Rajnish Kohli vs Hcl Technologies Ltd
2018 Latest Caselaw 5263 Del

*              IN THE HIGH COURT OF DELHI AT NEW DELHI

+                  RFA No. 735/2018

%                                             4th September, 2018

RAJNISH KOHLI                                         ..... Appellant
                          Through:       Mr. Raman Kapur, Sr. Adv.
                                         with Mr. Aviral Tiwari,
                                         Advocate.
                          versus

HCL TECHNOLOGIES LTD.                                  ..... Respondent

CORAM:

HON'BLE MR. JUSTICE VALMIKI J.MEHTA

To be referred to the Reporter or not?

VALMIKI J. MEHTA, J (ORAL)

CM No. 35801/2018 (delay in re-filing)

For the reasons stated in the application, delay in re-filing is

condoned.

CM stands disposed of.

CM No.35802/2018 (Exemption)

Exemption allowed subject to just exceptions.

CM stands disposed of.

RFA No.735/2018

1. This Regular First Appeal under Section 96 of the Code

of Civil Procedure, 1908 (CPC) is filed by the plaintiff in the suit

impugning the Judgment of the Trial Court dated 27.2.2018 by which

the Trial Court has dismissed the suit filed by the appellant/plaintiff.

By the suit the appellant/plaintiff sought the relief of mandatory

injunction for grant of 1950 Shares of the respondent/defendant

company to the appellant/plaintiff under the Employees Stock Option

Plan (ESOP) or in the alternative the appellant/plaintiff claimed the

relief of money decree being the value/price of shares as damages

totaling to a sum of Rs.56,55,000/-.

2. The facts of the case are that the appellant/plaintiff was

an employee of the respondent/defendant company M/s HCL

Technologies Ltd. The earlier name of the respondent/defendant

company was HCL Consulting Ltd., and this was during the period

when the appellant/plaintiff was the employee of the

respondent/defendant company. By the Letter dated 8.11.1995 the

appellant/plaintiff was offered by the respondent/defendant company

ESOP of 1950 Shares of the respondent/defendant company. This

offer given to the appellant/plaintiff was in terms of the Letter dated

8.11.1995 (Ex.P3). The offer was however subsequently deferred in

terms of the Letter dated 20.1.1997 (Ex.P-4) whereby the entitlement

of the appellant/plaintiff to the ESOP was to be enforced after 30 days

of the Initial Public Offering (IPO) of the respondent/defendant

company. Appellant/plaintiff pleaded that he kept on patiently waiting

to get the ESOP and that he was orally informed by the officers of the

respondent/defendant company that information with respect to the

coming out of its IPO shall be conveyed to him. The appellant/plaintiff

pleads that he had repeatedly requested the respondent/defendant

company through phone calls and e-mails to enable him to exercise

the option in terms of the Letter dated 20.1.1997, but the

respondent/defendant company refused to grant ESOP for one reason

or the other. Ultimately, the appellant/plaintiff was forced to issue a

Legal Notice dated 11.10.2004 asking the respondent/defendant

company to issue the ESOP shares, and to make good on all losses,

and on failing to get the requisite response, the subject suit was filed.

3. Respondent/Defendant company contested the suit by

filing its written statement. The first defence raised by the

respondent/defendant company was that the ESOP 1995 was

withdrawn in the year 1999. It was further contended by the

respondent/defendant company that the appellant/plaintiff knew of the

withdrawal of ESOP 1995 Scheme, including because under the ESOP

1999 Scheme of the holding company of the respondent/defendant

company namely HCL Corporation Ltd., the appellant/plaintiff was

granted 9662 Stock Options at Rs.4/- each and the appellant/plaintiff

exercised that option and made profit of about Rs.20 lacs on sale of

the said shares. The further case of the respondent/defendant

company was that the entitlement for ESOP as claimed by

appellant/plaintiff, in terms of the SEBI (Employee Stock Option

Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 as

amended w.e.f 30.6.2003, could not be given to the appellant/plaintiff

as ESOP benefits were to be given only to an employee of a company

or employee of a subsidiary company or an employee of a holding

company, and that the appellant/plaintiff admittedly from April 1997

ceased to be the employee of the respondent/defendant company and

became the employee, not of a subsidiary or holding company of the

respondent/defendant company, but of a joint venture of the

respondent/defendant company and M/s. Perot Systems Corporation,

USA. In fact, M/s HCL Perot Systems Ltd. even ceased to be a joint

venture company of the group of respondent/defendant company w.e.f

19.12.2003 when it ceased to be a joint venture on account of sale of

shares in the joint venture company by the respondent/defendant

company M/s HCL Technologies Ltd. to M/s Perot Systems Ltd. It

was further pleaded by the respondent/defendant company that since

the appellant/plaintiff knowingly failed to participate in ESOP 1999

and therefore now not only it cannot be asserted by the

appellant/plaintiff that he came to know only in the year 2004 that the

ESOP 1999 had been withdrawn, but infact the suit was barred by

time. Suit was hence prayed to be dismissed.

4. After pleadings were complete the trial court framed the

issues and parties led evidence, and these aspects are recorded in paras

6 to 7.2 of the impugned judgment, and these paras read as under:-

"6. Issues From the pleadings of the parties, following issues were framed on 23.01.2007:

1. Whether in view of SEBI (Employees Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 (Guidelines),

the plaintiff is entitled to exercise the Stock Option Plan of 1950 shares? OPP

2. Whether the plaintiff is an employee of the defendant company or a subsidiary of the defendant company and as such he is entitled to exercise the balance stock options? OPD.

3. Whether the stock option in respect of 1950 equity shares as claimed by the plaintiff is different from the equity shares claimed by the plaintiff in Suit No. 414 of 2006? OPP.

4. Whether the plaintiff has approached this Court with clean hands entitling him to the grant of a decree for mandatory injunction? OPP.

5. Whether in case plaintiff cannot be granted decree of mandatory injunction, would the defendant be liable to pay damages? OPP

6. Whether the ESOP was withdrawn by HCL Corporation which issued the ESOP? OPD

7. Whether the suit is time barred?

8. Relief, if any.

7. Evidence led by parties 7.1 In evidence, plaintiff examined himself as PW1 vide affidavit Ex.PW1/A. PW1 relied upon documents Ex.P3 to Ex.P7 viz., (i) letter dated 08.11.1995 issued by defendant to plaintiff as Ex.P3; (ii) letter dated 20.01.1997 sent by defendant to plaintiff as Ex.P4; (iii) copy of legal notice dated 11.10.2004 sent by plaintiff to defendant as Ex.P5; (iv) copy of letter dated 24.12.2004 sent by plaintiff to defendant as Ex.P6 and (v) newspaper „Times of India‟ dated 07.01.2006 as Ex.P7. 7.2 Defendant got examined Sh. Manish Anand, Deputy Company Secretary of the defendant company as DW-1 vide affidavit Ex.DW1/A."

5. Learned senior counsel for the appellant/plaintiff has

argued as under:-

(a) Trial court has committed an illegality in denying the

benefit of ESOP 1999 of the respondent/defendant company to the

appellant/plaintiff because the respondent/defendant company never

informed the appellant/plaintiff of the IPO of the respondent/defendant

company taking place in the year 1999. It is argued that since the

factum of IPO of the year 1999 of the respondent/defendant company

was not informed to the appellant/plaintiff, therefore, the

appellant/plaintiff could not exercise the option within 30 days of the

IPO in the year 1999, and consequently the right of the

appellant/plaintiff is alive for getting the 1950 Shares of the

respondent/defendant company in terms of ESOP 1995.

(b) It is argued that the trial court has wrongly held the suit to be

barred by time when it was held that the suit should have been filed

within 3 years of 1999. Since the suit was filed much later in the year

2006, inasmuch as, the appellant/plaintiff never had the knowledge of

the IPO issue of the respondent/defendant company during this period

starting from the year 1999, and the appellant/plaintiff came to know

of the same only in around October 2004 when the Legal Notice dated

11.10.2004 (Ex.P-5) was sent by the appellant/plaintiff to the

respondent/defendant company.

(c) Trial court has gravely erred in placing reliance upon SEBI

Regulations of 1999 as amended w.e.f. 2003 because such regulations

cannot have retrospective effect to take away the benefit granted to the

appellant/plaintiff in the year 1995.

6. In my opinion, the appeal is without merit and is liable to

be dismissed. The reasons for the same are stated hereinafter.

7 Firstly in my opinion it cannot be argued by the

appellant/plaintiff that he was not aware of the IPO of the

respondent/defendant company in the year 1999. Trial court in this

regard has, in para 8.25 of its impugned judgment held that

appellant/plaintiff had applied as a private investor in IPO 1999 of the

respondent/defendant company, and therefore, he would be

consequently well aware of the IPO of the respondent/defendant

company of the year 1999. Though Learned Senior Counsel for

appellant/plaintiff argued that the appellant/plaintiff did not know that

IPO was of HCL Consulting Ltd., and under which name the stock

options in 1995 in terms of the letter dated 8.11.1995 (Ex.P3),

inasmuch as the 1999 IPO was in the name of the

respondent/defendant company HCL Technologies Ltd., however I

cannot agree with this argument for two reasons.

(i) Firstly, IPO is in terms of the Prospectus and it is

conceded before this Court on behalf of the appellant/plaintiff that in

the Prospectus indubitably it is written that the respondent/defendant

company‟s present name which was Hindustan Technologies Ltd. was

earlier having the name of Hindustan Consulting Ltd. Once therefore

the appellant/plaintiff applied as a private investor in an IPO, he would

deemed to have read the prospectus, and therefore he would have very

much known in the year 1999 itself of the IPO having taken place of

the respondent/defendant company in the year 1999 itself. This

argument of the appellant/plaintiff that he did not come to know about

the IPO of the respondent/defendant company in the year 1999 is

rejected.

(ii) The second reason why the appellant/plaintiff is deemed to have

knowledge of IPO of the respondent/defendant company in the year

1999 is also because the appellant/plaintiff was legally put to regular

enquiries after receiving the Letter of the respondent/defendant

company dated 20.1.1997 (Ex.P4) whereby ESOP 1995 was deferred

till 30 days after making of the IPO. The appellant/plaintiff cannot

claim that he was entitled to keep on sleeping and suddenly wake up

in the year 2004 to claim that he did not know that any IPO took place

of the respondent/defendant company in the year 1999. Where a

person by his own act fails to take requisite steps which he ought to

have taken by which such person would have come to know of a fact,

then in law the necessary knowledge is imputed to such a person and

he is deemed to have such knowledge. This is so in this case, because

after the year 1997 there is no correspondence of the

appellant/plaintiff with the respondent/defendant company as to

whether any IPO of the respondent/defendant company has or has not

come out.

8. I also refuse to believe the oral statements and the oral

contentions urged on behalf of the appellant/plaintiff, as per his

pleadings and evidence, that the employees of the

respondent/defendant company kept on assuring him that he will get

the shares under the ESOP of 1995.

9. Therefore, in my opinion the appellant/plaintiff was very much

aware of IPO of respondent/defendant company coming out in the

year 1999, and therefore appellant/plaintiff cannot contend by a suit

filed on 1.2.2006 that ESOP 1995 continued to exist although the

appellant/plaintiff had failed to exercise the option for ESOP within 30

days of the IPO of the respondent/defendant company coming out in

the year 1999. Thus it is held that, by the suit filed by the

appellant/plaintiff in the year 2006, the appellant/plaintiff is not

entitled to accept the ESOP 1995 by getting the requisite 1950 Shares

as appellant/plaintiff had failed to apply for the same within 30 days of

IPO of respondent/defendant company in the year 1999.

10. For the self-same reasons as discussed above, the trial

court has also rightly held the suit to be barred by limitation which

was filed in the year 2006 for ESOP given vide Letter dated 8.11.1995

and postponed vide Letter dated 20.1.1997 to 30 days of the IPO, as it

is already held that the appellant/plaintiff had actual knowledge of the

1999 IPO of the respondent/defendant company as discussed above,

and also is otherwise deemed to have knowledge of the IPO of the

respondent/defendant company in the year 1999 and therefore the suit

had to be filed within 3 years of 1999 but the suit was filed 7 years

after the year 1999.

12. I also do not agree with the arguments urged on behalf of

the appellant/plaintiff that SEBI 1999 Regulations and as amended

from June 2003 will not prevent the exercise of option of ESOP 1995

by the appellant/plaintiff inasmuch as the SEBI 1999 Regulations are

prospective. In my opinion in the facts of the present case there is no

issue of prospectivity as the prospectivity aspect cannot destroy

crystallised rights. In the year 1999 there were no crystallised rights in

favour of appellant/plaintiff as he had not accepted in the year 1999

the ESOP. Only when a contract is complete, by acceptance of an

offer of ESOP, would crystallised rights come into existence, and by

the year 1999 the appellant/plaintiff had not exercised the ESOP

option, and in any case not within 3 years of the 1999 IPO of the

respondent/defendant company. Since ignorantia juris non excusat,

the appellant/plaintiff is deemed to have knowledge of the 1999 SEBI

Regulations, at least within 3 years from 1999, and thus the

appellant/plaintiff should have filed the subject suit for specific

performance to claim the shares under the ESOP 1995, but since

admittedly the subject suit has been filed only on 1.2.2006, therefore,

for this reason the appellant/plaintiff cannot claim that the he is

entitled to the benefit of ESOP 1995 in spite of the same being legally

barred.

13. Thus when the ESOP 1995 was given at that time the

appellant/plaintiff was the employee of the respondent/defendant

company, but once appellant/plaintiff ceased to be the employee of the

respondent/defendant company w.e.f April, 1997, then because of

SEBI 1999 Regulations which provided that the Scheme of ESOP

1999 will not be available to an employee who is not the employee of

the company or the subsidiary company and holding company, then

statutorily the right of the appellant/plaintiff came to an end because

of SEBI 1999 Regulations (and as amended w.e.f June, 2003) had

come into force.

13. In my opinion, the trial court has also rightly dismissed

the suit by holding that the appellant/plaintiff has failed to prove his

readiness and willingness. Readiness and willingness would have

been proved by the appellant/plaintiff in case the appellant/plaintiff

had sent his cheque for the amount of Rs.19,500/- alongwith his notice

dated 11.10.2004/Ex.P5, but admittedly the appellant/plaintiff failed to

pay/tender the amount of Rs.19,500/- alongwith his Legal Notice

dated 11.10.2004. Further, and though it may only be a technicality,

but the fact is that the appellant/plaintiff has not filed and proved in

the suit his financial capacity with respect to the amount payable of

Rs.19,500/-, and hence for this technicality also in my opinion, it has

to be held that the appellant/plaintiff was not ready and willing for

grant of specific performance of the ESOP 1995.

14. In view of the aforesaid discussion, I do not find any

merit in the appeal. Dismissed.

SEPTEMBER 4, 2018/ib                        VALMIKI J. MEHTA, J