Madras High Court
Ravindranath Ge Medical Associates ... vs Mr. P. Raja Rao
Author: N. Sathish Kumar
Bench: N. Sathish Kumar
A.Nos.1283 to 1288 of 2020 in O.A.No.1178 to 1180 of 2018 in C.S.. No.874 of 2018
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Reserved on Delivered on
25~06~2020 01~07~2020
CORAM:
THE HONOURABLE MR. JUSTICE N. SATHISH KUMAR
A.Nos.1283 to 1288 of 2020 in O.A.Nos.1178 to 1180 of 2018
in C.S. No.874 of 2018
A.Nos.1283, 1285 and 1287 of 2020
Ravindranath GE Medical Associates Private Limited
Represented by its Authorised Signatory,
Mr. Shriram Vijayakumar,
439, CheranNagar, Sholinganallur, Perumbakkam,
Chennai- 600100. …Applicant / Defendant No. 1
Vs.
1. Mr. P. Raja Rao
S/o P. Sivaramaiah
Aged 60, having office at
3rd floor, Umayal villa
8/18, 12thCross Street, Indira Nagar,
Adyar, Chennai- 600020. ...Respondent No. 1 / Plaintiff No. 1
2. Prathyusha Resources and Infra Private Limited
Represented by its Chairman and
Managing Director, Mr. P. Raja Rao,
Prathyusha House, No. 25-40-12,
Gangulavari Street, Vishakapatnam,
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Andhra Pradesh- 530001. …Respondent No. 2 / Plaintiff No. 2
3. Prathyusha Global Trade Private Limited
Represented by its Chairman and
Managing Director, Mr. P. Raja Rao,
Prathyusha House, No: 25-40-12,
Gangulavari Street, Vishakapatnam,
Andhra Pradesh- 530001. …Respondent No. 3 / Plaintiff No. 3
4. Global Hospitals Private Limited
Represented by its Chairman and Managing Director,
Dr.RavindranathKancherla,
11-1070/1 to 4, Lakdikapool,
Hyderabad,
Telangana- 500004. …Respondent No. 4 / Defendant No. 2
5. Dr.RavindranathKancherla
Aged 64, S/o Seshiah Naidu,
11-1070/1 to 4, Lakdikapool,
Hyderabad, Telangana- 500004.
Also at:
Plot No. 303, F Road, No.25,
Jubilee Hills, Hyderabad- 500033,
Telangana. …Respondent No. 5 / Defendant No. 3
6. Mrs. AdilakshmiKancherla
W/o Dr.RavindranathKancherla,
Plot No. 303, F Road, No.25,
Jubilee Hills, Hyderabad- 500033,
Telangana. ...Respondent No. 6 / Defendant No. 4
7. Mrs. Potlapally Lakshmi Sailaja
D/o Dr.RavindranathKancherla,
Plot No. 303, F Road, No.25,
Jubilee Hills, Hyderabad- 500033,
Telangana. …Respondent No. 7 / Defendant No. 5
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8. Dr, K. Pruthvinath
Aged 35, S/o Dr.RavindranathKancherla,
Villa No. C-5, Amara Anantha,
4/211, MGR Salai, Palavakkam,
Chennai- 600041,
Tamil Nadu. …Respondent No. 8 / Defendant No. 6
9. Mrs. K. Prathyusha
W/o Dr. K. Pruthvinath,
Villa No. C-5, Amara Anantha,
4/211, MGR Salai, Palavakkam,
Chennai- 600041,
Tamil Nadu. …Respondent No. 9 / Defendant No. 7
10. Gleneagles Development Pte Ltd.
Represented by its Authorised Signatory,
Mr. Shriram Vijayakumar
#15-01, Triple One, Somerset,
Singapore – 238164. …Respondent No. 10 / Defendant No.8
A.Nos.1284, 1286 and 1288 of 2020
Gleneagles Development Pte Ltd.
Represented by its Authorised Signatory,
Mr. Shriram Vijayakumar
#15-01, Triple One, Somerset,
Singapore – 238164. …Applicant / Defendant No.8
Vs.
1. Mr. P. Raja Rao
S/o P. Sivaramaiah
Aged 60, having office at
3rd floor, Umayal villa
8/18, 12thCross Street, Indira Nagar,
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Adyar, Chennai- 600020. ...Respondent No. 1 / Plaintiff No. 1
2. Prathyusha Resources and Infra Private Limited
Represented by its Chairman and
Managing Director, Mr. P. Raja Rao,
Prathyusha House, No. 25-40-12,
Gangulavari Street, Vishakapatnam,
Andhra Pradesh- 530001. …Respondent No. 2 / Plaintiff No. 2
3. Prathyusha Global Trade Private Limited
Represented by its Chairman and
Managing Director, Mr. P. Raja Rao,
Prathyusha House, No: 25-40-12,
Gangulavari Street, Vishakapatnam,
Andhra Pradesh- 530001. …Respondent No. 3 / Plaintiff No. 3
4. Ravindranath GE Medical Associates Private Limited
Represented by its Authorised Signatory,
Mr. Shriram Vijayakumar
439, CheranNagar, Sholinganallur, Perumbakkam,
Chennai- 600100. …Respondent No. 4 / Defendant No. 1
5. Global Hospitals Private Limited
Represented by its Chairman and Managing Director,
Dr. Ravindranath Kancherla,
11-1070/1 to 4, Lakdikapool,
Hyderabad,
Telangana- 500004. …Respondent No. 5 / Defendant No. 2
6. Dr. Ravindranath Kancherla
Aged 64, S/o Seshiah Naidu,
11-1070/1 to 4, Lakdikapool,
Hyderabad, Telangana- 500004.
Also at:
Plot No. 303, F Road, No.25,
Jubilee Hills, Hyderabad- 500033,
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Telangana. …Respondent No. 6 / Defendant No. 3
7. Mrs. Adilakshmi Kancherla
W/o Dr. Ravindranath Kancherla,
Plot No. 303, F Road, No.25,
Jubilee Hills, Hyderabad- 500033,
Telangana. ...Respondent No. 7 / Defendant No. 4
8. Mrs. Potlapally Lakshmi Sailaja
D/o Dr. Ravindranath Kancherla,
Plot No. 303, F Road, No.25,
Jubilee Hills, Hyderabad- 500033,
Telangana. …Respondent No.8 / Defendant No. 5
9.Dr, K. Pruthvinath
Aged 35, S/o Dr. Ravindranath Kancherla,
Villa No. C-5, Amara Anantha,
4/211, MGR Salai, Palavakkam,
Chennai- 600041,
Tamil Nadu. …Respondent No. 9 / Defendant No. 6
2.Mrs. K. Prathyusha
W/o Dr. K. Pruthvinath,
Villa No. C-5, Amara Anantha,
4/211, MGR Salai, Palavakkam,
Chennai- 600041,
Tamil Nadu. …Respondent No. 10 / Defendant No. 7
Prayer in 1283, 1285 and 1287 of 2020: Applications filed to Order XIV
Rule 8 of the Madras High Court O.S.Rules r/w Order XXXIX Rule 4 and
Section 151 C.P.C. to vacate the Ad-Interim Order dated December 21,
2018 passed in O.A. Nos. 1178 to 1180 of 2018 in C.S. No. 874 of 2018,
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to the extent of removing the status quo on the share capital of the
Applicant / Defendant No. 1 Company.
Prayer in 1284, 1286 and 1288 of 2020: Applications filed to Order XIV
Rule 8 of the Madras High Court O.S.Rules r/w Order XXXIX Rule 4 and
Section 151 C.P.C. to vacate the Ad-Interim Order dated December 21,
2018 passed in O.A. Nos. 1178 to 1180 of 2018 in C.S. No. 874 of 2018,
to the extent of removing the status quo on the Applicant/D8's
shareholding in the Defendant No. 1 Company.
For Plaintiff : Mr. R. Rajesh
For D1 : Mr. R. Sankaranarayanan
Senior Counsel for
Mr. Arun Karthic Mohan
For D2 & D3 : Mr.P.H.Aravind Pandian
Senior Counsel for
Avanash Krishnan Ravi
for D4 & D5 : Mr. Adithya Reddy
for D6 & D7 : Mr. R.S.Raveendran
For D8 : Mr.V.P. Singh for
Mr. Arun Karthic Mohan
COMMON ORDER
These Applications have been filed by the Defendants 1 and 8 to Page 6 / 40 http://www.judis.nic.in A.Nos.1283 to 1288 of 2020 in O.A.No.1178 to 1180 of 2018 in C.S.. No.874 of 2018 vacate the Ad-Interim Order passed by this Court directing them to maintain status quo in their share capitals in the 1st Defendant's company.
2. The facts relevant to decide these applications are as follows:
2(a) The suit has been filed originally by the Plaintiff interalia contending that the first plaintiff in his individual capacity as well as the Chairman and Managing Director of the 2nd and 3rd Plaintiffs' company have advanced certain financial assistance to the 1st, 2nd and 3rd Defendants. The plaint further proceeds that, amount has been advanced at the request of the 6th Defendant, Son-in-law of the 1st Plaintiff, who married 7th Defendant, the daughter of the 1st Plaintiff. Upon the explicit request of the 3rd and 6th Defendant, the father and son, owing to the close family ties coupled with 1st Plaintiff's own daughter's (7th Defendant) well-being, the Plaintiffs have extended financial assistance to the 1st and 2nd Defendants. The Plaintiffs have advanced Rs.42,00,00,000/- (Rupees Forty Two Crores only) originally, out of which Rs.25 Crores have been returned. The 1 st Plaintiff agreed to pump in the required funds in the 1st and 2nd Defendants on the understanding that the benefits that were to accrue out of such an Page 7 / 40 http://www.judis.nic.in A.Nos.1283 to 1288 of 2020 in O.A.No.1178 to 1180 of 2018 in C.S.. No.874 of 2018 investment ought to go to his daughter, 7th Defendant, who happens to be the wife of the 6th Defendant. Accordingly, it is the condition of the Plaintiff that explicit understanding between the parties was that the sum extended by the Plaintiffs would be converted into shares that would be allotted in the name of the 1st Plaintiff's daughter i.e., the 7th Defendant, in the 2nd Defendant.
2(b) The Plaintiff, on the genuine belief that the shares in the 2 nd Defendant company would be allotted in the name of his daughter, advanced the amounts. Contrary to the understanding the shares have not allotted. The 3rd Defendant to enrich himself from the amount invested by the Plaintiffs has not allotted shares to the 7th Defendant. Thereafter, the plaintiff came to know that out of the total investment , Rs.11,11,30,000/- as on 06.07.2018 was capitalized and equity shares to the said tune were allotted in the name of the 3rd Defendant in the 2nd Defendant. No shares have been allotted to the Plaintiff's daughter, 7th Defendant. Thereafter, 6th Defendant filed a Company Petition before the National Company Law Tribunal (NCLT), Hyderabad. The NCLT has passed an order holding that Page 8 / 40 http://www.judis.nic.in A.Nos.1283 to 1288 of 2020 in O.A.No.1178 to 1180 of 2018 in C.S.. No.874 of 2018 Proposal in Circulation shall be subject to the result of the application. The Plaintiffs have also impleaded in the above company Petition. Hence it is his contention that the 3rd Defendant had made huge gains out of the investments of the Plaintiffs. 3st Defendant by allotting shares of the 1st Defendant to himself, it should have gone to the 1st plaintiff's daughter, the 7th Defendant.
2(c) It is also stated in the Plaint that Defendants 2,3,4 and 5 entered into an investment agreement dated 28.08.2015 with the 8th Defendant pursuant to which the 8th Defencant acquired 74% of the shares in the 1st Defendant company. The Defendant 2,3,4 and 5 become 26% shareholders of the 1st Defendant. Defendants 3 and 4 are seeking to sell 4.75% of their shares in the 1st Defendant to the 8th Defendant for an exorbitant amount of Rs.90,00,00,000/-(Rupees Ninety Crores only). Hence, suit has been filed by the Plaintiffs for the following reliefs:
(a) Mandatory Injunction directing the 3rd Defendant to transfer 37,04,330 shares of the 2nd Defendant allotted to the 3rd Defendant to the 1st Plaintiff or in the alternative;Page 9 / 40
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(b) To direct 2nd and 3rd Defendants to pay the 1st Plaintiff a principal sum of Rs.3,70,43,330/- along with interest at the the rate of 15% p.a.being Rs.2,77,82,497/- totally amounting to Rs.6,48,25,827/- along with future interest of 15% on the principal sum of Rs.3,70,43,330/- from the date of filing of the suit till the date of realisation;
(c) Mandatory Injunction direting the 3rd Defendant to transfer 60,19,542 shares of the 2nd Defendant allotted to the 3rd Defendant to the 2nd Plaintiff or in the alternative;
(d) To direct the 2nd and 3rd Defendants to pay the 2nd Plaintiff a principal sum of Rs.6,01,95,420/- along with interest at the rate of 15% p.a.Rs.5,02,92,036/- totally amounting to Rs.11,04,87,456/- along with future interest of 15% on the principal sum of Rs.6,01,95,420/- from the date of filing of the suit till the date of realisation;
(e) Mandatory Injunction directing the 3rd Defendant to transfer 13,89,125 shares of the 2nd Defendant allotted to the 3rd Defendant to the 3rd Plaintiff or in the alternative ;
(f) To direct the 2nd and 3rd Defendants to pay the 3nd Plaintiff a principal sum of Rs.1,38,91,250/- along with interest at the rate of 15% p.a.Rs.1,04,24,146/- totally Page 10 / 40 http://www.judis.nic.in A.Nos.1283 to 1288 of 2020 in O.A.No.1178 to 1180 of 2018 in C.S.. No.874 of 2018 amounting to Rs.2,43,15,396 /- along with future interest of 15% on the principal sum of Rs.1,38,91,250/- from the date of filing of the suit till the date of realisation;
(g) Mandatory Injunction directing the 2nd Defendant to transfer 50,000 0.1% Compulsory Convertible Preference Shares of the 1st Defendant out of the Compulsory Convertible Preference Shares issued on 28.07.2014 to the Plaintiff;
(h) To direct the 1st and 2nd Defendants to pay the 3nd Plaintiff a principal sum of Rs.5,00,00,000/- along with interest at the rate of 15% p.a. being Rs.4,96,23,288/- totally amounting to Rs.9,96,23,238/- along with future interest of 15% on the principal sum of Rs.5,00,00,000/- from the date of filing of the suit till the date of realisation;
(i) To direct the 2nd Defendant to pay the 1st Plaintiff a principal sum of Rs.29,56,667/- along with interest at the rate of 15% p.a. being Rs.25,26,130/- totally amounting to Rs.54,82,800/- along with future interest of 15% on the principal sum of Rs.29,56,667/- from the date of filing of the suit till the date of realisation;
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(j) To direct the 2nd Defendant to pay the 2nd Plaintiff a principal sum of Rs.48,04,583/- along with interest at the rate of 15% p.a. being Rs.40,14,128/- totally amounting to Rs.88,18,708/- along with future interest of 15% on the principal sum of Rs.48,04,583/- from the date of filing of the suit till the date of realisation;
(k) To direct the 2nd Defendant to pay the 3rd Plaintiff a principal sum of Rs.11,08,750/- along with interest at the rate of 15% p.a. being Rs.10,70,323/- totally amounting to Rs.21,79,0738/- along with future interest of 15% on the principal sum of Rs.11,08,750/- from the date of filing of the suit till the date of realisation; and
(l) To direct the costs of the suit be paid by the Defendants to the Plaintiffs.
2(d) Along with the suit, three Original Applications have been filed for seeking interim reliefs which are as under:-
O.A.No.1178 of 2018
To grant an injunction restraining the 2nd, 3rd, 4th, 5th and 6th defendants and their men, agents or any other persons acting on their behalf from alienating, Page 12 / 40 http://www.judis.nic.in A.Nos.1283 to 1288 of 2020 in O.A.No.1178 to 1180 of 2018 in C.S.. No.874 of 2018 transferring, changing or in any manner altering the shareholding of the 2nd Defendant pending disposal of the suit;O.A.No.1179 of 2018
To grant an injunction restraining the 2nd, 3rd, 4th, 5th, 6th, and 8th defendants and their men, agents or any other persons acting on their behalf from alienating, transferring, changing or in any manner altering the shareholding of the 1st Defendant pending disposal of the suit;O.A.No.1180 of 2018
To grant an injunction restraining the 2nd, 3rd, 4th, 5th and 8th defendants and their men, agents or any other persons acting on their behalf from entering into and implementing the third amendment to the Investment Agreement dated 28.08.2015 which is the share Purchase Agreement as proposed in Circular resolution of the 2nd Respondent dated 25.08.2018 and approved in Annual General Meeting of 2nd Respondent held on 29.09.2018 pending disposal of the suit.
2(e) The above applications are opposed by the Defendants 1 and 8 and also Defendants 2 and 3 and all the applications came for hearing. This Page 13 / 40 http://www.judis.nic.in A.Nos.1283 to 1288 of 2020 in O.A.No.1178 to 1180 of 2018 in C.S.. No.874 of 2018 Court has directed 1st, 2nd, 3rd, 4th, 7th and 8th Defendants to maintain status quo and posted the matter on 02.01.2019. On 02.01.2019, the staus quo has been ordered to continue until further orders. Thereafter, the matter has been periodically adjourned mainly for the purpose of settling the matter between the family members, since the entire issue mainly revolve around the dispute interse between the family members i.e., 1st Plaintiff, 3rd, 6th and 7th Defendants. Thereafter on 14.05.2020 Joint Memo was filed by the 2nd, 3rd and 4th Defendants, in which 1st and 8th Defendants were not parties to the agreement. They categorically stated that they are not party to the agreement; any joint compromise memo will not bind them. As the matter has not reached any settlement, once again posted for arguments.
3. In the meanwhile, applications have been filed by 1st and 8th Defendants in Application Nos.1283 to 1288 of 2020 vacating the interim order passed in O.A.No.1178 to 1180 of 2018.
4(a) It is mainly stated in the Applications filed by the 1st Defendant that the interim order have serious impact on Applicant's share capital Page 14 / 40 http://www.judis.nic.in A.Nos.1283 to 1288 of 2020 in O.A.No.1178 to 1180 of 2018 in C.S.. No.874 of 2018 causing undue hardship on the Applicant, which is not even a primary party to the dispute set out in the suit. The 1st and 8th Defendants are completely alien to this family dispute. The Plaintiffs have not sought any final relief against 1st and 8th Defendant. They have merely sought a mandatory injunction directing the 2nd Defendant to transfer certain compulsorily convertible Preference Shares of the Applicant, which are held by the 2 nd Defendant to the Plaintiff No.3. This prayer relates to an interse transfer of shares between the 2nd Defendant and 3rd Plaintiff, which is an alternative to the money claim made by the Plaintiff against the Applicant and 2 nd Defendant. Therefore, the only relief sought against the Applicant is a money claim. No final relief has been claimed against the Applicant relating to its share capital. Therefore, interim reliefs relating to the Applicant's share Capital cannot be maintained. Continuance of such interim order on the Applicant's entire share capital causes grave hardship to the Applicant and hence liable to be vacated. The Applicant/1st Defendant's position affects public interest as well. The Applicant/1st Defendant operates several hospitals in India, including in Chennai, and is engaged in providing healthcare services to all sections of the society. The Applicant Page 15 / 40 http://www.judis.nic.in A.Nos.1283 to 1288 of 2020 in O.A.No.1178 to 1180 of 2018 in C.S.. No.874 of 2018 needs imminent funding to continue paying salaries to its employees, including doctors and staff, to ensure continuity in operations.
4(b) 8th Defendant is the majority shareholder in the applicant, holding 74.76% of the equity shareholding. 8th Defendant is a part of IHH Healthcare Bhd Group of Companies which are engaged in providing healthcare services in several conuntries. 3rd Defendant is the minority shareholder of the Applicant holding 14.19% of the equity shareholding. 2 nd Defendant holds 3.89% of the equity shareholding in the Applicant.
4(c) It is also stated in the Application No.1283 of 2020 that the Applicant owes dues to several vendors, which have been overdue for more than 270 days. The total outstanding debts comes around Rs.296.3 Crores which does not include licensing and support services amounting to Rs.54.1 Crores payable for the financial years 2017-2108 and 2018-2019. the losses are amplified during the present lockdown restrictions in India on account of Covid-19 pandemic. Further, on account of the pandemic, the applicant has found it difficult to recover its receivables from third party administrators of Insurance Claims (TPAs) Government Agencies and other Page 16 / 40 http://www.judis.nic.in A.Nos.1283 to 1288 of 2020 in O.A.No.1178 to 1180 of 2018 in C.S.. No.874 of 2018 debtors. Parallel to the rising losses, the applicant's debt burden has also increased. This includes principal repayments and interest payments to bank as well as dues owed to vendors. The debt burden can be alleviated significantly if the Applicant company is permitted to implement the proposed capital infusion by its shareholders. Besides in some cases vendors have initiated legal proceedings against the applicant. Therefore, Applicant intends to raise a sum of Rs.65 crores by way of the rights issue. This sum has been calculated in a manner so as to meet the immediate financial needs of the Applicant. The Applicant proposes to utilize the sum of Rs. 65 crores in the following manner:
S.No. Intended use of funds received pursuant to the Amount Rights Issue (in Rs.
Crores 1 Rental dues 9.3 2 Overdues to vendors (including supplier of 33.8 medicines, medical equipment, etc.) 3 Principal repayments to Axis Bank for the month 4.3 of June 2020 4 Working capital requirements to continue 17.6 functioning as a going concern amid Covid-19 (payments of salaries, utilities, etc.) Total proceeds from rights issue 65.0 Hence, prayed to vacate the interim order.
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5. In the applications filed by the Applicant/8 th Defendant, it is stated as follows:
5(a) The Applicant filed its objections to the Interim Applications filed by the Plaintiffs. The Interim Applications, however, have not been adjudicated and remain pending. At the same time, the Plaintiffs and the Defendant No.(s) 2-7 have submitted to this Court time and again that they intend to settle their inter-family dispute. In fact, the Applicant was advised that specific oral submissions to this effect were made by these parties to this Court. But, unfortunately, these parties have failed to consummate the settlement for reasons best known to them. The present circumstances have thus gravely prejudiced the Applicant, against which no prayers have been sought in the Suit. On one hand, the Applicant is neither a party to the inter- se family dispute nor a party to the ongoing settlement discussions between the Plaintiffs and the Defendant(s) No.2-7. On the other hand, the Applicant continues to remain hostage to this dispute and be subject to the Ad-Interim Order for no fault or delay of its own. The Applicant has demonstrated that the Ad-interim Order was passed on the basis of an inter-family dispute to Page 18 / 40 http://www.judis.nic.in A.Nos.1283 to 1288 of 2020 in O.A.No.1178 to 1180 of 2018 in C.S.. No.874 of 2018 which the Applicant is completely alien. Indeed, no final prayers have been sought against the Applicant and the said Ad-Interim Order was passed only on the basis of undertakings given by the Defendant Nos.2 and 3 alone. The ramifications of the Ad-interim Order have been dire the Applicant is unable to deal with its shares in the Defendant No. 1 Company in accordance with its rights under law.
5(b) It is further stated in the applications that In fact, the Applicant understands that the Defendant No. 1’s financial position is dire and there is a distinct possibility that the Defendant No. 1 Company may default on its obligations with its lender bank, in addition to being unable to pay its employees and numerous vendors. As set out above, non-payment to the lender bank will have adverse consequences for the Applicant and its holding company. In view of the above, the Defendant No. 1 requires imminent capital infusion. In this regard, on April 28, 2020, the Defendant No. 1 approached its shareholders, including the present Applicant, for a capital contribution of an aggregate amount of Rs. 65 crores which is to be infused by the shareholders in proportion to their present shareholding in the Defendant No. 1 Company. However, the proposed capital infusion Page 19 / 40 http://www.judis.nic.in A.Nos.1283 to 1288 of 2020 in O.A.No.1178 to 1180 of 2018 in C.S.. No.874 of 2018 cannot be implemented at present on account of the Ad-Interim Order. Having no other recourse available, the Applicant is constrained to approach this Hon’ble Court for vacating the Ad-interim Order to the extent of the status quo on the Applicant’s shareholding in the Defendant No. 1 Company. Hence, the applicant/8th Defendant prays to vacate the Ad-Interim Order to the extent of removing the status quo on the Applicant’s shareholding in the Defendant No. 1 Company.
6(a) Opposing the above applications Respondents 5 and 6, i.e., 2nd and 3rd Defendants filed counter stating that the company (8th Defendant) was promoted in the year 2015, invested in the Applicant and acquired majority of the shares. The 3rd Defendant along with his spouse, daughter and the 2nd Defendant company hold 20.21% of Equity Share Capital and 39% of Cumulative Convertible Preference Shares in the Applicant. The 3rd Defendant continue to be a Director in the Applicant/1st Defendant company. 4Th, 5th, 6th, and 7th Respondents hold 21.22% of Equity Shares Capital and 1,21,89,266 Cumulative Convertible Preference Shares in the Applicant. Investment Agreement that was amended on two occasions i.e., on 07.11.2015 and 05.02.2018. The third amendment ot the Investment Page 20 / 40 http://www.judis.nic.in A.Nos.1283 to 1288 of 2020 in O.A.No.1178 to 1180 of 2018 in C.S.. No.874 of 2018 Agreement proposed changes in the conversion rate of Compulsory Convertible Preference Shares (CCPS) that were allotted by the Applicant to the 4th Respondent on 15.07.2014. The Conversion ratio of 2,77,174 number of CCPS shares held by the 4th Respondent were proposed to be increased from 0.9845 per CCPS share to 29.3398 per CCPS share in pursuance of the proposed third amendment to the investment agreement. This proposed increase in conversion ratios will result in an enhanced allotment of 78,59,352 equity shares of the Applicant to the 4th Respondent, thereby resulting in an additional allotment of 10.74% shareholding rights to the 4th Respondent, the benefit of whichwill accrue to the 4th Respondent and its Shareholders, thereby enhancing the investment value of the 4th Respondent. The directors of the 4th Respondent, excepting the 8th Respondent, approved the circular resolution dated 25.08.2018 that authorised the 4th Respondent to sign the Third Amendment Agreement.
6(b) Similarly, on 25.08.2018 the Applicant vide its mail circulated the draft circular resolution to all the Directors, including to the 5th Respondent, for entering into the third amendment agreement and to Page 21 / 40 http://www.judis.nic.in A.Nos.1283 to 1288 of 2020 in O.A.No.1178 to 1180 of 2018 in C.S.. No.874 of 2018 approve the transferof 36,73,182 equity shares of the Applicant from the 5th and 6th Respondents in favour of the 10th Respondent. Dr.Ajay Bakshi, CEO, India Operations, Parkway Pantai approved the circular resolutions that were circulated with respect to the Third Amendment to Investment Agreement and Share Purchase Agreement with 4th Respondent and its Promoters. Copy of the mail dated 25.08.2018 of the Applicant and the mail dated 27.08.2018 of the CEO of the parent company of the 10th Respondent approving the circular resolutions. The mail would confirm that the 10th Respondent agreed to purchase the shares from the 5th and 6th Respondents. As his son has filed a Company Petition before the National Company Law Tribunal, Hyderabad Bench. There were no direction issued for Item No.2 of the circular resolution with respect to transfer of 36,73,182 equity shares of the Applicant and this Court also directed status quo to be maintained. Hence, it is his contention that as per the circular resolution 10th Respondent i.e., 8th Defendant has to pay Rs.90 Crores to the 5th and 6th Respondents. Hence it is his contention that 8th Defendant has to pay Rs.90 Crores for effective settlement. Without proving the circular resolution the interim order cannot be lifted. Further the entire counter indicate that there is a Page 22 / 40 http://www.judis.nic.in A.Nos.1283 to 1288 of 2020 in O.A.No.1178 to 1180 of 2018 in C.S.. No.874 of 2018 dispute between the shareholders with regard to the alleged share purchase agreement and Third Amendment. Hence, opposed to vacate the interim injunction. Further it is stated that the applicant is not in need of substantial capital for its survival, sustenance and business growth. Hence prayed for dismissal.
7. The Respondents 8 and 9 (Defendants 6 and 7) mainly opposed the applications on the ground that while there are very many avenues availableto source funds, the applicant is attempting to exploit the COVID- 19 situation for its own failing on business front. The applicant cannot be permitted to take advantage of its own wrong.
8. The Plaintiffs also filed counter wherein it is stated that the applicant has not made out any grounds to vacate the interim orders. The applicant company's entire 100% shareholding is not held by 8th Defendant since about 26% of the share capital of the applicant is held by 2nd Defendant and others. Any increase in the share capital it shall only be in accordance with Articles 41, 42 of the Articles of Association of the Page 23 / 40 http://www.judis.nic.in A.Nos.1283 to 1288 of 2020 in O.A.No.1178 to 1180 of 2018 in C.S.. No.874 of 2018 company and more particularly if the applicant company is in need of future funding either for its growth or working capital requirements such future funding shall only be in the order of priority as determined under Article 65 of the Articles of Association of the Applicant company. Further, since the RBI has given moratorium to all the borrowers in the country from making any payment of loans during the Covid 19 situation, immediate payment to the loans does not arise and the need for increasing its share capital for want of funds on that ground is not genuine in nature. Hence, prayed for dismissal of the applications.
9. Mr.R. Sankaranarayanan, learned Senior Counsel appearing for the applicant/1st Defendant vehemently contended that the Order of Status Quo is seriously affecting the running the company. Defendants No.1 and 8 having 74.76% of the shares. The Plaintiffs are strangers to the company;
they cannot prevent the company bringing the right issues. The Applicant is clearly pleaded the bona fide requirement for further money to be infused the company to run several hospitals and paying salaries. Raising of money which is bona fide one to run the company. 8th Defendant is willing to Page 24 / 40 http://www.judis.nic.in A.Nos.1283 to 1288 of 2020 in O.A.No.1178 to 1180 of 2018 in C.S.. No.874 of 2018 bring amount to the company to run the hospital and pay the salaries to the Doctors. 3rd Defendant also can bring money. There is no bar to bring the money to the company by 3rd Defendant. Plaintiff being total stranger to the company, they cannot hold the company for ranson. They cannot seek an interim order in the shareholding.
10. It is his contention that the entire suit is appears to be interse family dispute between the Plaintiff and Defendants 2 to 7. However, Defendants 1 and 8 no way connected to the dispute. Even the relief claimed in the entire suit except one relief for a direction to pay a sum of Rs.5 Crores as against 1st Defendant no relief was sought in the main suit. Therefore, interim order cannot be granted beyond the scope of the suit. Hence, submitted that the application has been taken out bonafidely to the right issue only to the tune of Rs.65 Crores. Therefore, Interim Orders passed by this Court has to be vacated.
11. Mr.V.P.Singh learned counsel appearing the 8th Defendant adopting the submissions of the learned Senior Counsel Mr.R. Page 25 / 40 http://www.judis.nic.in A.Nos.1283 to 1288 of 2020 in O.A.No.1178 to 1180 of 2018 in C.S.. No.874 of 2018 Sankaranarayanan and submitted that no prayers sought against 8th Defendant. 8th Defendant is stranger to any dealing to the Plaintiff and Defendant Nos.2 and 3. since the 8th Defendant is stranger, he is not a privy to the settlement, the hospital cannot be shutdown at the instance of the stranger, particularly, disputes is not connected with the affairs of the company. Company cannot be held for ransom in a family disputes. Hence, it is his contention that the interim order cannot be continued.
12. It is the further contention of both the counsels that the proceedings before the court clearly show that the matter has been settled between the family members. Thereafter, they took U-turn. Now, the entire family joined together and insist 8th Defendant to pay Rs.90 Crores to settle the dispute among the family members. Such contention is not valid in the eye of law though the defendants rely upon certain communications between Defendant Nos.3 and 1. Such communications is not concluded contract, the same cannot be agitated in this matter. It is their further contention that there is no concluded contract between Defendant No.8 and others. Therefore such communications cannot be pressed into service to Page 26 / 40 http://www.judis.nic.in A.Nos.1283 to 1288 of 2020 in O.A.No.1178 to 1180 of 2018 in C.S.. No.874 of 2018 hold the company under ransom. Hence, prayed for vacation of the interim order.
13. P.H.Aravind Pandian, leanred Senior Counsel, appearing for the Defendants 2 and 3 vehemently placed reliance on the communications between the Defendants 1 and 3 with regard to certain proposed resolution in terms of the CCPS shares held by one of the groups and sale and purchase of shares and contended that including 8th Defendant have approved the resolution, third amendment to the investment agreement also approved. When the contract had reached and concluded between the parties for value of Rs.90 Crores. Now, the 8th Defendant cannot resile from such concluded contract. Therefore, the entire settlement agreement is filed based on such concluded contract only. Hence, it is his contention that the 8th Defendant has to deposit Rs.90 Crores, then he can go for right issue. Otherwise, any right issue will change the pattern of the shares. Therefore, his main contention is that the interim orders protect the rights of the parties which need not be vacated.
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14. Mr. R. Rajesh, learned counsel appearing for the Plaintiffs is in agreement with the submissions of the learned Senior Counsel Mr.P.H. Arvindh Pandian. He has also submitted that the Defendants have not denied the contribution made by the Plaintiff and investment made by them. The 3rd Defendant has not denied the investment made only towards the shares to be allotted. Admittedly, no shares were allotted. Whereas 3rd Defendant himself alloted shares. The resolutions were typed in the 8th Defendant's letterhead and the applications to vacate the interim orders, other defendants are not made as parties and they are not impleaded in the applications. Hence prayed for dismissal of the applications.
15. Heard the learned counsel for the applicants as well as the Defendants through video conferencing.
16. This Court is dealing with the Interim Applications, the Suit has been interalia filed for various reliefs. The reliefs sought against the Defendants indicate that except the relief 'h' no other relief sought against either 1st Defendant or 8th Defendant. In the relief column 'h' only the Page 28 / 40 http://www.judis.nic.in A.Nos.1283 to 1288 of 2020 in O.A.No.1178 to 1180 of 2018 in C.S.. No.874 of 2018 money is sought against Defendants No.1 and 2 to the tune of Rs.5,00,00,000/- (Rupees Five Crores only) with interest. The nature of the relief sought mainly against the Defendants No.2 and 3 either to transfer the shares in the name of 3rd Plaintiff or for alternative refund of money to be valued as on date. The entire plaint proceeds as if the Plaintiff advanced amount under the premise that investment would be converted into shares for the benefit of 7th Defendant who is the daughter of the 1st Plaintiff and wife of 6th Defendant. 3rd and 4th Defendants are father and mother of 6th Defendant. Though elaborate pleadings made in the plaint as well as applications filed for interim injunction the crux of issue revolves around the money transaction between the two families viz., Plaintiff and 3rd Defendant. The relief sought as already indicated is only in respect of either direction or transfer of shares or in the alternative for money decree. The entire relief sought mainly against the Defendants No.2 and 3 except one relief against the 1st and 2nd Defendants to pay the 3rd Plaintiff a principal sum of Rs.5 Crores along with interest totalling to Rs.9,96,23,288/- and no relief whatsoever sought against the 8th Defendant in the suit. Page 29 / 40 http://www.judis.nic.in A.Nos.1283 to 1288 of 2020 in O.A.No.1178 to 1180 of 2018 in C.S.. No.874 of 2018
17. Before entering into the merits of the case, this Court cannot ignore certain events which has transpired in the presence of the Court. After passing interim orders by this Court and extended until further orders on 02.01.2019, matter has been adjourned for several hearings from 04.01.2019 till 20.09.2019. When the matter came before this Court on 20.09.2019 this Court has identified the issue and passed the following order:
“The dispute involved in the present suit is a family issue.
2. Post the matter on 03.10.2019, at 4.00 p.m.
3. The Defendants 3, 6 & 7 are directed to appear before this court on 03.10.2019 at 4.00 p.m., without fail.”
18. Thereafter, at the request of the learned Senior Counsel Mr.P.H. Arvindh Pandian matter was posted on 02.10.2019 in the Chambers. On that date party did not turn up. Hence this court directed to list the matter on Page 30 / 40 http://www.judis.nic.in A.Nos.1283 to 1288 of 2020 in O.A.No.1178 to 1180 of 2018 in C.S.. No.874 of 2018 31.10.2019 before the Court. On 31.10.2019 after interaction with the parties who were present, the following order has been passed by this Court.
“Third, Sixth and Seventh Defendants are present. Third Defendant is the father of the Sixth Defendant. Seventh Defendant is the wife of the Sixth Defendant. On interaction with the above Defendants, the primary dispute appears to be with regard to the family issues. Sixth Defendant submitted that he has cleared debt of Rs.40 Crores after the sale of properties. If that amount is reimbursed to him he will have no issues and the entire probles would be solved, besides the criminal complaint lodged would also be withdrawn. Third Defendant submitted that if the amount alone is the issue, as a father he will take care of. With this, the Seventh Defendant submitted that she will consult with her father who is the Plaintiff in this suit and come back in the next hearing.
Accordingly, Post the matter at Chamber Page 31 / 40 http://www.judis.nic.in A.Nos.1283 to 1288 of 2020 in O.A.No.1178 to 1180 of 2018 in C.S.. No.874 of 2018 sitting on 12.11.2019 at 4.00 p.m.”
19. On 12.11.2019, this Court has passed the following order:
“Third, Sixth and Seventh Defendants are present. Learned counsel for the Plaintiff Mr. Anirudh Krishnan and Mr. Adarsh Subramanian are present.
Learned Counsel Mr.Arvindh Pandian for Mr.Avinash Krishnan Ravi appearing for Third Defendant and learned counsel Ms.Deepika Murali appearing for the Sixth and Seventh Defendants are also present.
They mostly arrived settlement and they will file Compromise Memo in the next hearing. Third Defendant is agreed to provide a sum of Rs.40 Crores to his son viz., the Sixth Defendant; Rs.2.5 Crores to his daughter-in-law, viz, the Seventh Defendant and Rs.17.5 Crores to the father of the Seventh Defendant viz., the Plaintiff and companies and both the parties will file detailed Compromise Memo including other litigations pending before the NCLT, Page 32 / 40 http://www.judis.nic.in A.Nos.1283 to 1288 of 2020 in O.A.No.1178 to 1180 of 2018 in C.S.. No.874 of 2018 Hyderabad, NCLT Chennai and all other courts including the criminal cases. The statement of the parties is recorded. For filing such Compromise Memo post the matter before the Chamber on 22.11.2019 at 4.00 p.m.”
20. Again adjourned to 22.11.2019 and on 22.11.2019 this Court recorded as follows:
“Mr. Arvindh Pandian, the learned Senior Counsel submitted that the parties have settled the matter before this Court.
The third defendant is ready to pay the amount by way of Demand Draft. The only contention of learned senior counsel is that the Demand Draft will be produced before this Court and other side can encash the same only after withdrawal of other litigations.
2. Recording his submission the third defendant is directed to bring the demand draft along with Compromise Memo on 27.11.2019.
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3. Post the matter on 27.11.2019.”
21. Thereafter, the matter was adjourned to 27.11.2019. On 28.11.2019 at the request of the applicant/plaintiff to implead other respondents 9 to 14 as defendants 9 to 14 in the suit to recording compromise impleading was ordered and the matter was posted on 29.11.2019. Thereafter, this Court has reserved the matter to dispose the suit itself on the basis of the admission and compromise reached between the family members. However, as compromise memo has not been filed again the matter was posted on 13.03.2020 and this court directed the parties to appear before the Court on 31.03.2020. However, the Plaintiff and Defendant Nos.2,3 and 6 did not file any compromise petition. Accordingly, on 14.05.2020 the matter was again posted before me. In the meanwhile, applications have been taken out by Defendants 1 and 8 to vacate the interim order. At that stage, Mr.P.H. Aravindh Pandian, the learned Senior Counsel filed a joint memo signed by the 2nd, 3rd and 4th Defendants in which Defendants 1 and 8 are not parties to the agreement. In the above agreement for the first time, so called correspondence between the promoter Page 34 / 40 http://www.judis.nic.in A.Nos.1283 to 1288 of 2020 in O.A.No.1178 to 1180 of 2018 in C.S.. No.874 of 2018 group and Defendants No.1 and 8 sought to be introduced . Therefore, the matter was posted for hearing of the applications.
22. It is also relevant to record that now the Plaintiffs have changed their counsel and represented by new counsel. So, above proceedings recorded by the Court clearly indicate that the entire dispute only among the family members not relate to the company affairs. Having accepted to bring the Demand Draft to closure of the suit and other proceedings once for all, now it appears that the family members are joined together and canvas for sustaining the interim order granted by this Court at the earliest point of time. It is relevant to note that at the initial stage, applications for interim injunction were opposed by Defendant No.3 along with the Defendants No.1 and 8. Now, Defendant No.3 joined hands with the other family members to canvas the new case of the Defendant No.3 as to the correspondence, third amendment, share purchase agreement between them. When the suit itself is filed for limited relief by the Plaintiffs who are stranger to the company, the dispute interse among the Directors cannot be decided in these interim applications. It is also relevant to note that the relief Page 35 / 40 http://www.judis.nic.in A.Nos.1283 to 1288 of 2020 in O.A.No.1178 to 1180 of 2018 in C.S.. No.874 of 2018 is mainly against the Defendants No.2 and 3 except a direction for money decree as against Defendant No.1. Such view of the matter the interim injunction will have a serious impact on the running of the company, particularly, others who are the majority shareholders. If such interim order is continued, it will have a serious impact in the affairs of the company. Admittedly, 8th Defendant is majority shareholder, as per the plaintiffs version he is holding 74.76% of the shares. Such being the matter, when the suit is primarily for the nature of money suit, the family members now cannot hold company for ransom. Further, though the learned Senior Counsel Mr.P.H. Aravindh Pandian has pointed out certain communications as to the Third Amendment and Share Purchase Agreement and total sale consideration of Rs.90 Crores etc., among Defendants No.1, 8, 3 and other directors, the same cannot be agitated in this matter. Since the issue in the plaint has to be looked into for deciding the Interlocutory Applications, further it is not suit on a third party procedure to decide the issue between the co-defendants. When the Defendant No.3 claims any money from co- defendants, such question has to be decided only in the manner known to law as per order VIII(A) Rule 8 of the CPC. Therefore, in this applications Page 36 / 40 http://www.judis.nic.in A.Nos.1283 to 1288 of 2020 in O.A.No.1178 to 1180 of 2018 in C.S.. No.874 of 2018 for interim injunctions the questions between the co-defendants cannot be gone into the suit. Further, even assuming to be true that there are communications and discussions among the directors with regard to the sale of shares for total consideration of Rs.90 Crores such dispute pertaining to such discussions have to be agitated in a separate forum and not in this suit. Admittedly, company applications also pending before the NCLT as per the plaint pleadings at the instance of 6th Defendant in the plaint. Orders also passed by the company Court with regard to the proposal in circulation sent to directors of the company.
23. Now, the above proposal in circulation is the main bone of contention before this Court. When the company court has already took cognizance of the matter and passed an order that such proposal in circulation shall be subject to the result of the application, this Court cannot assume any jurisdiction to decide the same issue between co-defendants when the fact in issue in the suit is no way connected with the affairs of the company except some grievance to allot the shares to the 3rd defendant. Therefore, this Court is restraint itself from recording any finding with Page 37 / 40 http://www.judis.nic.in A.Nos.1283 to 1288 of 2020 in O.A.No.1178 to 1180 of 2018 in C.S.. No.874 of 2018 regard to the proposal in circulation on which much reliance was placed by the learned Senior Counsel Mr.P.H. Aravindh Pandian. While granting interim injunction or continuing the injunction, the Court has to see that there is a bonafide contest between the parties and find which side the balance of convenience lies. The proceedings of this Court indicate that though the suit has filed for certain relief against other family members the subsequent conduct of the parties clearly indicate that the suit is not a bonafide contest between them rather it is contested against the majority shareholder, who were neither a party nor privy to any settlement with the plaintiffs. That being the position, the relief of injunction cannot be granted in favour of the persons who come to the Court without bonafide. It is also well settled that no relief would be granted in interlocutory proceedings beyond the scope of the suit. The relief sought against 1st Defendant in relief clause 'h' of the relief is only a money decree. Therefore, if at all the plaintiffs are likely to succeed in the suit they are only entitled to money decree as against Defendant No.1 as pleaded by them, not beyond that.
24. Therefore, this Court is of the view that to protect the right of the Plaintiff in the interest of justice direct the Defendant Nos.1 and 2 to Page 38 / 40 http://www.judis.nic.in A.Nos.1283 to 1288 of 2020 in O.A.No.1178 to 1180 of 2018 in C.S.. No.874 of 2018 deposit a sum of Rs.5,00,00,000 (Rupees Five Crores only) to the credit of the suit. On such deposit of the amount the same shall be deposited in a nationalised bank until further orders. This Court is of the view that the interim order passed by this Court has to be vacated. Accordingly, status quo granted by this Court against Defendants No.1 and 8 is vacated and all the interim application are dismissed.
25. In the result, the Original Application Nos.1178 to 1180 of 2018 are dismissed. The order of status quo granted in the above applications are vacated. The Application Nos.1283 to 1288 of 2020 are allowed. The Defendants No.1 and 2 are directed to deposit a sum of Rs.5,00,00,000 (Rupees Five Crores only) to the credit of the suit within one month. On such deposit the same shall be deposited into a nationalised bank until further orders.
01.07.2020 Index:Yes/No Internet: Yes/No. ggs Page 39 / 40 http://www.judis.nic.in A.Nos.1283 to 1288 of 2020 in O.A.No.1178 to 1180 of 2018 in C.S.. No.874 of 2018 N. SATHISH KUMAR, J.
ggs A.Nos.1283 to 1288 of 2020 in O.A.Nos.1178 to 1180 of 2018 in C.S. No.874 of 2018 01.07.2020 Page 40 / 40 http://www.judis.nic.in