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17. The learned counsel submitted: When these legitimate expectations have been denied either by the company or by the other shareholders, the petitioners have the right to move a petition under Section 397 alleging oppression. In Ebrahimi v. West Bourne Galleries Ltd. 1972 2 AER 492, the court has held "The just and equitable provision does not entitle one party to discard the obligation he assumes by entering a company nor the court to dispense him. It does, as equity always does, enable the court to subject the exercise of legal rights to equitable considerations; considerations, i.e. of a personal character arising between one individual and another, which may make it unjust, or inequitable to insist on legal right, or to exercise them in a particular way". Similarly, in O'Neill v. Phillips 1999 2 AER 961, the House of Lords has said "In a quasi partnership company, they will usually be found in the understanding between the members when they enter into association. But there may be later promises, by words or conduct, which it would be unfair to allow a member to ignore. Nor is it necessary that such promises should be independently enforceable as a matter of contract. A promise may be binding as a matter of justice and equity although for one reason or another it would not be enforceable in law ". Thus this decision would indicate that not only the legitimate expectation arising at the time of entering into the company but those arising out of later contracts also have to be honoured. In Re: Elgindata Ltd. 1991 BCLC 959 Ch D., it has been held "In general members of a company have no legitimate expectations going beyond the legal rights conferred on them by the constitution of the company, i.e., to say its memorandum and articles of association. Nonetheless legitimate expectations superimposed on a member's legal rights may arise from agreements or understandings between the members". In Gurmeet Singh v. Polymer Papers Limited 123 CC 486, the CLB has taken the view that the legitimate expectations could form the basis for grant of relief.

66. At the out set, I would like record that I am in full agreement with the proposition that in a proceeding under Section 397, in the normal circumstances, this Board cannot and will not entertain the claim for specific performance of the contracts. Shri Sundaram referred to the decisions to that effect in Gaekwad, Regal Industries and Vijaya Dairy cases. While accepting this proposition, Shri Sarkar relied on the decision in The Great Outdoors Co Ltd in which it is held that disputes relating to contractual rights also could be considered in a petition against oppression. Even though over a dozen cases were cited by the counsel by the counsel for the respondents relating to the powers of civil courts in granting reliefs under the provisions of Specific Relief Act inter alia including judgments on readiness and willingness to perform, recession/avoidance of acts etc., I am not dealing with the same since, I will be examining, with reference to the conduct of the parties, only the issue whether the petitioners have established that they had and still have legitimate expectations while joining and continuing with the company. While doing so, inevitably, reference may have to be made to the terms of the agreements, not with the view to enforce the terms but only limited to see whether the terms have bearing on the claim of legitimate expectations. Even in Gaekwad case which was referred to by Shri Sundaram, in paragraph 162 of its judgment the Supreme Court while observing that in case of violation of contractual or statutory violation, one should approach a civil court, it also held that in extraordinary situation, the same can be considered in a petition under Section 397. Shri Sundaram vehemently argued that the doctrine of legitimate expectation has been applied only under English Law in terms of Section 459 of the English Companies Act, which deals with "unfairly prejudicial" conduct. On this contention, he relied on the Division Bench Judgment of Bombay High Court in Kundan Sippy case. In that case, the doctrine of "legitimate expectation " was not examined. The court only held that the concept of "unfairly prejudicial" as in Section 459 of the English Companies Act is different from "oppression" as in Section 397 of Indian Companies Act. This Board has consistently applied the doctrine of "legitimate expectations" in a number of cases taking into consideration the nature of the companies involved viz. closely held companies, family companies and companies in the nature of quasi partnership, on the ground that limiting the interests of shareholders strictly to the legal rights under the constitution of the company would not be equitable as most of the times their association with certain types of companies is based on personal relationship or personal dealings. In the present case, Shri Sarkar pointed out that the company is in the nature of quasi partnership which contention was challenged by Shri Sundaram on the ground that the principles of quasi partnership can be applied only if certain pre-conditions like conversion of a partnership into a company etc are established. He also contended that since, even as per the MOU, public participation to the extent of 40% had been envisaged, the principles of quasi partnership cannot be applied; He also relied on Kilpesi case wherein the Supreme Court has held that principles of partnership cannot be easily applied to an incorporated company. In paragraph 245 of the judgment in Sangram Sink P. Gaekwad v. Shanta Devi P. Gaekwad , the Supreme Court has held "that the decision in Kilpest cannot be said to be an authority for the proposition that for no purpose whatsoever the principles of quasi partnership can be applied to an incorporated company. The real character of a company, for the purpose of judging the dealings between the parties and the transactions which are impugned may assume significance and in such an event, the principles of quasi partnership in a given case may be invoked". Thus, it is evident that whether or not the quasi partnership principles can be applied would depend on the facts of each case. In the present case, as per the own admission of GoWB/WBtDC, the petitioners, GOWB/WBIDC and Tatas were the promoters of the company. Tatas had not been active participants in the affairs of the company, leaving only the petitioners and GOWB/WBIDC to implement the project and manage the company. Till 2004, there were no other shareholders. Even though the petitioners are incorporated companies and WBIDC is a government company, the personal relationship and interaction of DR.PC with the Chief Minister and the officials of GoWB brought in their association with the company. These two collectively hold substantive shares viz of over 95% of the equity in the company (exclusive of IOC) and even though it was envisaged that 40% shares could be held by public, yet, as of date, there are the only two dominant groups of shareholders. Each has 4 nominees on the Board. All the major decisions are taken in consultation and with the consent of each other, and as a matter this is the main defense of GoWB/WBIDC in relation to various allegations made in the petition. Further, from the terms of the various agreements, it is apparent that these two groups of shareholders decide every aspect of the functioning of the company. Even though the company is a public company, yet, in Article 33 of the AOA, pre-emption rights have been vested in the three promoters and as a matter of fact, under this Article, WBIDC acquired the shares of Tatas. Therefore, in these circumstances, if HPL could not be considered to be a quasi partnership between the petitioners and WBIDC/GOWB, I do not think that any other company would qualify to be considered to be a quasi partnership. The doctrine of "legitimate expectation" applies, as I have pointed out earlier, aptly to closely held companies for the reasons that not only at the time of coming into association, even while continuing with such association, parties undertake obligations with certain legitimate expectations. In a petition filed under Sections 397/398, In Synchron Machine Tools v. U.M Suresh Rao 79 CC 868, the Division Bench of Karnatka High Court applied the doctrine of legitimate expectations. Similarly, in a number of closely held companies, this Board has applied the doctrine of legitimate expectation. In Thirthram Ahuja's case (supra) the petitioners therein held only 12% shares and when they were completely excluded from the management after having been associated in the management for a long time, this Board held that their exclusion was an act of oppression. Some of the cases wherein this Board has taken a similar view are Gurnam Singh v. Polymer Papers Ltd. 123 CC 486, Arati Dutta v. Unit Construction Ltd. 124 CC 584 Asal Malbar Beedi 110-CC -0031 : Ultra Filter India Ltd. 112 CC 93 DSS Enterprises P. Ltd. 2001 4 CLJ 421. When this Board has consistently applied the doctrine of legitimate expectation in a proceeding under Section 397, no convincing arguments have been advanced as to why this doctrine should not applied in the present case other than stating that this doctrine could be applied only in a case of "unfairly prejudicial" conduct. In this connection, as rightly cited by Shri Sarkar, even under Section 210 of the English Act which is similar to Section 397, it has been held in Ebrahimi's case (supra) that "The just and equitable provision does not entitle one party to discard the obligation he assumes by entering a company nor the court to dispense him. It does, as equity always does, enable the court to subject the exercise of legal rights to equitable considerations; considerations, i.e. of a personal character arising between one individual and another, which may make it unjust, or inequitable to insist on legal right, or to exercise them in a particular way ". In that case, even though the term "legitimate expectations" has not been specifically used, yet, the meaning conveyed is nothing but "legitimate expectations". Therefore, in dealing with the various claims of the petitioners on the basis of the agreements, I shall be only examining whether the conduct of the parties pursuant to the terms of the agreements, has caused creation of any legitimate expectation for the petitioners.