Calcutta High Court
Stemcor Iron Ore Holdings Ltd. & Anr vs Aryan Mining & Trading Corpn. Pvt. Ltd. & ... on 3 October, 2017
Author: Soumen Sen
Bench: Soumen Sen
ORDER SHEET
T No.21 of 2017
AP No. . . . of 2017
IN THE HIGH COURT AT CALCUTTA
Ordinary Original Civil Jurisdiction
ORIGINAL SIDE
STEMCOR IRON ORE HOLDINGS LTD. & ANR.
Versus
ARYAN MINING & TRADING CORPN. PVT. LTD. & ORS.
BEFORE:
The Hon'ble JUSTICE SOUMEN SEN
Date : 3rd October, 2017.
Vacation Bench
Appearance:
Mr. S. K. Kapoor Sr. Adv.
Mr. Sakate Khaitan, Adv.
Mr. Gaurav Khaitan, Adv.
Ms. Jyoti Krishnan, Adv.
Mr. Shaunak Mitra, Adv.
Mr. Pranit Bag, Adv.
Ms. Pritha Basu, Adv.
Ms. S. Tiwari, Adv.
. . . for the petitioners.
Mr. Kapil Sibbal Sr. Adv.
Mr. Vikram Nankani Sr. Adv.
Mr. Samrat Sen Sr. Adv.
Ms. Anusha Nagarajan, Adv.
Mr. Naresh Thacker, Adv.
Mr. Ashish Prasad, Adv.
Ms. Urmila Chakraborty, Adv.
Mr. Ritoban Sarkar, Adv.
Mr. Avisekh Das, Adv.
Mr. Darshan Upadhyay, Adv.
Mr. A.K. Singh, Adv.
. . . for the respondent no.1.
Mr. Abhishek Manu Singhvi, Adv.
Mr. Anuj Singh, Adv.
Mr. Anand Varma, Adv.
Mr. Dhananjoy Mishra, Adv.
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Mr. Nishit Agrawal, Adv.
Ms. Urmila Chakraborty, Adv.
Mr. Siddharta Kanta, Adv.
Mr. Avishek Das, Adv.
. . . for the respondent nos.2 to 12.
The Court: The control and management of Brahmani River Pellets Limited [BRPL] is the subject matter of dispute in this proceeding. BRPL is a subsidiary of the respondent no.1. The respondent no.1 holds more than 99% of the share capital of BRPL. The petitioner no.1 owns 46% shares in the respondent no.1. The petitioner no.2 owns 27% share in the respondent no.1. The petitioners altogether own and control 73% shares in the respondent no.1. The balance 27% of the shareholding in the respondent no.1 is owned and controlled by the Saraf Group. The principal grievance of the petitioners is that the respondent no.1 is acting in breach of the shareholders agreement dated 11th December, 2015 and BRPL Governance Agreement dated 11th December, 2015.
Mr. S.K. Kapoor, learned Senior Counsel appearing on behalf of the petitioners has referred to Clauses 3.4 and 3.4.1 of the Shareholders' Agreement to argue that the respondent no.1 and the Saraf Group have agreed and undertaken that they shall not do anything which would reasonably likely to prejudice the petitioners' direct or indirect rights and interests in relation to BRPL. The respondent no.1 is under an obligation not to transfer its shareholding in BRPL or any of its assets without the consent and concurrence of BRPL. Mr. Kapoor has referred to Clause 3.2 which relates to Stemcor Approval Matters. The said Clause says that Stemcore shall have no right or responsibility 3 in the management or operations of the respondent no.1 except as required to protect and preserve its direct and indirect rights and interests in relation to BRPL. Mr. Kapoor has also referred to Clause 2.3 of the Governance Agreement to argue that the said Clause acknowledges the absolute right of Stemcore to have full authority to take all decisions in relation to all matters pertaining to BRPL.
The apprehension expressed by Mr. Kapoor is that AMTC in breach of the aforesaid agreements are now seeking to transfer its shareholding in BRPL in favour of a third party. It is submitted that in the event such transfer takes place the petitioners would loose control and management of BRPL and the said acts and conducts of the respondent authorities would be in derogation of the agreements arrived at between the parties and reflected in the said two agreements. Accordingly, Mr. Kapoor has prayed for an injunction in terms of prayers (a) and (d) of the notice of motion.
Mr. Kapil Sibbal learned Senior Counsel appearing for the respondent no.1 submits that BRPL was indebted to the extent of Rs.900 crores to various lenders under a consortium agreement which stood reduced to about Rs.560 crores in 2017. AMTC was the guarantor to the said loan. In view of default in repaying the loan by BRPL the lender filed a winding up petition in this Court against the respondent no.1 as the respondent no.1 was the guarantor. Initially an order was passed on 15th September, 2017 by Justice I.P. Mukerji in the winding up petition directing that in the event the petitioning creditor is selling the shares it would notify the company about the name of the purchaser and the 4 consideration expected to receive to enable the company to redeem the pledge or to take such action with regard to the shares as may be available to them. In an appeal preferred by the petitioning creditor the order was reversed. Mr. Sibbal has referred to the order dated 22nd September, 2017 in which the Hon'ble division Bench recorded an undertaking on behalf of the respondent no.1 that the said respondent no.1 shall pay a sum of Rs.560 crores to the petitioning creditor by the close of the working hours on September 29, 2017 and upon such payment being made and received the appeal shall stand disposed of. Mr. Sibbal submits that the respondent no.1 has paid the aforesaid sum in order to discharge the debt of BRPL. The said payment enures to the benefit of BRPL as otherwise any order admitting the winding up petition would have been prejudicial to the interest of both respondent no.1 and BRPL as the respondent no.1 is holding about 99% shares in BRPL. Mr. Sibbal submits that in order to enable the respondent no.1 to repay the said loan the shares of the respondent no.1 were pledged with Tribeni Earth Movers Pvt. Ltd. and with the amount made available by Tribeni the said loan was repaid. It is submitted that on both the occasions BRPL were represented and they never objected to the payment being made by the respondent no.1. The petitioners knew that the BRPL under the management of the petitioners are unable to discharge the debt and accordingly accepted that the respondent no.1 shall make the payment for the benefit of BRPL.
Mr. Manu Singhvi learned Senior Counsel appearing on behalf of the respondent nos. 2 to 12 submits that the petitioners have suppressed the fact 5 that in the past they wanted to sell the assets of BRPL. It was the primary obligation of the BRPL to repay the loan failing which the respondent no.1 had to arrange the fund in order to save BRPL. The learned Senior Counsel for the respondents has produced before this Court a Board Resolution dated 15th September, 2017 of BRPL to demonstrate that BRPL in the Board Meeting under the garb of restructuring had agreed to enter into a Tolling Agreement with a credit worthy operating company acceptable to the lenders. This resolution was given effect to on 27th September, 2017 and it would be made operational on 9th October, 2017. This resolution only shows that BRPL was in need of fund. The payment made by the respondent no.1 in fact had saved BRPL. Both the learned Counsel for the respondents have prayed that no interim order should be passed in favour of the petitioners in view of suppression of the material and important document.
Mr. Kapoor in reply has submitted that the respondent no.1 in order to save its own skin has voluntarily offered to pay the said amount and it was not the obligation of the petitioners to find out how the respondent no.1 would repay the loan. Moreover, before any pledge could be created in favour of the third party, the requirements of the Shareholders' Agreement and Governance Agreement are to be adhered to. Since no prior notice was given to the petitioners who are admittedly in management and control of BRPL before creation of pledge such agreement should not be given effect to and the parties should be restrained from dealing with the said shares.
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The fact that emerges from the arguments of the learned Counsel for the parties is that BRPL was indebted for a substantial amount to its various lenders. The respondent no.1 is holding 99% shares in BRPL. It is expected that the petitioners being in control and management of BRPL should have made an endeavour to repay the debt of BRPL to its lenders. In fact, the respondent no.1 appears to have saved BRPL from a possible liquidation. In the event the BRPL would have gone to liquidation all the agreements on which the petitioners rely upon would perish. The liquidation of the respondent no.1 may also lead to similar results as the official liquidator would have appointed over the assets and properties of the respondent no.1. The respondent no.1 as it appears has pledged shares in order to raise the funds. The repayment of loan has saved BRPL. The fact that BRPL was also in need of fund for its restructuring is reflected from the minutes of the meeting held on 15th September, 2017. Mr. Sibbal submits that there is no possibility of AMTC dealing with its shares. The fact remains that petitioners are in control and management of BRPL. The right of the petitioner to be in management and control of BRPL is not in doubt. Prima facie it appears that the pledging of shares was for the benefit of BRPL. The actions of the respondent no.1 being the majority shareholders of the BRPL appears to be for the benefit of BRPL. However, it needs to be assessed on affidavits if the creations of pledge of shares was for any oblique purpose and designed to oust the petitioners from control and management of BRPL.
Under such circumstances, there shall be an interim order directing the parties to maintain status quo with regard to the management and control of 7 BRPL. The BRPL shall not create any third party interest or encumber any of its assets and properties. However, the BRPL will be entitled to sell its products in its usual course of business. There shall be no further alienation and/or encumbrance of the pledged shares until the disposal of this application.
The petitioners shall disclose the Tolling Agreement within a week from date. The respondent no.1 shall also disclose the fullest details of the pledge agreement within a week from date.
Affidavit in opposition shall be filed by 24th October, 2017; reply thereto, if any, within 7th November, 2017. The matter shall appear on 15th November, 2017.
This order is passed without prejudice to the rights and contentions of the respondents that the application is not maintainable.
(SOUMEN SEN, J.) sp/A.s.