Delhi High Court
Srei Venture Capital Limited & ... vs Vijay Gopal Jindal on 16 March, 2010
Author: Manmohan Singh
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ FAO (OS) No.74/2010 & C.M. No.1437/2010
Judgment reserved on: 08.03.2010
% Judgment delivered on: 16.03.2010
SREI VENTURE CAPITAL LIMITED & ANR. ..... Appellants
Through: Mr. T.K. Ganju, Sr. Advocate with
Mr. Indiranil Ghosh, Mr. Sandeep
Mahapatra and Mr. Nitin Kala,
Advocates
Versus
VIJAY GOPAL JINDAL .....Respondent
Through: Mr. Pinaki Mishra, Sr. Advocate with
Mr. K. Datta and Mr. Manish
Srivastava, Advocates
CORAM:
HON'BLE MS. JUSTICE VIKRAMAJIT SEN
HON'BLE MR. JUSTICE MANMOHAN SINGH
1. Whether the Reporters of local papers may No
be allowed to see the judgment?
2. To be referred to Reporter or not? Yes
3. Whether the judgment should be reported Yes
in the Digest?
MANMOHAN SINGH, J.
1. The Appellants Srei Venture Capital Limited and Srei
Infrastructure Finance Ltd. have preferred the present Appeal against
the order dated 4th December, 2009 passed by the learned Single
Judge whereby the injunction application being I.A. No.9448/2008 of
the Respondent has been allowed and the application preferred by
Appellants under Order XXXIX Rule 4 of Civil Procedure Code, 1908
being I.A. No. 14345/2008 has been dismissed.
2. The Respondent herein filed a suit for recovery, mandatory
injunction and permanent injunction against the Appellants herein
bearing reference No.CS(OS) No.1575/2008 inter alia seeking the
following prayer :
(a) a decree for recovery of a sum of Rs.5,75,800/- alongwith
interest @18% per annum.
(b) a decree for mandatory injunction restraining the
Appellants herein from parting with the possession of
5,00,000 equity shares of appellant No.2 herein to any
other third party and thereby seeking direction upon the
Appellants to issue.
(c) allot 5,00,000 equity shares in favour of the Respondent
herein in accordance with the letter dated 2nd June, 2007.
(d) directions to be issued to the defendant to calculate and
pay the plaintiff his 10% share in the profits.
3. The case of the Respondent Mr. Vijay Gopal Jindal before the
learned Single Judge was that he was appointed as a Managing
Director of Srei Venture Capital Limited, Appellant No.1 herein vide
letter dated 19th May, 2007 issued by the said company. The terms of
the appointment of the Respondent in the company read as under :
(a) a sum of Rs.2.40 crores p.a. would be paid by the appellant
No.1 to the Respondent;
(b) the Respondent was also entitled to 10% of net profit of
appellant No.1;
(c) 25% equity stake in the proposed Media/Entertainment
fund; and
(d) the Respondent would be paid an advance of Rs.5 crore
against security of property/shares/other assets.
4. Vide letter dated 2nd July, 2007 issued by Srei Infrastructure
Finance Limited, Appellant No.2 herein it was agreed to grant 5,00,000
EEP units of shares which were priced at Rs.100/- per share to the
Respondent. In lieu thereof the Respondent was to pay 1% of the total
consideration of the aforesaid amount and the balance was to be
adjusted against the commission to be paid by Appellant No.1.
5. According to the Respondent he is a reputed professional
who has held various high level and important positions in reputed
companies since 1980. The details of the same are given in
paragraphs 3 to 5 of the plaint. It is also alleged that at the peak of
his career he was approached by one Mr. Hemant Kanoria (the vice-
chairman and Managing Director of appellant No.1) in April, 2007 and
offered the said job and promised that if he quit his job and joined
the Appellants, he would stand to make substantial gains on his then
existing compensation package. In view of the said assurance by the
Appellants and their other subsidiaries the Respondent joined the
Appellants in their mutual interest.
6. The grievance of the Respondent before the learned Single
Judge was that from the very beginning the Appellants failed to pay a
sum of Rs.5 crore as an advance to the Respondent and also failed to
communicate the percentage of commission payable by the
Appellants to the Respondent. According to the Respondent, he
suspected the conduct of the Appellants was such due to the reversal
in profitability as the net profit of the appellant No.1 came down from
Rs.6,45,59,156/- to Rs.9,43,597/-. Another reason assigned by the
Respondent was that on the one hand the Appellants were involved in
creating one fund with another fund company with one Mr. Sanjeev
Gupta with a corpus of US $ 1 billion under the aegis of appellant No.2
and on the other hand the Appellants had shifted the funds from the
aegis of Appellant No.1 to the aegis of Appellant No.2. Upon coming
to know of the said activities of the Appellants, the Respondent filed
the suit for recovery before the court. Alongwith the suit, the
Respondent filed an interim application which was listed on 8th
August, 2008 when an ex parte ad interim order was granted against
the Appellants restraining them from disposing of 5,00,000 equity
shares which were to vest in the Respondent in terms of the letter
dated 2nd July, 2007 as part of the Employees' Equity Participation Plan
2001, w.e.f. 1st August, 2008.
7. The Appellants thereafter filed an application under Order
XXXIX Rule 4 read with Section 151 CPC being IA No.14345/2008 for
vacation of ex parte ad interim order. After hearing both the parties
on merit, the learned Single Judge disposed of both the applications by
confirming the ex parte ad interim order already granted and
dismissed the Appellants' application for vacation thereof.
8. The reason for confirmation of the said order is given in
paragraphs 16 and 17 of the impugned order dated 4th December,
2009. The operative portion of the same reads as under :
"16. The plea taken by the plaintiff is that the
plaintiff was entitled to 10% profit in the entire Srei
Group of companies as he was working for the
entire Srei Group. He was not an employee of one
company and that is the reason that vide letter
dated 2nd July, 2007, he was offered 5,00,000
equity shares under Employees' Equity
Participation Fund, 2002 of Srei Infrastructure
Finance Limited and not to Srei Venture Capital
Limited. He has stated that if he has been an
employee of Srei Venture Capital Limited, he would
have been offered equity shares under
Employees' Equity Participation Plan only of Srei
Venture Capital Limited and not of Srei
Infrastructure Finance Limited. He further
submitted that Rs.9 lac profit being talked of by
the defendants was of Srei Venture Capital
Limited and not of Srei Infrastructure Finance
Limited and other group companies. Therefore,
the plea taken by the defendants was not tenable.
17. I consider that looking at the offer of
5,00,000 equity shares of Srei Infrastructure
Finance Limited made by the defendants, the plea
of the plaintiff that he was not merely an
employee of Srei Venture Capital Limited has some
force. If the plaintiff had been an employee of
merely Srei Venture Capital Limited, as is
propounded by the defendants during arguments,
there was no reason for Srei Infrastructure Finance
Limited to offer 5,00,000 equity shares under
Employees' Equity Participation Plan, 2001....."
9. Against the said order, the present Appeal has been filed by
the appellants, inter alia, challenging the impugned order as under :
(i) that the impugned order passed by the learned Single
Judge is contrary to the principles of Order XXXIX of Code
of Civil Procedure, 1908;
(ii) that in the absence of considerable amount for
transferring 5,00,000 equity shares to the Appellants, it
was not an obligation on the part of the Appellants to
transfer the said share in favour of the Respondent;
(iii) that offer of 5,00,000 shares of the appellant No.2 herein
was not part of the appointment letter dated 19th May,
2007 which was offered to the Respondent later on vide
letter dated 2nd July, 2007 and this court has to go strictly
as per the said contract entered between the parties;
(iv) the learned Single Judge incorrectly held that the shares
of appellant No.2 were offered to the Respondent although
the Respondent was an employee of appellant No.1 and
the learned Single Judge ought to have given his finding
on the basis of the appointment letter dated 19 th May,
2007 wherein it was specifically mentioned that the
Respondent was entitled to 10% of the net profits of the
appellant No.1 but not of appellant No.2.
10. Before dealing with the submission of the learned counsel for
the Appellants, let us examine the factual position in the matter.
11. In Annual Report 2008-2009 the Group Structure of Srei
Infrastructure Finance Ltd. has been given. The detail of the same is
shown below as under:
Group Structure
Srei Infrastructure Finance Ltd.
Srei Capital Srei Venture Srei
Markets Ltd. Capital Ltd. Infrastructure
Advisors Ltd.
Subsidiaries*
Srei Sahaj International Global
e-Village Ltd. Infrastructure Investment Trust
Services Ltd.
GmbH
Bengal Srei Zao Srei Hyderabad Cyberabad
Sub-subsidiaries Infrastructure Leasing Information Trustee
Development Technology Venture Company
Ltd. (JV Enterprises Ltd. Pvt. Ltd.
With WBIDC)
Srei Equipment
Joint Ventures Finance Pvt.
Ltd.
(Srei-BNP
Paribas Lease
Group JV)
Srei Insurance
Broking
Pvt. Ltd.
12. From the above Group Structure it is clear that both the
Appellants are part of Srei Infrastructure Finance Ltd. It is also not
disputed fact that there are common Directors/Promoters of the said
Group. This fact is further fortified from the copy of the circular dated
22nd April, 2008 issued by the Appellants wherein the Appellants have
made the following statement:
"In its journey of over 18 years, SREI, having
started from its core business of infrastructure
equipment finance, has since, evolved into a one
stop virtually real infra destination offering a wide
array of services as reflected in the companies
value chain diagram.
SREI is one company which has the
advantage of straddling infrastructure creation and
infrastructure funding, whereas the rest are either
involved in infrastructure creation OR
infrastructure funding. None is in both.
Today, SREI is spread over 53 offices in India
with an international footprint in 2 countries. A lot
is happening at any given point of time across the
Company."
13. In the same circular it is mentioned that various persons
including the Respondent shall additionally support the PR/brand effort
from Delhi of the various companies and the details thereof are given
as under:
Hemant Kanoria
Hemant
VC & MD
Sunil Kanoria
Director
Namrata Kumbhat*
Vijay Jindal
Funds+Brand
Rajesh Paleth Subhash Mohanti
AVP (Brand) VP (Media Relations)
Kolkata Kolkata
Tirthankar Supriyo Sarkar
Dasgupta Paromita
Raghav Kanoria Bhaduri
*Ms. Namrata Khumbhat EA to HK/SK/VJ shall additionally support the
PR/Brand effort in Delhi
14. As per the circular it is mentioned that Mr. Paleth and Mr.
Mohanty will work closely with all HODs and Business Heads
functionally, and shall be responsible to Mr. Vijay Jindal. They will
additionally seek overall guidance in their responsibilities from Mr.
Hemant Kanoria and Mr. Sunil Kanoria. All the above mentioned team
members will continue to serve at their present grades.
15. Another important aspect of the matter is that in the
appointment letter dated 19th May, 2007 there is specific reference to
the effect that the Respondent would be joining the organisation
although the said letter was issued by the Appellant No.1. But yet in
another letter dated 2nd July, 2007 written by the Appellant No.2 to the
Respondent, the letter informed the Respondent thus :
"We wish to inform you that you are granted 500000
EEP Units on 1st August, 2007 under the "Employees'
Equity Participation Plan 2001 (EEPP Schemes)". The total
EEP Units awarded under aforesaid EEPP Scheme would
vest with you on 1st August, 2008.
Please note that these units will be priced at Rs.100/-
per share. You will be requested to pay @1% of the total
consideration and the balance any time thereafter to
obtain these shares. You may also obtain these shares in
lieu of your commission to be paid by Srei Venture Capital
Ltd. in which case your commission amount will stand
adjusted/cancelled to the extent of the consideration
amount."
16. From the above, prima facie it appears that the Respondent
was not exclusively working with the Appellant No.1 but also for the
group. The learned counsel for the Appellants has not denied the facts
that the net profit from the Appellant No.1 from the earlier year i.e.
2006-2007 was Rs.6,45,59,156/- and it later came down to
Rs.9,43,597/- during the period when the Respondent was working in
the company for about one year.
17. It is not disputed by the Appellants' counsel that the net
profit of Appellant No.2 increased to Rs.132,41,00,000/-. The Appellant
No.1 has agreed and offered to pay 10% profit to the Respondent from
profit made by the Appellant No.1 which only comes to about
Rs.90,000/- when at the same time, the salary offered to the
Respondent is Rs.2.40 crores per annum. It is not possible to accept
the submission made by the Appellants in the light of the above
mentioned facts. Admittedly, the Respondent has sought the relief as
mentioned in the prayer clause from both the Appellants.
18. From the facts and circumstances explained above, it
appears to us that the balance of convenience at this stage clearly lies
in favour of the Respondent as per material available on record and
against the Appellants as all the points raised by the Appellants would
be answered after the trial of the matter. As regards the continuation
of interim orders, we are not inclined to interfere with the order
passed by the learned Single Judge who has passed a limited interim
order only to the extent against the Appellants restraining them from
disposing of 5,00,000 equity shares which were to vest in the
Respondent in terms of the letter dated 2nd July, 2007 as part of the
Employees' Equity Participation Plan 2001, w.e.f. 1st August, 2008. The
said shares are less than 0.35 per cent out of the total more than 11
crores shares owned by the company. In case we give any positive
finding on the point raised by the Appellants on merit at this stage we
are aware that it would definitely prejudice the case of one of the
parties. Therefore, on thoughtful consideration, we are of the view
that the Appellants have not made strong case for interfering with the
order passed by the learned Single Judge.
19. There is yet another aspect of the matter as to whether
finding of the learned Single Judge can be disturbed by the Appellate
Court. The scope and extent of the power enjoyed by the Appellate
Court in interfering with a detailed order passed in exercise of
discretion by the learned Trial Judge is limited and the circumstances
in which the discretion exercised by the learned Single Judge require
consideration have been discussed by the Apex Court in the case of
Wander Ltd. vs. Antox India Pvt. Ltd.; 1990 (Suppl.) SCC 727 at
page 733 wherein the Apex Court has held that in an appeal against
the exercise of discretion by the learned Single Judge, the Appellate
Court will not interfere with the exercise of discretion by the first Court
except under some limited circumstances. The relevant observation of
the Apex Court is extracted as under:
"14. The appeals before the Division Bench were against the
exercise of discretion by the Single Judge. In such appeals,
the Appellate Court will not interfere with the exercise of
discretion of the Court of first instance and substitute its
own discretion except where the discretion has been shown
to have been exercised arbitrarily, or capriciously or
perversely or where the Court had ignored the settled
principles of law regulating grant or refusal of interlocutory
injunctions. An appeal against exercise of discretion is said
to be an appeal on principle. Appellate Court will not
reassess the material and seek to reach a conclusion
different from the one reached by the Court below if the one
reached by that Court was reasonably possible on the
material. The Appellate Court would normally not be justified
in interfering with the exercise of discretion under appeal
solely on the ground that if it had considered the matter at
the trial stage it would have come to a contrary conclusion.
If the discretion has been exercised by the trial court
reasonably and in a judicial manner the facts that the
Appellate Court would have taken a different view may not
justify interference with the trial court's exercise of
discretion."
20. We do not find any infirmity in the impugned order and find
that there is no force in the Appeal. Therefore, the same is dismissed
with no orders as to costs. In view of dismissal of the Appeal, all the
pending CMs are also disposed of.
21. Needless to state that the observations made above are only
an expression of opinion for the purpose of grant/refusal of injunction
and will have no bearing on the final outcome of the suit which will be
decided on its own merit without being influenced by the observations.
MANMOHAN SINGH, J.
VIKRAMAJIT SEN, J.
March 16, 2010
sa/jk
