Rajnish Kohli vs Hcl Technologies Ltd.
2015 Latest Caselaw 8949 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

                                                  Reserved on: 23.02.2015
                                                Pronounced on: 02.12.2015


                             + CS(OS) 312/2006
RAJNISH KOHLI                                               ..... Plaintiff
                             Through: Mr. Raman Kapur, Sr. Adv. with
                             Mr. Aviral Tiwari and Mr. Varun Kapur and
                             Mr. R.P. Singh, Advs., Adv.
                    versus
HCL TECHNOLOGIES LTD. B+                                    ..... Defendant
                             Through:   Mr. N. Ganpathy, Adv.
CORAM:
HON'BLE MR. JUSTICE NAJMI WAZIRI


NAJMI WAZIRI, J.

1. This suit seeks a decree of mandatory injunction directing the defendant company to issue and deliver 1950 shares of the defendant company to the plaintiff or, in the alternative, a decree for Rs. 56,55,000/- in favour of the plaintiff along with pendente lite and future interest at the rate of 18% per annum till the date of actual payment.

2. It is the plaintiff's case that he was an employee of a company known as HCL Perot Systems owned by HCL Consulting Limited (the defendant company, now known as HCL Technologies Limited), until his resignation in 2005; during this time he was offered stock options by the defendant company as a part of his compensation package and to incentivize him to remain with the company and to make efforts to increase its business. Accordingly,

the defendant company, vide its letter dated 08.11.1995 (Ex. P-3), communicated to the plaintiff that he would be the recipient of 1950 equity shares of HCL Consulting Limited at Rs. 10/-, each fully paid up, which would be delivered in three equal instalments of 650 shares on 01.07.1996, 01.01.1998 and 01.07.1999. The shares were to be offered to the plaintiff at par and the option was to be exercised by the plaintiff within 30 days of their becoming due by the making of full payment thereof by means of a Pay Order or Demand Draft payable at New Delhi in favour of a party nominated by the defendant company. However, due to certain restrictions imposed by SEBI, the shares were only to be transferred after the defendant company had completed its initial public offering (IPO). Furthermore, there was no requirement of additional cost to be paid by the plaintiff in case of any bonus issue of shares and the plaintiff was also to be entitled to apply for further issue of shares on payment of the issue price plus interest at the rate of 20% per annum. It is also submitted that a right was conferred upon the plaintiff that should he desire, he would be able to sell the shares in the open market at the prevailing market price.

3. It is submitted that vide the defendant company's letter dated 20.01.1997 (Ex. P-4), it was acknowledged that the plaintiff had become entitled to 650 shares as of 1st July, 1996. He was also informed that his requirement to make the payment for the shares had been deferred due to the fact that the IPO had not taken place and that he would have 30 days to exercise his options once the IPO had taken place.

4. It is further submitted that in the year 2004, the plaintiff learnt that HCL Consulting Limited had merged with HCL Technologies

Limited in 1999 and had conducted its IPO in the same year itself; the defendant company did not make any efforts to intimate the same to the plaintiff; it did not offer to buy back the outstanding shares of the plaintiff, nor was he called upon to exercise his options in the shares vested in him. Aggrieved by the actions of the defendant company, the plaintiff issued a legal notice dated 11.10.2004 (Ex. P-5) to the defendant company whereby he sought to exercise his options in the 1950 shares that had vested in him as per the letters dated 08.11.95 and 20.01.97. Through a letter dated 11.11.2004 (Ex. P-1), the defendant acknowledged the receipt of the aforesaid legal notice dated 11th October, 2004 and promised to revert back to the plaintiff after due perusal of the issues involved. A reminder was sent by the plaintiff on 24.12.2004 (Ex. P-6) to the defendant; the defendant's reply dated 29.12.2004 (Ex. P-2) stated that the matter was under consideration by the concerned officials and that they would revert in due course. When no further action was taken, the plaintiff was constrained to file the present suit.

5. The plaintiff avers that he has been wronged by the defendant company since he was not fully compensated for his services in the manner which was promised and rightfully due to him.

6. The defendant, on the other hand, has set up a case for dismissal of the suit on the ground that no right had accrued in favour of the plaintiff because the employee stock option plan had been withdrawn in the year 1999. Referring to paragraph (c) of the preliminary objections, Mr. N. Ganpathy, the learned counsel for the defendant submits that the plaintiff was granted 9662 stock options of HCL Technologies Ltd. of Rs. 4/- each in October 1999 under the '1999 ESOP'. Of these, 6662 stock options of Rs. 4/-

each were exercised by him and an equivalent 13,324 shares of face value of Rs. 2/- each were allotted to him. He submits that the plaintiff was not able to exercise the balance stock options due to the restrictions imposed by SEBI.

7. Mr. Raman Kapur, the learned Senior Advocate for the plaintiff, refutes this argument and states that the allusion to have stock options at Rs. 4/- each in October 1999 is a matter of a separate suit i.e. CS(OS) 414/2006. He submits that the communications dated 08.11.95 and 20.01.97 were never withdrawn by the defendant and the shares continued to vest in the plaintiff. He further submits that subsequently, the face value of the shares which were vested in the plaintiff was lowered from Rs. 10/- per share to Rs. 2/- per share. As a result, the plaintiff claims to be entitled to 5 times the original number of shares, i.e., 9750 shares of Rs. 2/- each instead of the original 1950 shares of Rs. 10/- each.

8. It is the plaintiff's case that since the time when the shares were vested in him at Rs. 10/- per share, the value of the same has gone up considerably to Rs. 580/- per share, and this has caused him to suffer severe monetary loss at the instance of the defendant company.The learned Senior Advocate places reliance upon the statements made by Mr. Manish Anand, DW-1, during his cross examination, wherein it was admitted by the latter that there is nothing on record to prove that the aforesaid withdrawal had been communicated to the plaintiff. Although the said deponent voluntarily stated that the plaintiff was employed with the defendant company and thus would have been intimated about the said withdrawal by someone known to him, this statement is, in the view of the Court, of no value. The said deponent also

acknowledges the lowering of the face values of the defendant company's shares from Rs. 10/- per share to Rs. 2/- per share; that the market value of the shares of the defendant company was Rs. 580/- per share in the year 2006 and that publication has been made to this effect in the 'Business Times' of 'The Times of India' newspaper dated 25th January, 2006.

9. Mr. N. Ganpathy, the learned counsel for the defendant company, draws the attention of the Court to paragraphs 6 and 8 of the plaint, according to which an offer of the shares had to first be made by the defendant company and then, upon making of the offer, it was to be accepted by the plaintiff by making the payment within 30 days of the offer, along with the name of the nominee in whose favour the shares would be issued. He further submits that paragraph 8 of the plaint incorrectly avers that on 20.01.97, the plaintiff had been informed by the defendant company that the requirement to make the payment had been deferred due to the delay in the IPO. He submits that no communication to this effect was ever issued to the plaintiff either on 08.11.95 or 20.01.97; that the offer was made by HCL Corporation Limited having its office at A-10-11, Sector-3 NOIDA and having its registered office at 806-808, Siddharth 96, Nehru Place, New Delhi. The said suit has been filed against a separate legal entity, i.e. HCL Technologies Limited at the aforesaid registered address. The learned counsel for the defendant would argue that the case has been filed against HCL Technologies Limited but not against HCL Corporation Limited, which in fact had offered the shares; that the shares were without any consideration and therefore, would not be binding because the plaintiff never worked for HCL Corporation and that at

best the offer would be a promise for a gift which was never effectuated; that none of the correspondences were made by HCL Corporation. Upon a query being posed to the learned counsel, he submits that the HCL Corporation is the promoter of HCL Technologies and has a controlling share in the latter company.

10.The Court would note that the offer of shares was from HCL Consulting Limited which now has changed its name to HCL Technologies Limited as has been admitted in the written statement itself.

11.Mr. Ganpathy submits that for the sake of argument even if the 1950 shares were rightfully due to the plaintiff as per the '1995 ESOP', the plaintiff ought to have taken appropriate steps towards effectuating the offer; he did not do so for the subsequent five years; neither did he make any payment towards allotment of the shares, nor did he submit any nominee's name in whose favour the shares would be alloted. According to the learned counsel, the payment for the shares was conditional upon a call for the same, which never came. He submits that the subsequent replies to the legal notice and to the reminder by the defendant company on 11.11.2004 and 29.12.2004 are mere acknoledgements of receipt of the plaintiff's letters dated 11.10.2004 and 24.12.2004, but not of the content therein and therefore, do not create any legal rights in favour of the plaintiff whatsoever. Mr. Ganpathy further submits that the plaintiff, in his cross examination, had admitted that he was aware of the change in name of the defendant company from HCL Consulting Limited to HCL Technologies Limited. The same is evident from the fact that the plaintiff had invested in 1000 shares of the defendant company as an independent investor.

12.In rebuttal, Mr. Kapur, the learned Senior Advocate for the plaintiff submits that insofar as the letters dated 08.11.95 and 20.01.97 have acknowledged the entitlement of the plaintiff to the shares, the actual issuance of shares would be nothing more than an administrative act and all that would have to be proved to this Court for the purpose of relief sought is that the rights in the shares had indeed accrued to the plaintiff. He places reliance upon the written statement wherein it has clearly been admitted that HCL Corporation is the promoter of HCL Technologies and stock options had been offered under the '1995 ESOP' pursuant to the completion of the company's IPO.

13.According to the learned counsel for the defendant, HCL Consulting became HCL Technologies, prior to the IPO of the latter in December, 1999; thus, no IPO of HCL Consulting ever took place since the said entity had transmuted itself into HCL Technologies; that when the IPO was floated for HCL Technologies, it would have carried the history of the company which would show that the name of HCL Consulting had been changed to HCL Technologies. He submits that insofar as the plaintiff is deemed to have the knowledge of HCL Technologies having taken the place of HCL Consulting, he should have agitated his rights in the 1950 shares in the year 1999, i.e., when HCL Consulting transmuted to HCL Technologies and completed its IPO.

14.Having considered the aforesaid arguments the Court is of the view that the letters of the defendant company in response to the legal notice and the reminder dated 11.10.2004 and

24.12.2004 respectively were mere acknowledgements of receipt of the plaintiff's letters but not of the substance contained therein. The letters from the defendant company to the plaintiff, which intimated the latter about the offer of stock options, were received in the year 1995 and 1997. The defendant company conducted its IPO in the year 1999 and the plaintiff had knowledge of this fact as is evident from his actions insofar as he had applied for 1000 shares of HCL Technologies as an independent investor. However, the present suit was filed only in the year 2004. The plaintiff has failed to provide any explanation regarding the delay of 5 years in filing the suit and as such, the suit is barred by limitation.

15.In the circumstances, the suit is dismissed as it is barred under the provisions of The Limitation Act, 1963.

16.No order as to costs.

17.The suit is disposed off in the above terms.

NAJMI WAZIRI, J.

DECEMBER 03, 2015/acm/b'nesh/nrk