K.V. Vikram Reddy & Ors. vs R.Sreenivasulu Reddi & Ors.

When I had first perused the following observations of Hon'ble Supreme Court in the matter of Life Insurance Corporation of India Vs. Escorts Limited and others, reported in 1986 (1) Supreme Court Cases 264, I could hardly envisage that I will be accosted with the similar, if not, identical situation in my Court:-

"Problems of high finance and broad fiscal policy which truly are not and cannot be the province of the court for the very simple reason that we lack the necessary expertise and, which, in any case, are none of our business are sought to be transformed into questions involving broad legal principles in order to make them the concern of the court. Similarly what may be called the 'political' processes of 'corporate democracy' are sought to be subject to investigation by us by invoking the principle of the Rule of Law, with emphasis on the rule against arbitrary State action. An expose of the facts of the present case will reveal how much legal ingenuity may achieve by way of persuading courts, ingenuously, to treat the variegated problems of the world of finance, as litigable public-right-questions. Courts of justice are well-tuned to distress signals against arbitrary action. So corporate giants do not hesitate to rush to us with cries for justice. The court room becomes their battle ground and corporate battles are fought under the attractive banners of justice, fair-play and the public interest. We do not deny the right of corporate giants to seek our aid as well as any Lilliputian farm labourer or pavement dweller though we certainly would prefer to devote more of our time and attention to the latter. We recognise that out of the dust of the battles of giants occasionally emerge some new principles, worth the while. That is how the law has been progressing until recently. But not so now. Public interest litigation and public assisted litigation are today taking over many unexplored fields and the dumb are finding their voice.

In the case before us, as if to befit the might of the financial giants involved, innumerable documents were filed in the High Court, a truly mountainous record was built up running to several thousand pages and more have been added in this court. Indeed, and there was no way out, we also had the advantage of listening to learned and long drawn-out, intelligent and often ingenious arguments, advanced and dutifully heard by us. In the name of justice, we paid due homage to the causes of the high and mighty by devoting precious time to them, reduced, as we were, at times to the position of helpless spectators. Such is the nature of our judicial process that we do this with the knowledge that more worthy causes of lesser men who have been long waiting in the queue have blocked thereby and the queue has consequently lengthened. Perhaps the time is ripe for imposing a time-limit on the length of submissions and page- limit on the length of judgments. The time is probably ripe for insistence on brief written submissions backed by short and time-bound oral submissions. The time is certainly ripe for brief and modest arguments and concise and chaste judgments. In this very case we heard arguments for 28 days and our judgment runs to 181 pages and both could have been much shortened. We hope that we are not hoping in vain that the vicious circle will soon break and that this will be the last of such mammoth cases. We are doing our best to disentangle the system from a situation into which it has been forced over the years by the existing procedures. There is now a public realisation of the growing weight of the judicial burden. The cooperation of the bar too is forthcoming though in slow measure. Drastic solutions are necessary. We will find them and we do hope to achieve results sooner than expected. So much for sanctimonious sermonising and now back to our case".

High profile lawyers appeared in this case also and the matter was argued for months together. The appeal was filed on November 28, 2011 and the oral arguments were last heard on 2.3.2012. Even when the oral arguments mercifully came to an end, it was requested that the parties may be allowed to file written arguments. The prayer was but to be allowed. The defendant filed their written arguments as late as on 15th March, 2012 while the appellants had filed it earlier.

It is also noteworthy that 13 different compilations each running into thousands of pages was submitted before the Court though for its convenience. The lawyers from both sides have argued exhaustively and with great vehemence. The points were hammered with such persistence that they could disintegrate all seven colours of rainbow. The judgment was attacked from all corners. The facts and the law were scattered and thrown into the vast legal cosmos. It is the duty of the Court to collect all these colours to reconstitute the spectrum and try to make it visible through the hazy clouds of arguments. It will be difficult to write a small judgment but an attempt will be made to write a judgment which is comprehensive and yet understandable.

Instant company appeal has been preferred by above noted appellants under Section 10 (F) of the Companies Act, 1956 against the judgment and order dated 14.11.2011 (hereinafter referred to as impugned order) passed under Section-397 and 398 of the Companies' Act, 1956 (hereinafter referred to as the Act) by the Company Law Board, New Delhi Bench, New Delhi (hereinafter referred to as C.L.B.). Following reliefs were claimed in the Company Petition No.59/2011:-

"a) direct to maintain equity in the share holding of the Company and thereby allow Petitioner to infuse funds for fresh allotment of shares so that the quasi partnership is not disbursed;

b) direct the status quo of the directorship of the respondent Company before the alleged Board meeting of 29.4.2011;

c)direct that no Board meeting shall be held without prior approval of this Hon'ble Board and any resolution passed by the Respondent Company either in the Board meeting or the General meeting shall be subject to the order of the Hon'ble Board;

d)restrain the respondent No.s 4 to 6 from acting as directors of the respondent No.1 Company;

e) restrain respondent No. 2 and 3 from allotting any further shares of the respondent Company;

f) restrain respondent No.s 2, 3 and 7 from increasing the share capital of the respondent Company;

g) direct that the respondent No. 4 to 6 be restrained from participating the meetings of the Board of Directors;

h) direct that no Resolution be passed without the affirmative vote of the Petitioners;

i)direct that quorum for no Board/General meeting be considered complete in the absence of the Petitioners, unless they give a written waiver of attendance of the meeting;

j) Pass such other and further orders as this Hon'ble Board may deem fit and proper in the facts and circumstances of the case."

Copy of the Company Petition is available in Book I. It may also be noted that various compilations have been submitted by Mr. Prashant Chandra. They have been numbered as Book No.1 to Book No.10, two compilations numbered as I and II and one Convenience File. Since the contents of these compilations have not been disputed by the petitioner-respondents hence these compilations are taken on record. These will be referred by their number and names in this judgment.

Brief facts as given in the Company Petition are as follows. M/s Himalaya Hydro Pvt. Limited was incorporated on 16.1.1995 and is having its registered office at 76, Eldeco Greens, Gomti Nagar, Lucknow, Uttar Pradaesh- 226001. The Authorized Share Capital of the Company is R.37,00,00,000/- divided into 2,20,00,000 equity shares of Rs.10/- each. The issued and paid-up share capital of the company is Rs.21,50,31,000-00 divided into 2,15,03,100 equity shares of Rs.10/- each. The Company was incorporated to operate power plants to produce electricity by any mode of conventional or non-conventional and to be in the business as suppliers, distributors, converters of electricity light, heat and to deal in hydroelectric, wind, ocean, co-generation, gas based, sun rays based or any other method for producing electricity.

According to the petitioners-respondents the Company was incorporated by the erstwhile promoters namely, Mr. Aditya K. Jhunjhunwala and Mr. P.C. Jhunjhunwala, who, thereafter, obtained licences for implementing two 3 MW (Megawatt) capacity Hydro Power Projects namely, TANGA SHP and MOTIGHAT SHP (Small Hydro Project). In the year 2003, the petitioners who were looking for establishing Hydro Power Projects identified this Company and organized for its takeover. The petitioners invited the appellants to invest in one project of the Company namely, MOTIGHAT SHP with an understanding that both the the groups will independently manage and control their respective projects and their ultimate shareholding in the company will remain equal i.e. 50 % each and the Board will also remain equal by having equal number of representatives. In terms of of this understanding, since March, 2004 the Board was represented by two Directors each for appellant Sri K. V. Vikram Reddy and Sri Kurli Veera Raghava Reddy. The petitioners-respondents were represented by Sri Rebala Sreenivasulu Reddi and Smt. Neelama Reddy. After induction of two Directors each on part of petitioners, the petitioners-respondents/appellant-opposite parties, Jhunjhunwala's rarely attended any Board Meeting and there was no change in the constitution of the Board till 28.4.2011, except that in 2007, IREDA, the Lender, exercised its right to appoint its nominee on the Board of the Company. It is their case that for over 7 years, the petitioners-respondents and the appellant-opposite parties had equal representation on the Board of the Company. It is case of the petitioners that from the inception, the Company had two projects namely, Tanga SHP and Motighat SHP. In respect of the two projects, licenses from Government are separate, implementation agreement thereof is separate, Power Purchase Agreement with UPCL is separate, loans obtained from IREDA are separate namely A/c No.1714 (Tanga) and 1715 (Motighat), corporate offices of both the projects are separate and bank accounts of both the projects are separate namely A/c No.s 09790210000113 (Tanga) and 09790210000076 (Motighat). The correspondences in respect of both the projects are separately carried out by the petitioners-respondents for Tanga SHP and by appellants for Motighat SHP. It has been further contended that all the correspondences, instructions, decisions were signed and executed in respect of Tanga SHP in the authority of the petitioners-Company and for Motighat SHP by appellants respectively.

It was further contended that two projects are still separate and distinct and are only connected with certain common facilities such as approach road to Motighat Power House constructed by Tanga SHP with its own funds and a water discharge Gate from Tail Race Channel of Motighat which is opened to let water flow into Tanga infrastructure when Tanga Power House is running and closed when Tanga Power House is not running. When this Gate is closed, water is discharged directly into the river. These are the only measures taken to connect the two separate projects as they both belonged to the same Company and to the common promoters. It has also been submitted that even if the gate is not opened by Motighat SHP for whatever reasons then the water has to be discharged into the river and the Tanga can take the water from the river channel by building their own weir (Dam).

The appellants-opposite party do not agree with last part of this contention. They say that in 2008 the projects were merged as the appellant was made in charge of both the projects at site.

The petitioners have contended that the projects were neither merged nor the projects could have merged with their separate licenses, separate loans and and its documentation, separate Bank A/cs, separate reporting, separate Revenue generation and expenditure, separate Auditing and preparation of Balance sheets for the entire life of its licence for 40 years, etc. The projects were never merged nor integrated and the projects are still separate and distinct and will remain separate in the eyes of Government and its Departments like Environmental clearance, Forest Department and undertakings like UPCL, Lending Institution, Subsidity, Duty Draw back, etc. No such integration/merger decision of these projects was taken by the respective promoters nor such an issue was ever raised, discussed or agreed to in any Meeting of the Board of Directors since 2004 until it was raised for the first time by the appellants in the Board Meeting dated 10.09.2011 with a malafide intention of usurping the Tanga Project. The petitioners in good faith had bonafide belief that appellants with his youthful energy will be able to devote time to implement both the projects for which petitioners agreed to pay him salary of Rs.3 lacs per month. But the appellant is interpreting this request as merger of two projects for his ill-designed motive of controlling both the projects in view of his latest oppressive acts ad became evident by his oppressive conduct on 29.4.2011 and 21.5.2011 Board Meetings.

It has been stressed that the appellant was only made in-charge of day to day operations of projects at site and not the affairs of the Company. Petitioners have tried to clarify that in between 2008 and 2010 when the appellant was in-charge of two projects at site, no decision was taken by the Board. This arrangement was only a request from the petitioners. The petitioner even tried to compensate him for his efforts and proposal to this effect was placed in the meeting of the Board of Directors on 9.2.2011 and 20.2.2011 but he did not accept the offer and it was, therefore, deferred for consideration to subsequent Board Meeting.

For the last over seven years, this arrangement continued and there was no dispute or rival claim from each other till 22.4.2011. The problem started from the month of April, 2011 and it led to filing of two company petitions before the C.L.B.

Copy of the company petition has been given in Book-I A.

This petition was heard by the C.L.B. expeditiously on day-to-day basis on the directions of this Court. Counter affidavit was filed by the opposite party/appellant. The C.L.B. has passed judgment which runs into 71 paragraphs. Operative portion of the order is contained in Para 69 to 71 of the judgment. In fact, para 69 to 71 is a mixed bag of directions and reasoning. To put it all in proper sequence, the order can be quoted in the following manner :-

Para-69:....

"I. R-4, 5, 6 & 7 appointed as Additional Directors are hereby removed restoring the status quo of the Board as on 28.04.2011.

II.The resolutions passed at the Board Meetings on 29.04.2011 and 21.05.2011 and the Form 32 in respect of such appointments are hereby declared as null and void.

III.The Respondents are hereby directed to maintain the parity of shareholding on 50:50 basis and let shares be allotted to the Petitioners on the Petitioners' bringing in the required funds for completion of Tanga SHP.

IV.The allotment of shares to the Respondents made on 21.05.2011 being illegal and oppressive are hereby set aside restoring status quo ante in respect of shareholding as on 27.06.2010, all returns and resolutions in this regard are hereby held to be null and void.

V.Allotment of shares to the Respondents made on 29.06.2009, 22.12.2009 and 26.06.2010 are held to be irregular and are permitted to be got regularized within a period of three months from the date of receipt of this order."

It is clear that the C.L.B. has given the reasons in sub-paras (i), (ii), (iii), (iv) and (v) of para 69 and in further directions sub paras VI, VII, VIII of para 71 which is quoted as under:-

Para 69-sub para -

"(i) It is noted that Tanga SHP and Motighat SHP have been assigned to the Petitioners' group and the Respondents' group respectively by a tacit understanding by the parties, practically there has been no interference in the working of the each project by another. Though these projects have been approved by IREDA to the one company i.e. Himalaya Hydro Pvt. Ltd., but there is no denial of the fact that these projects have separate (1) licences, implementation agreements, power purchase agreement with UPCL, loans A/Cs from IREDA, even the collaterals have to be given by the group responsible for implementation of the projects, bank A/Cs are separate, reporting, revenue generation and expenditure, auditing all are separate, the R-1 Company has prepared separate final A/Cs for each project which, it is noted, upto a particular period are prepared and signed only by each group though these separate final A/Cs get merged in the Annual A/Cs of the R-1 Company, the correspondence, instructions, decisions in respect of each project are taken by a particular group, even the corporate office of each project has been separate. It is true that in 2008 certain common facilities have been provided for technical reasons and for economic reasons but such decisions have not taken away the identity of each project and the manner in which these had been implemented till C.P. No.59(ND) of 2011 was mentioned.

(ii) It is nobody's case that till the composition of Board was changed in the allegedly illegal meetings, the representation of these two groups was not equal, each group had two directors and there was a nominee director from IREDA. It is noted that notice for such meetings was not given to Jhunjhunwalas, who though have abandoned the Company long ago, they continue to be directors on paper only and have been given leave of absence in routine. E-mails, decidedly, is not yet a proper notice under Section 286 of the Act. Though in the facts of this case it is noted that the Petitioners have attended the meetings even on receiving of e mails. They have not registered their protest on not receiving of proper notices. However, the manner in which these meetings have been held with an oblique motive, cannot be ignored. The Petitioners are taken by surprise. Even the nominee director chairing the meeting has mechanically approved the Respondents' attempt to induct additional directors inducted under the garb of agenda Item No.3 regarding considering the means to raise Rs.11 crores of Additional Capital, there was admittedly no agenda for appointment of Additional Directors in that meeting, the Respondents have failed to show as to how the appointment of Additional Directors can be taken up in agenda Item No.3, when the said item along with agenda Items No.s 4, 5 & 6 in the Board Meeting dated 29.04.2011 were deferred for subsequent meetings, no specific permission under the residuary agenda was obtained whereas the Petitioners have succeeded in proving the oblique motive to gain majority on Board to gain control of management and shareholding, the Respondents had already proceeded to have consent of these Additional Directors, though they were not present in the meeting, their credentials were not circulated to the Petitioners in advance, the purpose of that meeting was only to induct them and defer all other specified agenda items to the next meeting. Appointment of Additional Directors in these circumstances and in violation of the prescribed procedure, despite the objections from the Petitioners is held to be malafide, prejudicial to the interest of the Company and the Petitioners besides being unfair, it is certainly an act of oppression even if appearing to be legal and deserves to be set aside to restore status quo of equal representation on the Board in view of the settled law that any act done with an oblique motive of gaining control and management cannot be upheld by the CLB exercising equitable jurisdiction.

(iii)It is noted that the Petitioners' group and the Respondents' group have treated themselves as partners, the Petitioners have rightly brought my attention to the Respondents' latest communication even in the year 2011 complaining that the Petitioners should not have treated their partners i.e. the Respondents in that manner (as reflected in that communication which has not been denied by the R-2). The tacit understanding of allotting shares as and when whichever group brings in money, even though sometimes their being no authorized capital, is taken in the stride of being equal partners in equity though at certain points of time the shareholding of the Petitioners was more, and at present the shareholding of the Respondents is more (as given in the charts during hearing of this matter and also annexed to the pleadings). It is noted that the Respondents have brought in Rs.16 crores (including the cost overrun) for Motighat project, the Petitioners have brought in Rs.11.10 crores (the Petitioners are yet to bring in cost overrun for Tanga project). But now with the majority on Board, the Respondents have blocked the Petitioners bringing in further funds to implement the Tanga project.

(iv)It is noted that the Audited A/cs reflect the cross holding of the investments of promoters in each others projects marginally only. Petitioners' group had invested Rs.1 crore in Motighat SHP and granted loans upto March, 2011 to the extent of Rs.181 thus totaling their investment in Motighat SHP at Rs.2.81 crores whereas the Respondents' group had invested a sum of Rs.2.36 crores in Tanga SHP thereby leaving a sum of Rs.45 lakhs excess amount invested by the Petitioners in Respondents' Motighat SHP A/c.

(v) The respondents have rightly pointed out that at one point of time the Petitioners had requested the Respondents to manage at site the Tanga SHP for which remuneration of Rs.3 lacs per month to R-2 was also provided. R-2 did accept the assignment upto a particular period.

....

71.To do substantial justice between the parties, and to regulate the affairs of the Company to facilitate commissioning of Tanga SHP before the onset of monsoon 2012 and to avoid cost overrun and to enable IREDA to achieve its objective without further loss of time, I hereby further order as under:-

VI. IREDA is hereby required, within one week of receipt of this order, to appoint an expert at Tanga SHP site to oversee day-to-day progress in the implementation of the project who shall send daily report on e-mail/fax to IREDA, Facilitator, IREDA nominee directors and to the R-1 Company, project's corporate office, (to be decided by the Petitioners in consultation with the Respondents, and the Facilitator), the daily report must also include suggestions/solutions. IREDA is further required to nominate two directors on the Board of the R-1 Company within one week preferably from Hyderabad or in the vicinity of Hyderabad to make fortnightly meetings of the Board feasible.

(VII). Shri Hari Shankar Acharya, Ex-Chief Commissioner of Income Tax, Ministry of Finance, Govt. of India, who has put in 34 years of valuable service in key areas like company-tax assessment, investigation into company accounts/affairs and company-audit, successfully having handled special assignment of Investigating of tax- frauds of big corporate houses in cases in Central Charges of the Deptt, having been in direct charge of raids/search operations for several years, who was a Member of Regional Economic Intelligence Committee, was ex-officio Member, Committee for Approval of SEZs, was a Member of Regional Tax Advisory Committee, and who has a keen understanding of corporate affairs, has kindly consented (his Mobile No. is 09423964091, e-mail is [email protected]) to help the R-1 Company tide over the situation in a competent manner with his varied and vast experience. Sri Hari Shankar Acharya is hereby designated and appointed, with immediate effect, as the Facilitator of the R-1 Company. His term shall come to an end on completion of the Tanga SHP. Shri Acharya is required to join his assignment at the earliest possible, he shall be stationed at corporate office of the Tanga SHP at Hyderabad. Both the parties, i.e. the Petitioners and the Respondents shall fully co-operate with Shri H. S. Acharya, in smooth discharge of his functions as the Facilitator. Shri Acharya shall provide the requisite input to the IREDA nominee directors. Sri H. S. Acharya is hereby granted complete immunity from any kind of civil and criminal proceedings already launched or to be launched anywhere in the Country against the Company and its Directors for all acts done prior to and subsequent to the date of appointment as the Facilitator with an additional personal immunity and protection during all such legal proceedings for and against the Company. None of the State or Central Government agencies, in exercise of their regulatory enforcement or like such powers initiate any action, civil, criminal punitive or coercive actions against Sri Acharya for the acts of commission and ommission in the Company without the prior approval of the Company Law Board. Shri Acharya shall be entitled to a fixed remuneration of Rs.3 lakhs per month besides other facilities to which the Directors at present are entitled in this Company. Shri Acharya shall periodically apprise the CLB regarding the smooth functioning of the R-1 Company for which he shall take all necessary steps. He is also at liberty to mention the matter before the CLB for seeking further necessary directions/clarifications in the matter.

(VIII) All Board Resolutions shall require approval of the two IREDA nominee Directors and the Facilitator."

Nearly thirty questions of law have been framed by the appellant for evaluation and determination by this Court. It can be easily said that most of them are overlapping and repeated questions. It is neither practical nor necessary to give findings on each of the said questions. However, during the course of arguments, Sri Prashant Chandra summarized his questions for convenience.

Since Mr. Prashant Chandra has submitted written arguments hence, the Court feels that his questions of law should be quoted herein below in his own language and format:

6. The order dated 14.11.2011 has been assailed inter alia on the following grounds:-

1.No issues were framed and evidence recorded by the learned Company Law Board.

2.Winding up of a company is sine qua non for granting relief under Sections 397 and 398 of the Companies Act, 1956, which is in lieu of winding up.

3.Just and equitable for winding up and deadlock are essential for passing an order under Sections-397 and 398 of the Companies Act, 1956.

4.Alleged act of oppression is not a continuous act and having participated in the meeting, their validity cannot be assailed.

5.Concealment of material fact and approaching the learned Company Law Board with unclean hands.

6.Reliefs not claimed for cannot be granted.

7.Once half of the judgment has been set aside by this Hon'ble court vide order dated 30.9.2011, the remaining half automatically goes as it is incapable of compliance.

8.No mismanagement having been complained. Relief under Section 398 cannot be granted. Section 398 is not attracted.

9.ON confession of guilt, sentence has to be imposed. After accepting that affidavit was not correct, no option but to dismiss the company petition.

10.The order of the learned Company Law Board is bad for non-joinder of necessary parties.

11.To determine quasi partnership, there has to be an agreement in writing and clear mention in the Articles of Association upon conversion of partnership into a company.

It is clear that the appellant counsel has reduced his thirty 'questions of law' (substantially) and compressed them into a 'power package' of 11 points. For the purposes of decision, it will be proper that each argument of the appellant is dealt with in order of its formulation separately.

1.No issues were framed and evidence recorded by the learned Company Law Board.:-

For proper understanding and adjudication of this issue it will be necessary to note that 'Company Appeal' against any order passed by the C.L.B. lies "only on questions of law to the High Court under Section-10 (F) of the Act". For convenience Section 10 (F) is quoted hereinbelow:-

"Section 10 F Appeals against the orders of the Company Law Board:- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order."

Under Section 10-E (4-C), 'Company Law Board' has the powers which are vested in a court under the Code of Civil Procedure only in respect of the following matters:-

(a) discovery and inspection of documents or other matterial objects producible as evidence;

(b) enforcing the attendance of witnesses and requiring the deposit of their expense;

(c) Compelling the production of documents or other matterial objects producible as evidence and impounding the same;

(d) Examining witnesses on oath;

(e) Granting adjournments:

(f) Reception of evidence on affidavits.

Thus the Code of Civil Procedure is applicable to the CLB only to a limited extent as provided for under Section 10-E(4-C).

The requirement to frame issues is provided for under Order XLV CPC which is inapplicable to the CLB.

Under Section 10-E(5) it has been provided that the CLB shall, in the exercise of its powers and discharge of its functions under the Companies Act, be guided by the principles of natural justice and shall act in its discretion.

It is thus clear that the framing of issues is not required to be done by the CLB and as long as the principles of natural justice are complied with, CLB is free to regulate its own procedure.

Under Section 10 E (6) of the Companies Act the CLB has been empowered to regulate its own procedure and in exercise of the aforesaid powers, the 'Company Law Board Regulations 1991' have been framed.

The aforesaid regulations inter-alia deal with the complete procedure to be followed by the CLB and there is no requirement under the CLB Regulations 1991 for framing of issues.

The Court is satisfied by the arguments of Mr. Mathur. The Court feels that CLB has been able to make its order understood. The reasons which have been given for reaching the conclusion are manifest and clear.

Apart from this, Mr. Mathur has further argued that any party raising this issue will have to show before the Court as to how he has been prejudiced by non-framing of issues. This could not be answered by the appellants.

However, Mr. Prashant Chandra has emphasied that in para 69 the CLB has observed "It is noted that the petitioners' contentions remained un-controverted.

The Court is not impressed with the argument of learned counsel for the appellant. The judgment of the C.L.B. has to be read in totality. All the arguments of opposite parties have been dealt with in separate paragraphs. The C.L.B. has given its reasons for not agreeing with them. Picking up one line out of the voluminous judgment and criticizing it for its construction and grammer is not justified. What the Company Law Board wanted to say by these words was that it is not satisfied with the argument of the opposite parties. The line is not happily worded. Nothing more can be read into this argument of the appellants.

2. Winding up of a company is sine qua-non for granting relief under Section-397 & 398 of the Company's Act, 1956 which is in lieu of winding up.

On examination, it appears that argument No.s 2, 3, 4 and 8 are connected arguments and they should be dealt with jointly. The argument Nos. 3, 4 and 8 are as follows:-

3. Just and equitable ground for winding up and deadlock are essential for passing an order under Section 397 & 398 of the Companies Act, 1956;

4. Alleged act of oppression is not a continuous act and having participated in the meeting, their validity cannot be assailed; and

8. No mismanagement having been complained. Relief under Section 398 can not be granted. Section 398 is not attracted.

At the very outset it may be noted that these questions conjointly are the crux of the whole matter. These are combinedly the "mother of all arguments".

It has been argued that sine-qua non for exercise of jurisdiction under Section 397 and 398 of the Companies Act, 1956 requires a definite finding to be recorded that the matters complained of warrant winding up of the company under just and equitable clauses, but winding up of the company shall prejudice the interest of the company. No finding whatsoever has been recorded that the facts and circumstances justify the winding up of the company but in case the company is wound up it would be detrimental to the company and other share holders.

Reliance has been placed on the following cases:

1. Hanuman Prasad Bagri and others Vs. Bagress Cereals Pvt.

Ltd. and others (2001) 4 SCC 420 (on para 12).

2.Dr. Percy Rutton Kavasmaneck & another Vs. Gharda Chemicals & others (2011) 166 Comp. Cas 292 (Bom) (Para-

62);

3. Chaterjee Petrochem (I) P. Ltd. Vs. Haldia Petrochemicals Ltd. and others (2011) 10 SCC 466 (Paras 133, 138, 139, 140, 141 and 142).

4. Hind Overseas Private Limited Vs. Raghunath Prasad Jhunjhunwalla, 1976 AIR 565, 1976 SCR (2) 226.

I have gone through the arguments and the observations in each case. Borrowing the words from the judgment of Chaterjee Petrochem (Supra) it can be summed up thus:-

"It clearly states that the common refrain running through all these decisions is that in order to succeed in an action under Sections 397 and 398 of the Companies Act, the complainant has to prove that the affairs of the Company were being conducted in a manner prejudicial to public interest or in a manner oppressive to any member or members".

There is no dispute about these arguments. The judgments are relevant. Taking cue from these judgments Mr. Prashant Chandra has strenuously argued that before any direction is issued by the tribunal, it has to record a separate finding that case for winding up has been made out. It should be recorded that winding up is imminent. In absence of any express finding on this issue, the scheme of Section 397 and 298 will be vitiated.

I have given my anxious consideration to this argument. After going through the case laws minutely I could not find anywhere that a specific finding has to be returned before proceeding under Section-397 and 398. I think formation of clear opinion is necessary which is a mental exercise. At times, it is expressed in so many words and at times by inference and conclusions..

Transcription of that opinion in alphabets will not be necessary, where, the opinion of the Court is palpably obvious. When 'a Law' is being legislated, specific words and express sentences are to be used for precision. But drafting of a 'Law' by the legislature is entirely different from writing of judgment by the Court. If the thoughts of the Judge are capable of being understood, it will be enough. If instead of specific sentences, a paragraph has been written and it conveys the thought process of the Court, it is good judgment.

If I say, " Please give me a glass of water" it will mean that 'I am of the opinion that I am thirsty and I want a glass of water'. Will it be necessary that while asking for glass of water I should state, "I am of the opinion that I am thirsty hence please give me a glass of water". The answer is 'No.' In the present case, the C.L.B. has issued directions after discussing all the arguments of both the sides, specifically in clause 18 of para 69 which is as under:-

"(xviii) It is noted that the Respondents have wrongly argued that since winding up of the Company on just and equitable grounds has not been pleaded on case of winding up has been mad out and hence the petition deserves to be dismissed at the threshold. The determination of the question whether there exist circumstances justifying the court ordering the winding-up of the Company in as much as it is just and and equitable so to do has been entirely left to the discretion of the court dealing with the matter. In the present case the acts of oppression (even when some of which may be legally permissible but are still oppressive) and which are continuous onces justify winding up of the Company on just and equitable grounds but winding up order shall not be in the interest of the R-1 Company as well as the Petitioners and stakeholders."

Mr. Mathur has further argued that there is no necessity for the petitioner to file a petition under Section-397 and 398 of the Companies Act to pray for winding up of a company. In this regard, the respondents have placed reliance on the following judgment in the case of Kamal Kumar Dutta and another Vs. Ruby General Hospital and others, 2006 (7) SCC 613; It was held in paragraph 30 as follows:-

"It is not necessary that in every case the relief of winding up should be made. It is an option with the Tribunal if it considers that in order to bring to an end the matter complained of, it can pass orders for winding up if it is just and equitable or it can pass such order as it thinks fit. It does not mean that in every case such winding-up order needs to be passed."

It is pertinent to note that the Apex Court in the aforesaid judgment did consider its earlier judgment in Hanuman Prasad Bagri (Supra), upon which the appellants are placing heavy reliance.

Notwithstanding above, a perusal of Section 398 of the Companies Act shows that the C.L.B. is not required to record a finding. It simply says that 'if the Court is of the opinion'. Opinion does not mean 'recording of opinion'.

The new 8th Edition of the Oxford Dictionary gives following meaning to the word 'opinion' -" your feelings or thoughts about a subject, rather than a fact'. It has been put as synonyms to the word 'view'. For example, I would like a second opinion (advised from another person) before I make a decision'.

It can be seen that the tribunal has definitely formed an opinion before applying Section 397 or 398. To insist for an express finding in a bookish language, is asking for too much.

An appeal is continuation of the proceeding of lower court. Ample opportunity was given to the lawyers arguing before this Court to put their cases on merits. At one stage, Mr. Prashant Chandra, Senior Advocate had offered for an amicable solution and the Court had readily agreed to the proposal. Time was granted and a date was fixed for the respective parties to meet. Even IREDA was directed to be present in the reconciliation proceedings. Despite the meetings, fixed by the Court nothing came out of this attempt. The appellants opted out of their own proposal. This goes to show that the attitude of the appellant was that of stubbornness and oppression.

Mr. Prashant Chandra for the appellants has further argued that another basic ingredient for exercise of jurisdiction under Section 397 and 398 is that acts of oppression complained of should be continuing. According to the appellants Company Petition No.59 of 2011 is primarily based on validity of the meeting dated 29.4.2011 and appointment of Additional Directors. Appellants say that it has been the settled practice of the company to send notices of the Bord Meetings via email and the same had never been objected to by the respondent No.s 1 and 2. They have been attending all the Board Meetings. In fact, the meeting of 29.4.2011 has also been attended by respondent No.s 1 and 2. The main ground of attack is that the notice convening the meeting of the Board of Directors dated 29.4.2011 has not been issued in accordance with the provisions of the Companies Act, 1956. In fact, it was concealed that in the meeting dated 29.4.2011 the respondents herein have attended and participated in the deliberations which culminated in passing of Board resolutions. Significantly, the respondents have appended their signatures on the Attendance Register and have also signed the share certificates and other documents filed with the Registrar of Companies. Service of notice in a manner not prescribed under the Companies Act appears to be the sole allegation and on this basis the resolutions have been assailed and indirectly the issues which are concluded and final and duly recorded in the resolution passed from time to time have collaterally been assailed before the learned Company Law Board. It is settled law that mere irregularity in the service of notice would not amount to an act of oppression particularly when person complaining of the service had duly attended the meeting. In any event, with the passing of the Information Technology Act, e-mail and other electronic communications are valid and legal.

Controverting the argument of the appellants Mr. Mathur has drawn the attention of this Court towards the Board Meeting held on 22.4.2011. The minutes of this meeting dated 22.4.2011 are available at page 161 of Book-2 supplied by the appellants which reads as under:-

"MINUTES OF THE MEETING OF THE BOARD OF DIRECTORS OF HIMALAYA HYDRO PRIVATE LIMITED HELD ON MONDAY THE 22nd DAY OF APRIL 2011 AT 10.00 A.M. AT ELLAA HOTELS, HILL RIDGE SPRING, GACHIBOWLI, HYDERABAD-500 032.

DIRECTORS PRESENT:-

1.Sri A. Balraj

2.Sri R. S. Reddi

3.Smt. O Nirmala

4.Sri K. V. Vikram Reddy

5.Sri K. V. Raghav Reddy PROCEEDINGS OF MEETING:-

Chairman: Sri A. Balraj was unanimously elected as Chairman of the meeting and he occupied the chair.

I.TO GRANT LEAVE OF ABSENCE TO DIRECTORS WHO EXPRESS THEIR INABILITY TO ATTEND THE MEETING.

Leave of absence was granted to Sri A. K. Jhunjhunwala & Sri P. C. Jhunjhunwala who expressed their inability to attend meeting.

II.TO CONFIRM THE MINUTES OF THE PREVIOUS BOARD MEETING OF DIRECTORS HELD ON 28th DAY OF FEBRUARY, 2011:

The Chairman placed on the table the minutes of the meeting of the Board held on 28th Day of February, 2011 which were read and confirmed by the Board.

III.TO CONSIDER AND APPROVE THE ALLOTMENT OF 45, 80, 346 NUMBERS OF EQUITY/PREFERENCE SHARES AT RUPEES 10 EACH.

The Chairman confirmed that that the authorized share capital of the company has been increased from Rs.22 crores to Rs.37 crores, by way of Rs.15 Crores of additional authorized capital in the form of 1,50,000 of preference shares of Rs.10 each. The board considered the matter of allotment of shares for Rs.45,803, 465 of share application money invested by various investors.

Mr. K. V. Vikram Reddy and Mr. K.V. Raghava Reddy said that 4,96,900 shares must be allotted to Mrs. Neelema K. Reddy at par value of Rs.10/share for part portion i.e. Rs.49,69,000 portion of the Rs.98,829,620 invested by her on October, 04, 2010. Mr. R. S. Reddi said 4,50,000 of these 4,96,900 equity shares must instead be allotted to Viz Infra Projects which had invested Rs.45,00,000 into the company on November 22, 2010. Mr. K. V. Raghav Reddy and Mr. K. V. Vikram Reddy objected to this on the grounds that Neelema K. Reddy's investment was made prior to the investment made by Viz Infra Projects and share allotments must be made to her investment first. The matter was deferred to the next board meeting.

It is a clear indication that the appellant was planning to allot the shares to Mrs. Neelima K. Reddy.

Mr. R. S. Reddi wanted a term sheet from Mr. K. V. Vikram Reddy and Mrs. Neelema K. Reddy before allotting preferred shares. Mr. K. V. Vikram Reddy said that he and his wife Mrs. Neelema K. Reddy were existing shareholders in the company and had invested in the company in good faith. Mr. K. V. Vikram Reddy said that they had invested these funds during a period when the company was going through a serious financial crisis and other shareholders/promoters had said they were not in a position to invest further into a company. This matter had been pending for 6 months and three board meetings. Mr. K. V. Vikram Reddy said given that he and his wife were existing shareholders in the company, the terms of investment could easily be discussed and resolved during the board meeting. The matter was then deferred to the next board meeting.

The Board noted that several shareholders in the company may fall in the category of non resident Indians. The board noted while RBI regulations allowed 100% foreign investment in the power sector via the automatic route, the company may still need to file certain statutory reports with appropriate authorities. The board asked Mr. K. V. Vikram Reddy to get a legal opinion in this matter and take necessary steps to file reports as per applicable rules and regulations."

It is alleged that when the appellants failed to make allottment on 22.4.2011 to the appellant No.1 suo-moto changed the constitution of Board on 29.4.2011 and made allottment to himself, his wife and his father and in the Board Meeting dated 25.5.2011 for which notice was given to the respondents on 20.5.2011.

The Board asked Mr. K. V. Vikram Reddy to get legal opinion in the matter and take necessary steps for filing reply as per applicable rules and regulations. Almost about a week thereafter a notice was issued on 28.4.2011 fixing another meeting to be held on very next day i.e. 29.4.2011.

The Minutes of meeting dated 29th April, 2011 has been annexed as annexure R-12 on page 164 to 167 which reads as under:-

"MINUTES OF THE MEETING OF THE BOARD OF DIRECTORS OF HIMALAYA HYDRO PRIVATE LIMITED HELD ON MONDAY THE 29th APRIL, 2011 AT 10.00 AM AT ELLAA HOTELS, HILL RIDGE SPRING, GACHIBOWLI, HYDERABAD-600 032.

DIRECTORS PRESENT:

1.Sri A. Balraj

2.Sri R. S. Reddi

3.Smt. O. Nirmala

4.Sri K. V. Vikram Reddy

5.Sri K. V. Raghav Reddy.

PROCEEDINGS OF MEETING:

Chairman: Sri A. Balraj was unanimously elected as Chairman of the meeting and he occupied the chair:

I.TO GRANT LEAVE OF ABSENCE TO DIRECTORS WHO EXPRESS THEIR INABILITY TO ATTEND THE MEETING.

Leave of absence was granted to Sri A. K. Jhunjhunwala nd Sri P. C. Jhunjhunwala who expressed their inability to attend meeting.

II.TO CONFIRM THE MINUTES OF THE PREVIOUS BOARD MEETING OF DIRECTORS HELD ON 22ND DAY OF APRIL, 2011:

The Chairman placed on the table the minutes of the meeting of the Board held on 22nd Day of April, 2011 which was read and confirmed by the Board.

III. TO CONSIDER THE MEANS TO RAISE THE RS.11 CRORES OF ADDITIONAL CAPITAL (INCLUDING THE SHARE APPLICATION OF RS.45,803,465 CURRENTLY PENDING ALLOTMENT) REQUIRED TO COMMISSION MOTIGHAT AND TANGA SHPS AND TO RESOLVE THE ONGOING FINANCIAL/MANAGEMENT CRISIS.

In the course of discussion of the means to raise Rs.11 Crores of additional capital required to commission Motighat and Tanga Small Hydro Power Projects and to resolve the ongoing financial and management problems, Mr. K. V. Vikram Reddy informed the Board that he is willing to get the Res.3 Crores of company bank fixed deposits currently pledged with IREDA by replacing it with his personal property of equivalent value. The Board appreciated and approved the offer by Mr. K. V. Vikram Reddy to release the company's fixed deposits currently held by IREDA by pledging his personal assets.

Mr. K. V. Vikram Reddy also informed the Board that raising additional capital from Private Equity funds was going to be a long drawn process. He informed the board that while there was interest in the sector, most funds seemed to me more interested in making large capital infusion in companies that had ambitious growth plans. He informed the Board that as the company could not afford to further delay the implementation of its Tanga project he was willing to raise the additional Rs.6.5. Crores required from his family sources. He proposed that his group will accept common equity at Rs.10/Shares for any new capital raised and for the Rs.4,04,03,466 investment already made by his family that was currently awaiting share allotment. Alternatively, Mr. K. V. Vikram Reddy proposed that his family would accept fully convertible, 7.5 cumulative dividend, non-redeemable preferred equity for the investment already made and contemplated. Each preferred share would be convertible to 1 common equity share at a price of Rs.10/- equity share of Rs.10 per value (i.e. 1:1 conversion ratio) anytime at the investor's option or compulsorily at the end of 20 years from the date of allotment. Mr. K. V. Vikram Reddy informed the Board that the preferred dividend rate proposed for his investment is significantly lower than the prevailing market rates including that typically charged by Private Equity Firms. The Board deferred Mr. K. V. Vikram Reddy's proposal to the next Board meeting.

Mr. K. V. Vikram Reddy said that given some of the problems the company was facing with its Motighat and Tanga projects the Board should consider the induction of additional directors with strong professional and infrastructural/power sector experience to strengthen the functioning of the company and better manage its affairs.

The Board was informed that Mr. Mavilla Subba Rao is proposed to be appointed as Additional Director of the company pursuant to the provisions contained in section 260 of the Companies Act, 1956 read with Articles of Association of the company. The consent letter of Mr. Mavilla Subba Rao containing the declaration that he is not disqualified from being appointed as a director was presented to the Board. The Board was informed of Mr. M. Subba Rao's professional background and credentials. The Board was informed that Mr. M. Subba Rao hold a B.E. In Civil Engineering from S. V. University, College of Engineering, Tirupathi. He has over 40 years of professional experience. He worked in various capacities as in the Panchayat Raj Dept., Govt. of Andhra Pradesh and retired as its Chief Engineer in 2001. He has rich experience in executing large civil engineering projects with outlays of several hundred crore rupees. The Board was informed that from 2001 to 2011 he has served as the Chief Engineer/V.P. Projects/Advisor with BSCPL Infrastructure Ltd., a Hyderabad based infrastructure Company with an annual turnover of about Rs.1400 Crores. The Board was informed that the company would benefit given his experience in infrastructure/constructions and engineering sector.

The Board was informed that Mr. Venketarami Reddy is proposed to be appointed as Additional Director of the company pursuant to the provisions contained in section 260 of the Companies Act, 1958 read with Articles of Association of the company. The consent letter of Mr. Venkatarami Reddy containing the declaration that he is not disqualified from being appointed as a director was presented to the Board. The Board was informed of Venkatarami Reddy's professional background and credentials. Mr. S. Venkatarami Reddy holds a B.E. (Electrical Engineering) and joined Andhra Pradesh State Electricity Board in 1980 and worked in various capacities in power generation and transmission systems. He retired as Chief Engineer in 1996 in charge of Transmission and Distribution of power in the state of Andhra Pradesh. The Board was informed that the company would benefit tremendously given his wealth of knowledge in the power sector. The Board was informed that Mr. Gali Venkatesh Rao is proposed to be appointed as Additional Director of the company pursuant to the provisions contained in section 260 of the Companies Act, 1956 read with Articles of Association of the company. The consent letter of Mr. Gali Venkatesh Rao containing the declaration that he is not disqualified from being appointed as a director was presented to the Board. The Board was informed of Mr. Gali Venkatesh Rao's professional background and credentials-Mr. Gali Venkatesh Rao is a senior lawyer practicing at the Delhi High Court and Supreme Court of India since 1986 and has appeared in about 3000 cases in the Supreme Court. He had wide experience in Commercial Laws, including customs and excise, Corporate Law, Taxation, Banking, Contracts etc. He has advised large public sector and private sector companies including National Hydro Electric Corporation, National Thermal Power Corporation, Bharat Heavy Electricals, Oil and Natural Gas Company of India Gas Authority of India, State Bank of India, WorldPhone Group Inc. USA etc. He has been counsel for Central Government of India and assisted Attorney General of India and other law officers in matters of national importance. In addition he has been counsel for various states including Haryana, Himanchal Pradesh, West Bengal and Gujarat. He has been a visiting faculty at IIM-Lucknow, Delhi University, Jamia Milia Islamia and Amity Business School and has published articles in various Journals and Magazines on matters of law. The Board was informed that Mr. Gali Venkatesh Rao's broad knowledge of corporate law and experience in working with a variety of large companies, including energy and financial services companies; would prove to be very beneficial to the company.

In consideration of the proposal to induct the three additional directors, Mr. R.S. Reddi and Mrs. O. Nirmala, promoter directors/guarantors to IREDA loans expressed the view that since the induction of additional directors was informed in the course of the discussion pertaining to Item (3) of the agenda i.e. raising additional capital required to commission Motighat and Tanga SHPs and to resolve the management problems facing the company, the proposal may be postpones to the next meeting for consideration.

Mr. K. V. Vikram Reddy made a firm plea to the Board that the company needed the services of independent directors with strong professional experience to help manage some of the problems it was dealing with. He informed the Board that given their varied experience in infrastructure, power and general corporate affairs, the additional directors would add tremendous value to the company as it seeks to speedily commission its Motighat and Tanga Hydro Power Projects and stabilize their operations.

Following this, the Board voted on the proposal to induct the three additional directors. The proposal was carried by a vote of 3 to 2. Mr. A. Balraj, Chairman, Mr. K. V. Vikram Reddy and Mr. K. V. Raghav Reddy, Directors voted for the proposal to induct Mr. Mavilla Subba Rao, Mr. S. Venkatarami Reddy and Mr. Gali Venkatesh Rao as additional directors into the Board with effect from April 29, 2011. Mr. R. S. Reddi and Mrs. O. Nirmala, Directors voted against the proposal.

THE BOARD THEN PASSED THE FOLLOWING RESOLUTIONS;

1."RESOLVED THAT pursuant to the provisions of Section-260 and other applicable provisions. if any, of the Companies Act, 1956 and subject to Articles of Association of the Company, the consent of the Board be and is hereby accorded to appoint Mr. Mavilla Subba Rao as an Additional Director of the company to hold office with effect from April 29, 2011.

"RESOLVED FURTHER THAT Mr. K. V. Vikram Reddy, Director of the company be and is hereby authorized to sign and file the prescribed E-Form:32 with Registrar of Companies and to do all such acts, deeds and things as may be required in this regard."

2."RESOLVED THAT pursuant to the provisions of Section-260 and other applicable provisions if any, of the Companies Act, 1956 and subject to Articles of Association of the Company, the consent of the Board be and is hereby accorded to appoint Mr. S. Venkatarami Reddy as an Additional Director of the company to hold office with effect from April, 29 2011.

"RESOLVED FURTHER THAT Mr. K. V. Vikram Reddy, Director of the company be and is hereby authorized to sign and fie the prescribed E-Form : 32 with Registrar of Companies and to do all such acts, deeds and things as may be required in this regard."

3."RESOLVED THAT pursuant to the provisions of Section-260 and other applicable provisions if any, of the Companies Act, 1956 and subject to Articles of Association of the Company, the consent of the Board be and is hereby accorded to appoint Mr. Gali Venkatesh Rao, as an Additional Director of the company to hold office with effect from April 29, 2011.

"RESOLVED FURTHER THAT Mr. K. V. Vikram Reddy, Director of the company be and is hereby authorized to sign and file the prescribed E-Form: 32 with Registrar of Companies, Andhra Pradesh and to do all such acts, deeds and things as may be required in this regard."

IV The Board deferred items 4, 5, and 6 of the agenda for the next Board meeting."

There is no dispute between the parties that the Minutes of Meeting have been properly recorded.

A perusal of these minutes will show that Item No.s 1 and 2 were of formal in nature which were passed quickly. Item No.s 4, 5 and 6 of the agenda were deferred for the next Board Meeting. It was only Item No.3 for which the Board Meeting appears to have been called. By these facts, Mr. Mathur has been able to demonstrate that the sole purpose of the Meeting of 29.4.2011 was to appoint three new Directors and to reduce the respondents to a ridiculous minority. Rest of the items of the agenda were neither important nor the appellants were keen on them.

Under item No.3, it has been recorded as under:-

"Mr. K.V. Vikram Reddy stated that given some of the problems the company was facing with its Motijheel and Tanga Projects, the Board should consider the induction of Additional Directors with strong professional and infrastructure/power sector experience to strengthen the functioning of the company and better manage its affairs."

Mr. Mathur has hastened to add that appointment of Directors is serious business. It was planted by way of conversation but it was not on agenda. He was at pains to emphasize and elaborate that the said Item No.3 should have been placed in the agenda of the next Board meeting but the appellants had sinister design in their minds. In subsequent paragraphs, we see that Mr. Mavilla Subbarao, Mr. Venketa Rama Reddi and Mr. Gali Venktesh Rao were proposed to be taken on board as Additional Directors because of their high professional abilities.

Interestingly, their consent to join as Additional Directors of the Board has already been obtained by the appellants on the following dates: Prior consent of Sri Subba Rao, dated 20.4.2011, prior consent of Mr. Venketesh Rama Reddy dated 25.2.2011, prior consent of Mr. Gali dated 25.4.2011.

It is clear that the argument of Mr. Mathur carries sufficient weight and it appears that there was a preplanned scheme in the mind of the appellant including the Director, IREDA, Mr. A. Balraj. The proposal was floated and decision was in favour of the appellant 3:2. By reading the minutes of meeting it is clear like mirror that petitioners/respondents Mr. R. S. Reddy and Mrs. O. Nirmala, Directors were taken by surprise and they could do nothing except to vote against the proposal. Mr. Mathur has narrated this incident to substantiate his claim that act of suppression and oppression had started by the appellants. In the meeting dated 22.4.2011 the appellants wanted to allot substantial number of shares to one Ms. Nilima K. Reddy but when this attempt was thwarted three Additional Directors were appointed in a surprise move by the appellants. This constituted the act of oppression and suppression and by latter actions the oppression and suppression is continuing further.

Mr. Mathur has added that although the minutes of this meeting were not prepared and signed, the appellants informed the Registrar of Companies on 30.4.201 on the very next day through e-filing (by filling up Form-32) about the appointment of Additional Directors.

Mr. Mathur has tried to demonstrate the undue haste by which the Additional Directors have been inducted goes to prove his point about oppression and suppression. He has further informed that the whole incident was complained off before the C.L.B. through company petition filed on 20.5.2011. The Point No.6.2 at page 24 of the Book No.1 contains the details mentioned hereinabove:

6.2: The contents of the corresponding Para of the Petition not admitted for want of knowledge and the Petitioners are put to strict proof of the same. In fact, respondent No.2 and respondent No.3 (who is a qualified civil engineer with over 40 years of experience in civil engineering and construction) had visited and surveyed the project site extensively before making a decision to invest in the respondent No.1 Company. It is respectfully submitted that the initial subscribers to the Memorandum and Articles of Association of the respondent No.1 Company, Mr. Aditya Jhunjhunwala and Mr. P.C. Jhunjhunwala, the founder directors, sold all their equity holdings in the Company to the Petitioners and Respondents in 2004 and therefore are no longer involved in the affairs of the Company. They have not attended a single Board meeting of the Company since 2004 and have in fact tendered their resignations from the Board of Directors which was placed at Board meeting dated June 26, 2010 for a decision to be taken by the Board.

Mr. Mathur has also referred page 16 of the Book No.4 supplied by the appellant which is a compilation about the correspondence/e-mails. Page 16 contained text of e-mails dated Friday, 20th May, 2011, 4:13 p.m. This is a notice from Mr. Vikram Reddy to Mrs. R.S.Reddy/Mrs. O. Nirmala and it reads as under:-

"The emergency Board meeting has been convened due to your own actions and communications which require immediate attention of the Board. Therefore, kindly attend the meeting as scheduled."

Notice was sent through e-mail on Friday 20, May, 2011 at 4.10 A.M. informing that an emergency meeting of the Board of Directors is to be held at 1:00 p.m. on 21st May, 2011. This was sent by the appellant. Mr. Mathur pointed out that 4.10 A.M. is a time, dead in the night. Notice at such hour can hardly be attended to.

Petitioners replied on Friday 20, May, 2011 at 12:32 p.m. that they will not be able to attend the Board meeting on 21st May, 2011 which was very short notice of one day only. Incidentally, petitioners were out of station. It was requested that since the agenda was important, the same may be adjourned for another day. The e-mail was again replied back on Friday 20 May, 2011 at 4.13 p.m. Request of the respondents was turned down.

It was replied that emergency Board meeting was convened due to actions of the petitioners/respondents and, hence, it can not be extended. The were advised to attend the Board meeting.

Mr. Mathur says that agenda No.5 in this emergency meeting was to appoint Managing Director for the company but there was no agenda to appoint Mrs. Nirmala Kurli Reddy, the Additional Director. Mr. Mathur also stated that the meeting was held in the absence of the petitioners/respondents but the minutes of this meeting were not circulated. Only extract of the minutes were circulated which are at page 56 of Book No.4 given by the appellants.

Mr. Mathur has informed that full text of the minutes of meeting has been annexed with the contempt petition filed by the appellants on page 340 of the contempt petition. Through the meeting held on 21.5.2011 Mrs. N. Kurli Reddy has been appointed as Additional Director. Mr. Mathur has argued that this action was also a continuous act of oppression and suppression and the requirements of Section 397 and 398 are fully met, hence the orders issued by the CLB were absolutely correct and the arguments raised by Mr. Prashant Chandra that there was no continuous act of oppression and suppression is belied.

The Court put a querry to Mr. J.N.Mathur whether if the company petition was filed on 20.5.2011 how the subsequent action irrespective of the meeting held on 21.5.2011 could be taken cognizance of by the CLB while deciding the continuous acts of oppression and suppression, Mr. Mathur replied that these acts were brought to the knowledge of the Board by subsequent document although no formal amendment application was moved or allowed by the CLB. At the same time, he has also argued that company appeal is a continuance of the proceedings before CLB and the High Court can very well see the acts of oppression and suppression in the company appeal. The High Court can very well come to the conclusion that the CLB was justified in giving directions.

It was further insisted that Section 397 and 398 can not be invoked if there is only one single act of oppression. It has been envisaged that there should be continuous act of oppression. One wonders what will happen where the single act is so oppressive that it gives a death-blow to the other party, where no further act would be possible or will be required.

In the present case, the appellant NO.1 has gone for the "Jugular Vein" by changing the number of Directors from 5 to 8. It was a death-trap with six Members on one side. The two respondents of this appeal were almost reduced to a non-entity. Clearly in this case, the Directors were appointed in a surprise move. The qualification of the Directors is not in doubt but they were inducted on the sole initiative and invitation of appellant No.1. Naturally, they would be loyal to appellant No.1 only. By a single move, the appellant had taken away everything from the hands of the respondents. No further act of oppression was required in a small, company, where there are only 4 Directors. An addition of three more Directors, was naturally going to tilt the balance in favour of the appellants irretrievably. I am reminded of a question put up in a quiz programme. The question:- On two different trees few birds are sitting on tree-A and few birds on tree-B. The first group of birds says that if one bird from your side comes to my side, we will become equal in strength. The other side replies:- If one bird comes to our side we will be three times of your number. How many birds are there on each tree ?

Answer:- 3 birds on tree-A and 5 birds on tree-B. If one bird goes from tree-B to tree-A they will become equal i.e. 4:4 but in case one bird goes from tree-A to tree - B the ratio will become 2:6.

In the present case, the situation is very similar to this symbolic story. Only there is no chance of any bird going to the tree-A ever.

Even if Mr. Balraj of IREDA was to remain on the side of the respondents still the decision would always be in favour of appellant No.1. But, in case, Mr. Balraj also chose to side with appellant No.1, the respondents will be hopelessly reduced to 6:2 ratio. The respondents were reduced to a no win situation for ever.

5.Concealment of matterial fact and approaching the learned Company Law Board with unclean hands :

and

9. On confession of guilt, sentence has to be imposed. After accepting that affidavit was not correct, no option but to dismiss the company petition:-

Point No. 5 and 9 are connected with each other. They are being discussed jointly.

The argument is to the effect that respondents have allegedly suppressed the fact that a civil suit was pending before the civil court at Hyderabad while the company appeal was preferred by the respondents before the CLB. This fact has been disclosed on page 40 of the company petition filed before the CLB. Mr. Mathur has explained that a civil suit was filed at Hyderabad which was withdrawn on 18.5.2011 with liberty to file company petition before the CLB. The company petition was filed on 20.5.2011. So at the time of filing of the company petition, the suit had already been withdrawn. The respondents say that this argument is totally misconceived. It is not substantive and relevant to the subject at hand.

In the affidavit filed by the petitioners in the company petition there is one defect in the whole procedure. The company petition was filed on 20.5.2011 but the affidavit has been sworn on 14.5.2011. A mistake and a typographical error has crept in somehow. This can be termed as an irregularity and not an illegality if we go to the root of the matter. This is not a fact which will cause any prejudice to either of the parties or would give any undue advantage to the petitioners. The Court feels that this is a minor mistake which can not be overstated in the facts and circumstances of the case. This mistake has crept in paragraph 23 of the company petition. In reply to the company petition no such objection has been taken. Since this factual mistake was not take up by the appellant/opposite parties in the company petition, it can not be opened up in appeal.

During the course of the argument at the very fag end Mr. Prashant Chandra pointed out that respondent No.s 3, 4, 5 and 6, who have been arrayed as proforma respondents have not been issued notice and they have not been heard.

6. Reliefs not claimed for can not be granted:-

An argument has been raised that the C.L.B. has granted such reliefs which were not prayed for. Although this has not been detailed but it will be interesting to examine the role of C.L.B. as envisaged under the Companies Act. Under Section-397and 298 powers have been given to the C.L.B. to pass appropriate orders if certain conditions are met.

It is clear that the legislature has given to the Tribunal, the 'Role of Mature Guardian', in a children's home. This guardian has to see that all the children in the family get equal opportunity to grow according to their own capabilities and merits; that the big brother should not be able to bully the younger one or the physically strong should not take away a weak's porridge."

At the same time, the guardian has to see that though there may be a case where the complaint of a child against another may be justiciable but the action would, otherwise, not be in general interest of the children. Sometimes, scolding will do instead of denying a lunch. The guardian has to see all aspects including the age, psyche and the general welfare of the family also. In such a situation, no straight-jacket formula of discipline can be adopted in every case. At times, the guardian has to invent new ways and means to bring to an end to the matters complained off. Tribunal is expected to improvise on the traditional methods. There can not be any fixed rule or yardstick in every case. Each case will have to be judged on its own merit and only experience and good conscience can be the guiding factor for the tribunal to pass orders while dealing with Section 397 and 398.

In the present case, apart from the interest of the rival parties, national interest is also involved. This country is fervently battling against power crunch. Electricity is the demand of the day. This Company is involved in power production. Winding up of such a Company would not only be prejudicial to the interest of the members but it would harm the interest of the nation as well. In such a situation, the C.L.B. has tried its best to pass orders which were equitable and necessary to keep the concern going. The Court is of the opinion that the directions issued by the C.L.B. are just and equitable and have been passed in the best interest of the Company.

INDIAN RENEWABLE ENERGY DEVELOPMENT AGENCY ( IREDA):

It is also one of the players in the game of this company appeal. A counter affidavit has been filed by IREDA. It has been stated that the IREDA is the agency which is financing the project to a large extent. The Chairman of IREDA is Mr. A. Balraj, who has been present in almost all the meetings as Director. Most of the times he was requested to preside over the meetings of the Board of Directors. His role has been that of vigilant guard, who wants to see that his money is protected and is being used safely in a manner which will result in profit to the agency. IREDA was not made a party by the petitioner-respondent in the proceedings before the CLB. However, despite the IREDA not being a party, the CLB vide order dated 14.11.2011 issued certain directions to be complied with by IREDA. Being aggrieved by the said ex-parte directions, the IREDA preferred a company appeal bearing No.8/2011 before this Court. This Court vide order dated 13.11.2011 set aside the directions issued by the C.L.B. against IREDA. The CLB was given the liberty to issue directions to the IREDA in case it so chooses after giving notice to IREDA.

The IREDA was not made a party in the company appeal before this Court. On 6.1.2012 the Senior counsel appearing on behalf of the appellants orally requested this Court for impleadment of IREDA to explore and consider their proposal for splitting the two projects between the warring shareholders of the Company as amicable settlement between them.

In view of such oral prayer and keeping in view the above purpose as proposed by the appellants, this Court vide order dated 6.1.2012, directed the appellants to implead IREDA. Court observed the loaning agency and naturally its presence and concurrence will be necessarily required if the split has to take place. It further directed that since IREDA is situated in Delhi and it is a convenient place for arranging a meeting between both the parties, a meeting shall be arranged in presence of an official from IREDA who shall sit with them and sort out the intricacies of this split.

It has been submitted by Sri R. C. Tewari that in compliance of the directions issued by this Hon'ble Court vide order dated 6.1.2012, IREDA convened a meeting on 9.1.2012 of both the group of shareholders. However, despite effort no mutual settlement between the warring group of shareholders which is found viable for the project and in IREDA's interest as lender could be arrived at for consideration and examination. It has been submitted that during the course of meeting, it was clearly explained by IREDA to both parties that unless both parties submit a common proposal, IREDA will not be able to look into any individual requests and further explained that issue of splitting the project would also be required to be examined by it for ascertaining viability and feasibility of split or otherwise any other settlement in the interest of project and IREDA as Lender and main stake holder in the Projects.

Mr. Tewari further submitted that since the impleadment of IREDA in the above-captions Company Appeal No.7 of 2011 was directed for a particular purpose, which in absence of amicable settlement between the warring parties could not materialize and, therefore, it is most humbly prayed that the impleadment of IREDA be recalled and consequently, notice issued to IREDA be discharged.

Mr. Tewari has also submitted that IREDA is a lender to the Company and therefore, is neither involved nor can be dragged in any inter-se dispute between the shareholders of a borrower company. The rights and obligations of IREDA are governed by the Loan Agreements executed among with the respondent Company with IREDA. About 70% of the investment in the Projects belongs to IREDA and the entire Assets of the projects are charged to IREDA.

It was further submitted that during the year 2011, allegedly, some dispute arose among two groups of shareholders as to the bifurcation of the projects. It is submitted that IREDA never recognized any bifurcation of project group wise. It was clarified by IREDA vide its letters dated 30.6.2011 and 9.9.2011, clearly explaining to both group of shareholders that IREDA may not like to intervene in inter-se dispute between the shareholders groups and further requested both groups to resolve the issues at the earliest so that it does not impact the project implementation/operation. Thus, it is evident that IREDA being a lender to the Company cannot be dragged in any inter-se dispute between the shareholders.

It was further submitted that the IREDA being a lender, cannot be burdened with any obligation to run or oversee the day to day to implementation of project of the Company, which will result into the conflict of interest. It was submitted that if any directions are issued by this Hon'ble Court to IREDA to oversee or run the project, the same will be prejudicial to the rights and interest of IREDA as lender to the Company and shall effect the right of independent decision making qua determination and projection of its lending to the Company. It is further submitted that IREDA does not possess any expertise to run or oversee the project. It was submitted that even otherwise this Hon'ble Court has already, vide its order dated 30.11.2011, set aside the directions issued by CLB to IREDA to oversee the project, which cannot be recalled in an ancillary proceeding and can only be done by filing an appeal before a higher court. Splitting of the project, although not commercially advisable and also likely to be unviable, can however be examined by IREDA separately on receipt of common amicable settlement amongst shareholders, if submitted to it. It is submitted that during the meeting held on 9.1.2012, IREDA clearly explained both the parties that the splitting of the project although not economically advisable, the same will be examined on the receipt of common amicable settlement among with warring shareholders/promoters.

It was further submitted that no amicable settlement was reached between the parties and therefore the occasion to examine the split of project by IREDA did not arise. It is pertinent to mention here that IREDA during the meeting explained to both the parties that unless both parties submit a common proposal, IREDA will not be able to look into any of their individual requests and further explained that any request if made will have to be examined by IREDA separately as per its guidelines on resolution of disputes and the issue of spilling the project and its viability and feasibility can be examined and looked into by IREDA only after receipt of the common understanding and agreement between the warring shareholders and the combined proposal to be submitted by them.

The IREDA has prayed that the present appeal qua IREDA be dismissed and the notice issued to IREDA be discharged.

IREDA filed separate appeal asking the High Court to absolve the IREDA of the responsibility of supervising the projects. The challenge was based on the ground that the IREDA was not a party to the company petition. IREDA was not consulted when the C.L.B. gave this order to IREDA. Company Appeal was moved with a limited prayer. It came up with a simple argument that since no opportunity of hearing was given to them, hence the order of CLB bestowing the liability of looking after the work of the project, was totally illegal. The argument was complete in its legality hence the Court allowed the company appeal and set aside the limited portion of the order which was concerning IREDA. The order of the High Court was passed on 30.11.2011.

7. Once half of the judgment has been set aside by this Hon'ble Court vide order dated 30.9.2011, the remaining half automatically goes as it is incapable of compliance:-

An argument has been raised by Mr. Prashant Chandra that since part of the order of the CLB has been held illegal hence the whole order should be set aside. It is very clear that part of the order concerning IREDA was clearly separable from the main order. In fact, it surprised the Court when IREDA moved such an application in the company appeal. The CLB had tried to protect the interest of IREDA rather than fastening any liability upon it. Since IREDA was the lending authority, hence it was nice on the part of the CLB to have cared for the interest of IREDA. Soul searching by IREDA may leave them to realize that their argument runs contrary to their conduct and interest.

Mr. A. Balraj has been chairing the meetings of the Board of Directors through out. He became the Director of company only because it protected the interest of IREDA. On one hand, he chairs the meetings and participates even in the voting and on the other hand, shirks from the responsibility of looking after the project work. This Court does not want to attribute any malice or bad intention to the move of IREDA but it is clearly not tenable. The order of C.L.B. is very innocuous. Following directions were issued to the IREDA which are recorded in paragraph-VI of page-7 of the judgment:-

"VI. IREDA is hereby required, within one week of receipt of this order, to appoint an expert at Tanga SHP site to oversee day-to-day progress in the implementation of the project who shall send daily report on e-mail/fax to IREDA, Facilitator, IREDA nominee directors and to the R-1 Company, project's corporate office, (to be decided by the Petitioners in consultation with the Respondents, and the Facilitator), the daily report must also include suggestions/solutions. IREDA is further required to nominate two directors on the Board of the R-1 Company within one week preferably from Hyderabad or in the vicinity of Hyderabad to make fortnightly meetings of the Board feasible."

No doubt an expert was to be appointed to oversee the SHP and Tanga project by IREDA. But simultaneously two Directors of IREDA were also appointed on the Board of Directors. Mr. A. Balraj was already there. In such a situation, any cost incurred in appointing the expert could have been borne out from the company by a simple resolution, alternatively, the IREDA could have borne the expenses itself. Where crores of rupees are invested, few thousand rupees as a security for that money was neither excessive nor unreasonable. The money would have been more secured and the petitioners-respondents could not have wriggled out from there and could not have absented themselves from working hard to complete the project. By throwing away the right of appointment of two Directors and appointment of expert, IREDA might feel light in its duties but the opportunity of providing security to the loan has been deliberately lost by IREDA.

The argument has been raised by Mr. Mathur that IREDA has done so in order to help the appellants. He has argued that an attempt has been made to provide an argument to the appellants that since part of the order is illegal hence the whole order is bad. According to Mr. Mathur, it was a tool so given in the hands of appellants to insist for stay of the order of the C.L.B. from this Court. As discussed above, the directions to the IREDA can easily be segregated from the main order.

It may also be noted here that this Court while passing the order in Company Appeal No.8 of 2011 filed by IREDA, had clearly mentioned two things:-

(a) That the C.L.B. was given liberty to pass orders with regard to IREDA afresh, if it so chose. It is clear that the direction was set aside only on the ground of technicality. This Court had not found anything substantially wrong with the direction.

(b) That while passing the order, it was, also mentioned that this order shall not affect the merit of other appeals.

It is necessary to quote the said order which is as follows:-

"Heard Sri Vibhu Bakhlu, Senior Advocate assisted by Sri Abhishek Anand for the appellant. Learned Senior Advocate has argued very briefly and pointedly. He says that the appellant is a Government Agency and it is not concerned with inter-se dispute between the Directors of the company. It is concerned only with the loan it has given to the company. In the order passed by the Company Law Board certain directions have been issued in paragraph-70 and 71. Learned counsel has specifically drawn the attention of this Court towards the direction in paragraph-71 (VI). By this direction, the Company Law Board has directed the appellant to appoint one expert and two Directors to oversee and monitor the progress of the 'Tanga' Project. The appellant says that they have never been issued any notice nor have been heard on this point and the ex-parte directions of the Company Law Board are detrimental to the interests of the appellant and they are not interested at the moment for appointment of such experts.

The counsel for the opposite parties-respondents Sri J. N. Mathur, Senior Advocate has defended the order of Company Law Board saying that this order has been passed only in the interest of the Company, however, he could not reply to the argument that IREDA was not heard before this order was passed.

Accordingly, this Court feels that the direction in the order passed by the Company Law Board, so far it relates to IREDA, needs to be set aside. Consequently that part of the order dated 14.11.2011 of the Company Law Board, New Delhi Bench, New Delhi in C.P. No.59/ND/2011 is set aside with the liberty to the Company Law Board that in case the Company Law Board still feels it necessary to continue with the directions given in paragraph-71 (VI) then IREDA may be issued notices and heard on the point and appropriate orders, if any, may be passed.

With these observations the appeal is disposed of finally.

It may be clarified that this order has been passed independent of the other connected appeals. Any observation in this order shall not have any bearing on the claims of the respective parties in other appeals.

Order Date :- 30.11.2011"

It is, thus, clear that the argument of the appellants is not tenable.

The main question to be decided in this appeal was whether there was a case of oppression and suppression under Section-397 and 398 of the Companies Act. The findings between the parties remained totally untouched even if direction to IREDA is taken out from the comprehension of the order. The argument of Mr. Prashant Chandra practically fails to convince the Court and leaves the Court wondering as to why IREDA chose to move company appeal No. 8 of 2011.

10. The order of the learned Company Law Board is bad for non-joinder of necessary parties:-

At this juncture, Mr. Prashant Chandra pointed out that respondent Nos.3, 4, 5 and 6 who have been arrayed as proforma respondents have not been issued notice and they have not been heard. In such a situation, any further hearing of the matter may be against the provisions of law specifically against the provisions of C.P.C. He further insisted that notices may be issued to the proforma respondents which was hurriedly resisted by Mr. J. N. Mathur, Senior Advocate. In this regard, he made the following arguments:-

Respondent No.s 3,4, and 5 have been arrayed as proforma respondents by the appellants. They have not challenged the order of CLB independently. They are not before this Court as appellants. The CLB has passed the order on 14.11.2011. Time for filing appeal is 60 days which has also lapsed. It can safely be assumed that respondent No.s 3, 4 and 5 have acquiesced to the judgment and order passed by the CLB. Respondent No.s 3, 4 and 5 were brought in as Directors in the company by resolution dated 29.4.2011. This resolution has already been annulled by the order of CLB dated 14.11.2011. Since they have not challenged their order of removal passed by the CLB, it can also be assumed that they have accepted that they were illegally inducted. This will also mean that it is accepted by them. It will also mean that their induction in the Board on 29.4.2011 was also illegal. It will also mean that they could not have participated in the meeting dated 21.5.2011 by which three persons were inducted including appellant No.2. In any case, the proforma respondents could have come only as appellants and they really did not want to say anything as respondents.

Mr. Mathur has argued that insistence of issuance of notice to the proforma respondents at this stage by the appellants is only a delaying tactics which was conveniently ignored when the hearing started. Mr. Mathur has argued that this insistence for notices was not made prior to grant of interim relief which was granted by this Court mid-way due to non-filing of counter affidavit by him. The stay was not granted on the basis of argument and merits of the case. Today when hearing is going on on day-to-day basis and as the stay is operating in favour of the appellants, the prayer is palpably loaded with malafides and malice. The Court feels that no useful purpose will be served by issuing notice to the opposite party No.s 3, 4 and 5 So far as respondent No.6 is concerned, he is the father of appellant No.1. In the company petition No.59 (M/B) of 2011 the respondent No.s 6 was respondent No.3 and he was an active respondents. It was up to him to challenge the order of C.L.B and join the band of appellants. The appellant No.1 has deliberately chosen to array him as proforma respondent. It can not be said that Sri Kurili Veer Reddy, the respondent No.6 is not in the know of the proceedings. Hence the plea of issuing notice to all such party is only a ploy to delay the proceedings and enjoy the benefit of the interim order.

Mr. Mathur has also argued and prayed that the interim order be vacated on the ground that the persons who did not challenge the order of the C.L.B are enjoying the status which they had voluntarily given-up vide order of the C.L.B. He elaborated that Director-ship of respondent No.s 3, 4 and 5 was annulled by the C.L.B. on the date of its judgment. At the time of filing the appeal before this Court the proforma respondent No.s 3, 4 and 5 were not Directors. The continued to remain out of the Board during pendency of this appeal till interim order was granted by this Court. In such a situation, it is just and equitable that the interim relief be vacated. He has also offered that if Mr. Prashant Chandra is willing to transpose the respondents as appellants under Order 1 Rule-10 of C.P.C., he has no objection. To this Mr. Prashant Chandra has replied that he has no instructions on this issue.

11. To determine quasi partnership, there has to be an agreement in writing and clear mention in the Articles of Association upon conversion of partnership into a company:-

In reply to this argument of Mr. Prashant Chandra, it has been submitted by Sri J. N. Mathur that firstly, the aforesaid issue is a pure question of fact and the C.L.B. has returned its finding based upon the facts of the instant case. The same cannot be considered as a question of law.

However, for the sake of responding to the appellants' issue, it is submitted that Himalaya Hydro Pvt. Ltd. is a Quasi Partnership concern based upon a tacit understanding according to which 50:50 parity and equity will always be maintained between appellants and respondents.

From the inception of the company in 2004, the respondent group and the appellant group have always maintained 50:50 control/shareholding in the company and therefore principles of quasi partnership are squarely applicable in the present case.

It is submitted that the appellants and respondents since 2004 have continuously acted as partners in the venture carried on as a private limited company, and controlled two projects separately without interference of one in another's, which is evident from the operation of Bank accounts by the respective groups, separately.

It should further be noted that the company has two separate bank accounts in the name of the respective projects, Tanga and Motighat. All the monies brought in by the respondents group are into their Tanga project Bank a/c only, which is evident from the list of shareholders in the Auditor's certificates.

Further, it is pertinent to note here that both the respondents are the Personal Guarantors to the entire Loans obtained from IREDA, New Delhi, for both Tanga SHP and Motighat SHP. The loans were sanctioned by IREDA, more on the support of Networth of both the respondents which is Rs.29.65 crores as against appellants No.1 and 2 Indian networth of Rs.5.63 crores.

Further, it is stated that to be a company in the nature of quasi partnership, such understanding need not be mandatorily in writing, such understanding has to be inferred from the facts and circumstances and from the conduct of the parties. It is further submitted that appellants and respondents accepted the principles of partnership wherein the buyout of one partner by the other partner was suggested in emails dated 1.10.2011 and 4.10.2011.

In terms of this understanding since March 2004, the Board was represented by two Directors each from the respondents group and the appellant group. That for over seven years, the appellants and respondents had equal representation on the Board of the company, controlling/managing their respective projects. Appellant No.1 had even requested as latest as on 30.3.2011 fro 50% contribution towards interest overdue of Motighat project for September 2010 payable to IREDA.

There had been a clear understanding that parity and equity will always be maintained and in this regard it may be noted that the respondents and appellants had maintained 50:50 for three years up to 7.3.2007.

However, there after the respondents share had gradually increased to 58% as against 42% of the appellants as on 24.3.2009 and 55% against the 45% up to 28.6.2009. Acting earnestly, the respondents have always maintained that shareholding pattern 50:50 between appellants and respondents, even when the respondents were in majority.

In this regard, reliance is placed on Needle Industries (India) Ltd. and another Vs. Needle Industries Newey (India) Holding Ltd. and others, (1981) 3 SCC 333, Shri Badri Nath Galhotra Vs. Aanaam private Limited and others, (2007) 76 SCL 241, K.N. Bhargava Vs. Trackparts of India Ltd. (2000) 36 CLA 291 (CLB), the courts in the aforesaid cases have held that it is the facts and circumstances of a particular case that reveals that a company is in the nature of partnership.

In the facts and circumstances of this case, on facts and conduct of parties, it is noted that until the appellants on 21.5.2011, issued ''anytime convertible shares', to their group to usurp control, there has been a tacit understanding of maintaining parity in equity even when more shares were issued based on the amounts brought into the projects. Even when the Authorized Capital of the company was increased in the EGM held on 25.3.2011, there was no change in the Equity Share Capital of the company and only the Redeemable Preference Share Capital was contemplated and accordingly carved out for increase in the Authorized Capital of the company by adding Preference Capital only. The appellants in violation of this arrangement, issued ''anytime convertible shares' with a malafide intention of gaining majority and illegally usurping the company. There has been equal representation on the Board. The appellants and the respondents understood themselves and acted as partners in the venture being run as a private limited company to manage and control two projects separately without interference of the one in another's. To be a company in the nature of quasi-partnership it is not necessary that it must have been converted into a private limited company from an existing partnership. It is also not necessary that there must be a written agreement to that effect. For all practical purposes, it was in the nature of quasi-partnership.

Plea against appointment of facilitator:-

The appointment of facilitator Mr. Harish Chandra Acharya, ex- Chief Commissioner, Ministry of Finance, Government of India as the facilitator has also been seriously challenged. It has been argued that choice of a particular person is totally arbitrary and without any nexus to the objective of completing the project. It has also been said that Mr. Harish Chandra Acharya has previously worked with the Chairperson of CLB hence the order of CLB is based on malice and personal choice. The counsel for the respondents Mr. Pinaki Mishra and Mr. J. N. Mathur on being confronted with this argument, have conceded that they will not have any objection if the name of Sri Harish Chandra Acharya is changed and some other facilitator is appointed by the Court. They said that they were not interested in a particular person but an expert who has worked for 34 years in this particular line will definitely come handy in giving a guideline and impetus to the project. The objection of the appellant does not carry much force and is not very relevant for the purposes of decision of this appeal.

It has also been argued that direction which have been issued by the CLB gives immense powers to the facilitator. A lot of protection has been given to the facilitator which is normally not available even to the constitutional authorities. It has been argued that such vast power and protection to the facilitator is likely to make him arbitrary and despotic. He may work against the interest of the company.

The Court finds that the allegations are totally unfounded. They are in the form of apprehension. Not one single misconduct has been leveled against the facilitator. Moreover, if there is a case of abuse of powers by the facilitator, it is always open to the authorities to move an application before the CLB which can reign in the facilitator. Further, the appointment was only till completion of the work. It is not a permanent posting. His appointment is more of a help than burden for the company. This argument is also frivolous and has been made only for the sake of it.

In view of the discussions made above, there remains no doubt that the questions of law framed by the appellants are not sustainable. It has been discussed threadbare that framing of issues, as suggested by the appellants, were not necessary at all. There was a clear case of oppression and suppression. There was no concealment of matterial fact and no relief has been granted which was not required under the facts and circumstances of the case. So far, half of the judgment being set aside by this Court is concerned, it is only a small part of the judgment, easily separable. All the eleven questions have been dealt with. The Court is of the opinion that the appellants have not succeeded in making out a case. The impugned order of Company Law Board dated 14.11.2011 is absolutely justified, based on equity and the circumstances of the case. It is upheld.

The appeal is, therefore, dismissed, however, without any cost.

Dated: 16.4.12.

RKM.