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• The shareholders' rights and their rights under the EPC Contract are inseparable, as borne out by the terms of the EPC Contract. AKSH failed to implement the project as stipulated in the time schedule forming part of the EPC Contract. No Acceptance Certificate for any set of broadband connections has been produced as envisaged in Clause 12.3.5 of the EPC Contract. The petitioners, as shareholders of the Company, in exercise of their statutory rights under Section 397/398, have questioned, the mismanagement of the funds of Company by the majority shareholders of the Company in the name of the EPC Contract, which can be adjudicated and reliefs granted by the CLB. Therefore, the petitioners have locus to file the present petition and cannot be relegated to any other alternate remedies. No other forum can decide the issues, which are raised in the main petition, since the Company, which has to take action against AKSH, is under the management of the nominees of AKSH. AKSH cannot and would not sue itself. The Company is controlled by AKSH and therefore, cannot question the malpractices in supply of the materials by AKSH under the EPC Contract. If the EPC Contract was given to any other contractor, the Company would have filed civil suit for appropriate reliefs. In these circumstances, the petitioners' action to set aside the EPC Contract constituting an exception to the rule in Foss v. Harbottle is maintainable under law. Even if the disputes are referred to the arbitrators, in terms of the arbitration clause contained in the EPC Contract it will not serve any purpose, since the Company is controlled by AKSH. Thus, the shareholders of the Company can approach the CLB for remedying their grievances arising out of the EPC Contract. The first petitioner has complained of the grievances raised before the CLB in his communications dated 22.08.2006 and 01.11.2006 addressed to the Company prior to filing of the company petition which were neither replied by AKSH nor assessed the monies spent by AKSH towards implementation of the project. AKSH must render accounts, bring back the monies misappropriated by it and also contribute its part of the unpaid share capital, for which the Bench may appoint a team of Chartered Accountants to evaluate the quantum of work done by AKSH and assess the monies spent by AKSH. No revenue is being generated by the Company with the reported investment of Rs. 110 crores in the Company. The Company has not started its business and hence selling of one's shares to the other shareholder on valuation of the shares of the Company does not arise. The first petitioner has entered into a marketing agreement with the Company, while AKSH got the benefit of EPC Contract. The first petitioner has genuine interest in the marketing agreement, which is attempted to be cancelled by the respondents in respect of which appropriate remedies will be worked out by the petitioners.

4. Shri Raghavan, learned Senior Counsel, while opposing the company petition submitted:

• The EPC Contract is a Turnkey Project for a total value of Rs. 370 crores given by the Company to AKSH, which is solely responsible for implementation and completion of the Contract, as borne out by articles 3(a) (b), 4.1 and 6.1.1 of the agreement dated 21.04.2005. The EPC Contract has been signed on behalf of the Company by the second petitioner. Article 10 empowers AKSH to appoint subcontractors) to execute portions of the EPC contract. The Government of Andhra Pradesh would provide free right of way including free right of way on AP Transmission Corporation electricity poles and other low tension distribution poles. AKSH is to provide progress report periodically on the implementation of the project as envisaged in Article 11. Article 16 specifies that failure of AKSH to complete the implementation of the project as specified in the EPC Contract, would amount to an event of default, consequences of which are enumerated in article 17 of the contract, thereby providing inherent protection against any default by AKSH to the Company. APTS is not a party to the CLB proceedings and therefore, EPC Contract cannot be cancelled, since it would adversely affect APTS. By virtue of article 18, any dispute arising out of the contract, may be referred to arbitration. The notification dated 10.08.2007 providing right of way by the Government of Andhra Pradesh in favour of AK.SH would show that APTS will not cancel the contract. In view of this, the unsigned letter of APTS dated 14.06.2007 obtained illegally by the petitioners does not assume any relevance at all.
• There is, therefore, no need to examine the witnesses, as claimed by the petitioners. Having suppressed the material facts and having come with unclean hands and therefore, are also guilty of distortion of true and correct facts to sub-serve their dishonest motives, the petitioners are not entitled for any equitable reliefs. The Supreme Court held in S.P. Chengalvaraya Naidu (Dead) by LRs v. Jagannath (Dead) by LRs and Ors. that (a) one who comes to the court must come with clean hands; (b) a litigant who approaches the court, is bound to produce all the documents executed by him which are relevant to the litigation. If he withholds a vital document in order to gain advantage he would be guilty of playing fraud on the court as well as on the opposite party; (c) a person whose case is based on falsehood, has no right to approach the Court; and (d) fraud avoids all judicial acts, ecclesiastical or temporal. The High Court of Karnataka in Srikanta Datta Narasimharaja Wadiyar v. Sri Venkateswara Real Estate Enterprises Private Limited (1991) Vol. 72 CC 211 categorically held that the relief under Sections 397 and 398 is an equitable relief, which is entirely left to the discretion of the company court and they will be granted only to persons who approach the Court in good faith and the parties who apply for equitable reliefs must come with a clean record and hands. The communications of the second petitioner on record do not complain of the grievances set out in the company petition but various other issues in the affairs of the Company, namely, payment of commission, internet loss, Cisco Service poles, cable TV equipments, financial indiscipline etc. • The audited balance sheet for the period ending 31.03.2006 of the Company and the invoices of AKSH submitted to the Company during the period 2006-2007 disclose the work done by AKSH amounting to Rs. 131 crores. The CLB cannot be made to verify the vouchers made available by ASKH. As per the accounts for the period ended 31.03.2006, AKSH is a creditor in the books of the Company after adjustment of the advance given by the Company to AKSH in terms of the EPC Contract. The Company owes an amount of Rs. 62 crores to AKSH towards supply of the materials and work done under the EPC Contract, which can be appropriated and set off from and out of the amounts due to AKSH from the Company, in the light of article 59 of the articles of association of the Company. The audit of accounts for the year 2005-2006 have been duly conducted by M/s Suresh & Co., which is confirmed by the second petitioner in his communication dated 05.03.2007 addressed to M/s S.R. Batliboi and Associates. The audit report of M/s Suresh and Co. reflects the assets in the form of cables and other equipments held by the Company. The auditor's report dated 10.07.2006 shows that the Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets and during the year management has carried out physical verification of fixed assets. No material discrepancies were noticed on such verification. The balance sheet for the year ended 31.03.2006 has also been signed by the second petitioner. The report of M/s. Suresh and Co. on the particulars of cables and accessories as well as the value thereon, is not disputed by the petitioners. The schedule-3 forming part of the balance sheet and profit and loss account for the year ended 31.03.2006 shows a net block fixed assets of Rs. 118 crores, which include cables and other accessories of Rs. 94.43 crores. The second petitioner was taking care of the Company and is not maintaining any inventories and there is no need to verify the stock register by the CLB. The statutory auditors' certificate on verification of the ledger extract for the period upto 30.09.2006 of the Company in the books of AKSH discloses the value of work performed by AKSH under the EPC Contract. The monies paid by the Company to AKSH are actually for the work carried out and the materials supplied by AKSH under the EPC Contract. The auditors' certificate dated 05.02.2007, based on the ledger account of the Company in the books of account of AKSH would reveal that AKSH supplied materials and rendered services to the Company during the period 2005-2006 & 2006-2007 upto 30.09.2007 to a tune of Rs. 152 crores. The payments to the contractors are kept pending, since the reconciliation and verification of the work have not been done by the contractors. AKSH never fraudulently inflated the bills or dumped any defective fibre optic cables. All the materials supplied by AKSH have been duly verified and the petitioners' charges are baseless. The plea of the petitioners that 25% of the EPC Contract of Rs. 370 crores ought to have been completed with the amount of Rs. 100 crores withdrawn by AKSH, whereas, not even a single district or the Secretariat has achieved the connectivity is not logical. No petition can be entertained on speculative premises and with the object of engaging in fishing expedition and making a roving enquiry as held in Ashok Kumar Pandey v. The State of West Bengal (2004) 1 L.W. (CrL) 369. The plea of fraud putforth by the petitioner is not only required to be specifically pleaded but also to be proved, as held by the Supreme Court in Sangramsinh P. Gaekwad v. Shantadevi P. Gaekwad and Ors. .
• In the event of any dispute arising out the SHA shall be referred to arbitration in the specified manner (Article 18).
The grave charges levelled against AKSH in relation to supply of poor quality and substandard, defective and non-functioning fibre optic cables, fraudulent withdrawal of several crores of rupees against fictious invoices, non-achieving of any single triple play connectivity, non settlement of the bills of contractors, etc., are undoubtedly and directly flowing on account of the breach of the terms of the agreement dated 21.04.2005, the EPC contract dated 10.05.2005 and the SHA dated 04.06.2005. The cumulative effect of these contracts is that AKSH shall implement the project in terms of the bid in a timely and cost effective manner, failure of which attracts payment of liquidated damages and replacement of AKSH as the EPC contractor or termination of the EPC contract. There is a device at periodical intervals for carrying out the implementation of the project. The Project Implementation Committee, wherein the second petitioner, being a member is responsible to monitor periodically the progress achieved towards implementation of the project, including the maintenance of online Management Information System in this behalf. The Company shall make payments to AKSH under the EPC contract provided the invoices are complete in all respects. Dispute resolution mechanism by way of arbitration is already in place. The main reliefs for appointment of a team of Chartered Accountants to evaluate the quantum of work done by AKSH, replacement of AKSH as the EPC contractor, termination of the EPC Contract and investigation into the investments made by AKSH are squarely covered under the aforesaid agreements and the EPC contract, contemplating appropriate remedial measures for the purported breach of agreements as well as the EPC contract. There is no scope in the present proceedings for adjudication of the various disputes arising on account of breach of the contractual obligations as agreed among the shareholders, especially when they do not in any way relate to the rights of the petitioners as shareholders. In a proceeding under Section 397/398 the acts of oppression and mismanagement complained of must affect the person concerned in his capacity or character as a member of the company and such conduct can be oppressive only when it is burdensome, harsh, and wrongful, involving an element of lack of probity and fair dealing to members in matters of the proprietary right as shareholders. The project has been awarded by APTS in favour of AKSH to be implemented by the first respondent Company, which is closely held by the petitioners as well as AKSH. According to the petitioners their rights as shareholders and their rights under the EPC contract are interwoven, while it is strenuously contended by the respondents that it is only the Company and not the petitioners, being shareholders of the first respondent Company can invoke the jurisdiction of the CLB for the alleged breach of the terms of the EPC contract, by AKSH. The general rule as laid down in Foss v. Harbottle (supra) is that in the case of an injury to the corporation, it is for the corporation to sue in its own name and individual shareholders cannot assume to themselves the right of suing in the name of the corporation. The effect of the rule in Foss v. Harbottle (supra) is that the minority shareholders cannot complain of any irregular act, which is bound to be agitated by the majority. In this context the decision in Johnson v. Gore Wood and Co. (supra) cited by Shri Ragnavan, learned Senior Counsel, assumes relevance, wherein it was held that where a person suffers losses caused by breach of duty owed to the Company, it alone can sue in respect of those losses. Nevertheless, there are certain circumstances constituting the exceptions to the rule in Foss v. Harbottle (supra), which are approved by the courts, whereby minority shareholders' actions are permissible in their own name, but for the benefit of the company. Where the reliefs sought against oppression and mismanagement ultimately go in id of the company, the reliefs provided by the statute in case of oppression would also constitute an exception to the rule in Foss v. Harbottle (supra). It will not, therefore, be just and equitable to deny the statutory right of the petitioners, being minority shareholders under Section 397/398, which will not however encompass the grievances resulted on account of breach of the contractual obligations between the parties. Even otherwise, any order terminating the EPC contract without notice to APTS will be against the principles of natural justice. Nevertheless, it shall be seen whether the petitioners have acted diligently in claiming the discretionary reliefs and further whether they have approached this Bench in good faith in order to work out the rights within the framework of the Act. The petitioner's good faith has to tested by their conduct in the present proceedings and therefore, must have come with a clean record and the persons who seek equity must do equity and must come with clean hands, without which the will not be entitled for any equitable relief under Sections 397 and 398.