore, for the first time in the list of
dates tendered in Court and in its written submissions, falsely alleged that
the said three Agreements were not acted upon. Again, the allegation that
the Agreements were not acted upon is also belied by the fact that VMPL's
ledger folio in SPCPL's books of account (produced and handed over in
Court during the hearing), has regular debits for payment of "Equipment
Lease Charges" and "Secondment Charges" by VMPL to SPCPL and
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payment of conversion charges - as per Agreement by SPCPL to VMPL.
SPCPL has tried to incorrectly draw support to their contention that the
three Agreements were not acted upon, from the submission of RKM that
he was handed over copies of the three Agreements only in the year 2013.
However, Mr. Chinoy has correctly explained that RKM was always aware
that the three Agreements were required to be executed between SPCPL
and VMPL for the purpose of the job work agreement, as provided in the
BTA. However, since Vyas and Chaudhari at the instance of Rakesh, who
admittedly controlled SPCPL, turned hostile and chose to exclude RKM,
who holds 99.99% shares in the five Indian Companies including VMPL,
they did not provide RKM with copies of the three Agreements, and the
same were provided to him only in the course of the Company Appeal
proceedings in this Court in 2013. This fact certainly cannot be construed
to mean that the said three Agreements were not acted upon by the parties.
16. That the case of SPCPL that all the assets of VMPL were transferred
to SPCPL pursuant to the BTA and Supplemental BTA is further belied by
the fact that on 9th February, 2012 and 7th November, 2012, CLB passed
KPPNair 67 coappl-10/2015
Orders restraining the Respondents in Company Petition No. 13 of 2012
filed by RKM including Rakesh, Vyas and Chaudhari from disposing off,
transferring, encumbering or creating any charge on the assets of VMPL
including the immovable properties of VMPL and directed the parties to
maintain status quo in respect of the assets/immovable properties of
VMPL. The said Orders were also continued by this Court whilst
dismissing the Appeals filed by Rakesh by its Order dated 20 th August,
2014. However, at no point of time Vyas and Chaudhari and/or Rakesh
have impugned the said Order and/or have submitted before the CLB or
before this Court or before the Hon'ble Supreme Court that since all the
assets of VMPL have allegedly been transferred to SPCPL or that SPCPL
is in possession and control of the assets including Plant No. 2, no such
orders could have been passed by the CLB or continued by this Court.
17. Again, after the Appeals filed by Rakesh were dismissed by this
Court by its order dated 12 th /20th August, 2014 and the removal of Vyas
and Chaudhari was upheld and Rakesh failed to obtain a stay of the said
order in the SLP filed by him, the Advocates for RKM repeatedly wrote
KPPNair 68 coappl-10/2015
letters to the Advocates for Rakesh, Vyas and Chaudhari, calling upon Vyas
and Chaudhari to hand over the records and immovable properties of
VMPL to the newly appointed Directors. Neither the said Ex-directors
nor Rakesh at any time took a stand that all the immovable properties of
VMPL are transferred to SPCPL or are in control and possession of SPCPL
as is now alleged.
18. The most glaring facts which belie the allegation of SPCPL that it is
in control and possession of Plant No. 2, are, at the cost of repetition, once
again set out hereunder as follows:
18.1 Mr. Sanjay Jagtap, Head Legal and Secretariat of SPCPL who has
filed his Affidavit-in-Support in the above Appeal claiming control and
possession of Plant No. 2 by SPCPL since December, 2010/March, 2011
has filed an Affidavit dated 14th March, 2013, in Civil Application No. 2023
of 2012 in Writ Petition No. 4358 of 2001 in this Court wherein he has
stated that, "I deny that SPCPL has been put in possession of the suit
property (i.e. Plant No. 2) or that they are now carrying on the business
KPPNair 69 coappl-10/2015
from the suit property" (Para 20 of the Affidavit) and "I deny that SPCPL
are in occupation and possession of the suit property...." (para 21 of the
Affidavit).
18.2 Similarly, Mr. Subhash Chaudhari, General Manager - Corporate
Legal of SPCPL, Respondent No. 9 herein, who has filed Affidavit/s in
the present proceedings and had orally contended before the CLB on 2 nd
February, 2015, when the impugned Order was passed that SPCPL was
allegedly in possession of VMPL's Plant No. 2 had filed an Affidavit on
28th February, 2012, as the authorised signatory of VMPL in Civil
Application No. 2023 of 2012 in Writ Petition No. 4358 of 2001
categorically stating that, " I deny that SPCPL are in occupation and
possession of the suit property" (i.e. Plant No. 2) [Para 10 of the Affidavit]
and "I deny that the Petitioners (VMPL) have created third party interest
over suit property or that they have parted with possession of the suit
property to SPCPL....." [Para 12 of the Affidavit].
18.3 As stated earlier, when the above contradictions were pointed out,
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SPCPL unabashedly submitted before this Court that the earlier
statements made by Jagtap and Chaudhari were made on behalf of VMPL
and not on behalf of SPCPL and reflected VMPL's possession thereby
admitting that false statements were made on oath by Jagtap and
Chaudhari as it suited their convenience and depending on the
party/Company on whose behalf such statements are made. It is also
sought to be contended by SPCPL that the said Affidavits were filed at the
instance of the Directors/Promoters of the Company. This surely cannot
be accepted since again, as stated earlier, before the said Affidavits were
filed, RKM had already filed Petition No. 13 of 2012 before the CLB under
Sections 397, 298 and 402 of the Act setting out how at the instance of
Rakesh, the said Vyas and Chaudhari were committing acts of oppression
and mismanagement qua RKM/VMPL.
19. SPCPL, in support of its contention that pursuant to the BTA and
Supplemental BTA, SPCPL is in possession and control of all the assets of
VMPL including Plant No. 2, has laid emphasis on the fact that in
Company Petition No. 13 of 2012, it is averred by RKM that the Company
KPPNair 71 coappl-10/2015
is not carrying on any business as on date and that by a BTA, the business
together with all its assets and liabilities were transferred to SPCPL,
thereby meaning that even Plant No. 2 was in control and possession of
SPCPL. Apart from the contention of the SPCPL that they were in
control/possession of Plant No.2 since 30 th December 2010/18th March,
2011 being belied by the aforestated facts, as correctly submitted by Mr.
Chinoy, the Learned Senior Advocate appearing for VMPL, it is obvious
that what RKM meant was that VMPL was not carrying on its own
business as on date but was carrying on the job work of SPCPL as agreed
under the Job Work Agreement. Again it cannot be held that RKM meant
that each and every asset along with the liabilities of VMPL was under the
BTA transferred to SPCPL in view of the following averments/prayers
contained in the Company Petition No. 13 of 2012 itself:
(i) "...... The Company, in addition to the investments held as
stated above, is the owner of several immovable properties, which
are more particularly described in Annexure "2" hereto annexed"
(Para 15 page 175 of Compilation Volume 1). It is pertinent to
note that Annexure "2" also includes Plant 2 of VMPL and
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therefore as on 2nd February 2012 it is the case of RKM in the
Petition that the Company (VMPL) is inter alia the owner of
Plant No.2.
(ii) "....... The Petitioner states that by issuing the said corporate
guarantee, Respondent Nos. 2 and 3 have not only breached the
fiduciary responsibilities to the Company but have also jeopardized the
assets of the Company" ( Para 21 page 178 of Compilation
Volume 1);
(iii) "The Petitioner apprehends that under the influence of Mr.
Rakesh Malhotra, Respondent No.6 (Rakesh), Respondent Nos. 2
and 3 (Vyas and Chaudhari) are likely to engage in further activities
of mismanagement that may permanently impair the assets of the
Company and result in irreparable loss damage and injury to the
Company and its shareholders" (Para 26 pages 179-180 of
Compilation Volume 1);
(iii) Interim reliefs: (g) and (h):
"(g) Respondent Nos. 2 and 3 (Vyas and Chaudhari) be restrained
by a temporary order and injunction of this Hon'ble Board from:
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(i) ... .... ....
(ii) selling, transferring, encumbering or charging or otherwise
disposing of or alienating any of the assets of the Company including
the immovable properties more particularly described in
Annexure 2 hereto:
(iii) .... ...... ....
(h)
Respondent Nos.2, 3 and 5 to 8 be directed to maintain status
quo with regard to the properties and assets of the Company including
but not limited to bank accounts, mutual fund holdings and
immovable properties."
Therefore the statement made in Company Petition No. 13 of 2012 that
the business together with all its assets and liabilities was transferred to
SPCPL will have to be read to mean that by a BTA all the assets and
liabilities set out therein were transferred to SPCPL.
20. I am therefore of the view that SPCPL has not even made out a
prima facie case of VMPL's Plant No. 2 having been transferred to SPCPL,
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or SPCPL being in control and possession of Plant No.2. As submitted by
RKM, upon execution of the BTA, the Staff of VMPL was transferred to
SPCPL. Vyas and Chaudhari who were earlier the employees of VMPL
now became employees/consultants of SPCPL. However, since Vyas and
Chaudhari as employees of VMPL were appointed as Directors of VMPL
since the years 1993 and 2001 respectively, RKM reposed trust in them
and
allowed them to continue as Directors of VMPL. Rakesh who
admittedly controls SPCPL started prevailing upon Vyas and Chaudhari
and through them was dealing with the finance and assets of VMPL as per
his wishes. In fact it is for this purpose that RKM filed Company Petition
No. 13 of 2012 before the CLB under Sections 397, 398 and 402 of the
Companies Act, inter alia, against Vyas, Chaudhari and Rakesh, seeking
removal of Vyas and Chaudhari and appointment of new Directors in their
place and protection of the assets of VMPL. CLB allowed RKM to replace
Vyas and Chaudhari from acting as Directors of VMPL. Rakesh impugned
the orders right upto the Hon'ble Supreme Court of India but failed to
prevent RKM from removing Vyas and Chaudhari as Directors of VMPL.
Since Vyas and Chaudhari have during the interregnum throughout denied
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access to RKM qua the working and affairs of VMPL and have acted as per
the directions of Rakesh who admittedly controlled SPCPL and allowed
Rakesh to deal with the finances and assets of VMPL as per his wishes,
Rakesh or SPCPL now cannot be allowed to take advantage of the same
and contend that SPCPL was in possession and control of the assets of
VMPL, since RKM is unable to show which Officer of VMPL supervised
the working of Plant No. 2 or that VMPL never made a demand for
conversion charges or that there were only book entries made qua the
conversion charges or that some property tax bills were paid by SPCPL,
etc. All these happenings were only because Rakesh, who controlled
SPCPL, also controlled Vyas and Chaudhari, who were
employees/consultants of SPCPL and also the ex-Directors of VMPL and
through them acted completely against the interest of VMPL and RKM. If
Rakesh/SPCPL is allowed to take advantage of their own wrongs, it would
amount to Rakesh/SPCPL being paid a premium on their dishonesty.
21. SPCPL has in its desperate attempt to point out that it was allegedly
in possession and control of Plant No. 2 tried to pull out a sentence here
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and there from the pleadings filed by RKM in his several proceedings
claiming that RKM has admitted the possession and control of SPCPL in
respect of Plant No.2. I have gone through all the pleadings in their entirety
and am satisfied that they belie the allegation that RKM has admitted the
possession and control of SPCPL. On a reading of the pleadings in entirety
(and not a sentence here and there) it is clear that RKM has repeatedly
stated in his pleadings that Vyas and Chaudhari were the two Directors of
VMPL on the date of execution of the BTA of December, 2010 and were
the employees/consultants of VMPL. Upon execution of the BTA, the
staff of VMPL was transferred to SPCPL, Vyas and Chaudhari became
employees/consultants of SPCPL. RKM reposed trust in them and
allowed them to continue as Directors of VMPL. Rakesh who admittedly
controls SPCPL started prevailing upon Vyas and Chaudhari and through
them was dealing with the finance and assets of VMPL as per his wishes.
In fact it is for this purpose that RKM filed Company Petition No. 13 of
2012 before the CLB under Sections 397, 398 and 402 of the Companies
Act, inter alia, against Vyas, Chaudhari and Rakesh, seeking removal of
Vyas and Chaudhari and appointment of new Directors in their place and
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protection of the assets of the Company.
22. Having come to the conclusion that SPCPL has not even made out a
prima facie case in support of its contention that Plant No. 2 has been
transferred to SPCPL or SPCPL has been in control and possession of
Plant No. 2 pursuant to the BTA dated 30 th December, 2010 and the
Supplemental BTA dated 18th March, 2011, the issue which now needs to
be considered is whether, as submitted on behalf of RKM, the present
Appeal filed by SPCPL is a bona fide action on the part of SPCPL or is an
act of SPCPL at the instance of Rakesh who admittedly controls SPCPL.
As stated earlier, RKM had decided to restructure and hand over control
of Supermax Group of Companies to his eldest son Rakesh. As part of that
restructuring, SPCPL was registered as a new Company controlled by
Rakesh. On 30th December, 2010, a BTA was executed between VMPL and
SPCPL, the relevant terms of which are set out/discussed hereinabove.
Since the persons who were appointed as Directors of VMPL were always
the employees/consultants of VMPL and not the family members of RKM,
pursuant to the BTA all the employees including the ex- Directors of
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VMPL (Vyas and Chaudhari) were transferred as employees/consultants
of SPCPL. RKM at this stage could have removed Vyas and Chaudhari
and appointed new Directors. However, since mortal beings are unable to
foresee the future, and RKM being no exception, RKM not only trusted
Rakesh, but Vyas and Chaudhari as well, and continued Vyas and
Chaudhari as Directors of VMPL. Rakesh misused the trust placed on
him by RKM and used his influence over Vyas and Chaudhari, the
Directors of VMPL (who pursuant to the BTA were now
employees/Consultants of SPCPL), to exclude RKM who held 99.99% of
the shares of the five Companies. Through these pliant Directors, Rakesh
also sought to utilise the funds, assets and properties of the 5 Companies
including VMPL for the benefit of SPCPL/himself. Therefore in 2012,
RKM was constrained to file Petitions in the CLB under Sections 397/398
of the Companies Act for removal of the said hostile Directors Vyas and
Chaudhari. Rakesh, at whose instance the said Directors were acting, was
joined as a party Respondent to the Petition. Ordinarily, employees like
Vyas and Chaudhari would have straightaway submitted to the orders of
the Court but Rakesh, who admittedly controlled SPCPL, wanted his way
KPPNair 79 coappl-10/2015
out in VMPL. He therefore left no stone unturned in opposing their
removal sought by RKM.
22.1 From 2012 till 2014, Rakesh prevented/delayed the hearing of the
CLB Petition/removal of the said hostile Directors by filing diverse
proceedings and through the said hostile Directors continued to use and
exercise control of the funds and assets of VMPL. In 2012, Rakesh filed a
Suit in the UK Court and obtained a stay from proceeding with the CLB
Petitions. After the UK Suit was dismissed, Rakesh filed an application in
the CLB Petition for reference of the disputes to an Arbitrator under
Section 45 of the Arbitration and Conciliation Act, 1995. After that
application was dismissed by the CLB and orders were made by the CLB
in January, 2013, permitting the removal of the hostile Directors, Rakesh
filed an Appeal (L) No. 10 of 2013 in this Court and secured orders of
interim stay of their removal. Vide its Judgment dated 12 th /20th August,
2014, this Court dismissed Rakesh's Appeal, and while rejecting his
application for continuation of stay of removal of the Directors, severely
criticized /stigmatised Rakesh's attempt to usurp and control the funds and
KPPNair 80 coappl-10/2015
assets of VMPL through Vyas and Chaudhari. Rakesh preferred SLP
against the said Judgment and Order dated 20 th August, 2014. In the SLP
grounds, Rakesh categorically affirmed that he controlled SPCPL and
stated that he was apprehensive that if the stay order was vacated and
RKM was allowed to take control of the 5 Companies including VMPL, he
would jeopardize arrangements between them and SPCPL. By its Order
dated 10th September, 2014, the Hon'ble Supreme Court granted Rakesh
Leave to Appeal but specifically declined stay of the order. Thereafter from
August 2014 to December, 2014, the said ex-Directors despite the
Judgment and Order refused to hand over charge of the funds, assets and
properties to VMPL's new management on diverse and untenable grounds.
This again was done obviously at the instance of Rakesh.
22.2 In the circumstances, VMPL filed Company Application No. 296 of
2014 in the CLB Petition to restrain the ex- Directors from holding
themselves out as Directors of VMPL and to direct them to hand over
charge of the properties and records of VMPL to the newly appointed
Directors. In the said application, Rakesh and the ex-Directors of VMPL
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were represented by the same Advocates. By Orders dated 20 th November,
2014 and 5th January, 2015, made in Company Application No. 296 of
2014, CLB had restrained the ex- Directors of VMPL i.e. Respondents
Nos. 8 and 9 therein from acting and holding themselves out as Directors
of VMPL and had recorded a finding that the ex-Directors were wilfully
disobeying the orders and not handing over charge. Rakesh and the ex-
Directors now realised that it would no longer be possible for the ex-
Directors to hold on to the assets of VMPL. Rakesh therefore caused
SPCPL to file an Arbitration Petition under Section 9 of the Arbitration
and Conciliation Act, 1996 against VMPL restraining VMPL from
communicating with the statutory authorities regarding Plant No.2 and
against discontinuation of water supply from the Peeco Plant to Plant Nos.
1 and 2. VMPL has in its reply set out the aforesaid facts and pointed out
that at the instance of Rakesh the removed/hostile Directors had
wrongfully been retaining control of VMPL's Plant No.2; that under the
BTA, SPCPL has no right to control or manage Plant No.2, but
notwithstanding that, SPCPL had purported to file the Petition; that the
said Petition of SPCPL was an abuse of the process of law and was a mala
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fide attempt by Rakesh to wrongfully assert control over Plant No.2. As
correctly submitted by Mr. Chinoy, SPCPL in its written submissions have
incorrectly alleged that VMPL has in the said Affidavit admitted SPCPL's
possession of Plant No. 2. A perusal of the entire Affidavit clearly negates
the said allegation. No reliefs are granted to SPCPL till date in the said
petition.
22.3 On 2nd February, 2015, the ex-Directors for the first time
confirmed/accepted before the CLB that they had ceased to be Directors of
VMPL from November,2014. However, the said ex-Directors for the first
time orally alleged that SPCPL was in possession of the assets of VMPL
under the BTA of 2010. As submitted by VMPL, the said claim was
obviously at the instance of Rakesh and was an attempt by him to
somehow continue to retain control over the assets of VMPL, this time
through SPCPL. SPCPL filed the present Appeal on 3 rd February, 2015
alleging that it has nothing to do with the disputes between Rakesh and
RKM and was forced to approach the Court only in view of certain
instances of interference on the part of VMPL/RKM commencing from
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December, 2014. As set out in paragraph 4 hereinabove, SPCPL
repeatedly represented to this Court that it was not concerned with the
fights between RKM and Rakesh. In answer to the contention of
VMPL/RKM that Rakesh admittedly controls SPCPL, SPCPL took a
stand on oath that Rakesh is neither on the Board of Directors of SPCPL
nor is concerned with the day to day affairs of SPCPL. These false
representations on the part of SPCPL stood exposed when this Court
enquired from SPCPL whether SPCPL had financed Rakesh qua any of
the litigations initiated/defended by Rakesh against RKM before the CLB
or before this Court or before the Hon'ble Supreme Court and in the event
of SPCPL having financed Rakesh to pursue the litigation against his
father, whether the Board of Directors of SPCPL had passed any
Resolution approving the same. After seeking time from the Court on two
occasions, the Court was informed by the Counsel appearing for SPCPL
that the entire litigation initiated/defended by Rakesh i.e. since the year
2012 has been throughout financed by SPCPL and there is no Board
Resolution on record qua the litigation expenses having been borne by
SPCPL on behalf of Rakesh. Therefore the entire litigation expense of
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Company Petition No. 13 of 2012 incurred by Rakesh has been throughout
borne by SPCPL and is shown as the litigation expense of SPCPL. So much
for the assertion on oath by SPCPL that it is an independent entity which
has nothing to do with the disputes between Rakesh and RKM. I have
therefore no doubt that Rakesh after leaving no stone unturned in trying
to prevent the removal of Vyas and Chaudhari as Directors of VMPL and
having failed in his endeavour, realised that the assets of VMPL, viz. Plant
No. 2, will have to be handed over to the new Directors. He has therefore
put up SPCPL to file the above appeal making statements/submissions
which are false and incorrect to the knowledge of SPCPL. SPCPL, which
has admittedly financed the entire litigation pursued by Rakesh against his
father RKM, cannot be heard to say that since they were not parties to
Company Petition No. 13 of 2012 they were not aware that in the said
Petition, RKM had sought protection qua the assets and immovable
properties of VMPL and the same were protected by Orders dated 9 th
February, 2012 and 7th November, 2012 and were also continued by this
Court vide its Order dated 20th August, 2014. SPCPL also cannot claim to
be ignorant of the fact that Rakesh himself has in an Affidavit filed in the
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UK proceedings admitted that Plant No. 2 is in possession of VMPL. Being
conscious of these difficulties, SPCPL in its pleadings has repeatedly
stated that it was not concerned in any manner with the litigation between
Rakesh and RKM. However, this falsehood, as stated hereinabove, stood
exposed when in a query raised by the Court SPCPL was compelled to
speak the truth that in fact it is SPCPL who has inter alia financed the
entire litigation commencing with Company Petition No. 13 of 2012 filed
by RKM including Appeals/SLP filed by Rakesh arising from the orders
passed therein. The above Appeal, which is undoubtedly filed by SPCPL at
the instance of Rakesh, in my view, therefore, lacks bona fides and smacks
of mala fides.
23. As set out hereinabove, SPCPL has made several submissions qua
the impugned order. Since as held hereinabove, SPCPL has failed to even
prima facie establish that it is in possession of Plant No. 2 pursuant to the
BTA/Supplemental BTA since 30th December, 2010/18th March, 2011, no
question arises of the impugned Order dated 2 nd February, 2015 being in
violation of natural justice qua SPCPL or of the Order having dispossessed
KPPNair 86 coappl-10/2015
SPCPL. As correctly submitted by Mr. Chinoy, a mere bald allegation
made by the ex-Directors for the first time before the CLB on 2 nd February,
2015, or the allegation of possession subsequently made by SPCPL in the
present Appeal cannot affect the jurisdiction of the CLB to pass the Order
dated 2nd February, 2015 or require the CLB to join SPCPL as a party or
hear SPCPL or adjudicate upon such an oral allegation. On 2 nd February,
2015 the allegation that pursuant to the BTA dated 30 th December, 2010,
SPCPL was in possession of Plant No. 2 was orally made on behalf of Vyas
and Chaudhari. Significantly no such allegation was made by Rakesh who
admittedly controls SPCPL, who was a party Respondent before the CLB
and who was represented by the same Advocates. Again from the record
of the proceedings it was clear that though by an Order dated 9 th February,
2012, CLB had restrained the Respondents, which included Rakesh and
the ex-Directors, Vyas and Chaudhari from disposing off, encumbering the
assets of VMPL and the very same Order was continued by this Court
whilst dismissing the Appeals filed by Rakesh in August, 2014, at no stage
had Rakesh (who admittedly controlled SPCPL) and the ex-Directors Vyas
and Chaudhari submitted before the CLB or before this Court or before the
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Hon'ble Supreme Court that the said Order dated 9th February, 2012 ought
not to have been passed since allegedly all the assets including Plant No. 2
of VMPL are in possession and/or control of SPCPL from 30 th December,
2010/18th March, 2011. Even after Rakesh failed to obtain a stay from the
Hon'ble Supreme Court on removal of Vyas and Chaudhari as Directors of
SPCPL, Rakesh and the ex-Directors, as stated hereinabove, refused to
accept that Vyas and Chaudhari had ceased to be the Directors of VMPL
and that consequently they were required to hand over the assets of VMPL
to the new Directors. Extensive correspondence was thereupon
exchanged by and between the Advocates for RKM/ VMPL and the
Advocates for Rakesh/ex-Directors Vyas and Chaudhari. However, in
none of the letters it was contended on behalf of Rakesh, Vyas and
Chaudhari that all the assets of VMPL are transferred to SPCPL or are in
possession and control of SPCPL. Moreover, the oral allegation made
before the CLB was directly contrary to the statements made on oath, more
particularly the statement made by Rakesh himself before the UK Court
that amongst others, Plant No. 2 of VMPL is in possession and control of
VMPL. I therefore see no infirmity in the Order passed by the CLB dated
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2nd February, 2015 and in my view the same falls squarely within the
powers/jurisdiction under Section 403 of the Act as it in effect directs the
removed/ex-Directors of VMPL to hand over charge of the Company's
properties and assets to its newly appointed Directors/present
management. None of the submissions made on behalf of SPCPL in
support of its case that the Company Law Board ought not to have passed
the impugned order dated 2nd February, 2015 can be accepted and the same
are hereby rejected. Also in view of the past conduct on the part of Rakesh
(who admittedly controls SPCPL) and the ex-Directors Vyas and
Chaudhari of refusing to abide by the Orders passed by the CLB/this Court
even after the Hon'ble Supreme Court in the SLP filed by Rakesh had
specifically declined to stay the same, the CLB was completely justified in
directing police assistance which was required to maintain peace and order
at the time of implementation of its Order by VMPL/RKM. The case law
relied upon by SPCPL is therefore of no assistance to SPCPL.
24. In the circumstances, the above Appeal is dismissed with costs.
25. After pronouncement of this Judgment, the learned Senior Advocate
appearing for the Appellant has submitted that the statement of RKM
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recorded by this Court in its Order dated 3 rd February, 2015, be continued
for some time. Since the arguments advanced in this Appeal on behalf of
SPCPL are confined only in respect to Plant No.2 of VMPL and SPCPL
has also confirmed in its written submissions that "The Appellants' case is of
possession of Plant 2 by virtue of the BTA dated 30 th December, 2010 and the
Supplementary BTA dated 18th March, 2011" (Appeal Pgs. 12-13),
VMPL/RKM shall for a period of four weeks from the date of this order,
maintain status quo as of today in respect of Plant No.2.
(S.J. KATHAWALLA, J.)
