REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS.5416-5419 OF 2008

CHATTERJEE PETROCHEM (I) PVT. LTD. … APPELLANT

Vs.

HALDIA PETROCHEMICALS LTD.& Ors. … RESPONDENTS

WITH

CIVIL APPEAL NOS.5420, 5437-5440 OF 2008

J U D G M E N T

ALTAMAS KABIR,J.

1.M/s. Haldia Petrochemicals Ltd., hereinafter

referred to as “H.P.L.”, was incorporated in 1985

for establishing a green field petrochemical

complex in Haldia in the State of West Bengal to be

established by the West Bengal Industrial

Development Corporation, hereinafter referred to as

“WBIDC”, and the R.P. Goenka Group. However, the

Goenka Group left the Company in 1990 and Tata

Chemicals and Tata Tea were inducted into the

project between 1990 and 1993. Not much headway was

made towards implementing the project till June,

1994 when Dr. Purnendu Chatterjee, hereinafter

referred to as “PC”, a Non-Resident Indian

industrialist and financier, expressed an interest

in the project. Accordingly, a Memorandum of

Understanding was entered into between WBIDC and

the Chatterjee Petrochem (Mauritius) Company,

hereinafter referred to as “CP(M)C” and the Tatas

on 3

rd

May, 1994. According to the said Memorandum,

the initial cost of the project was estimated at

Rs.3600 crores which was to be funded with a debt

of Rs.2400 crores and equity of Rs.1200 crores.

Initially, equity capital of Rs.700 crores was to

2

be contributed by WBIDC, CP(M)C and the Tatas in

the ratio of 3:3:1 respectively. It was also

provided that the Board of the Company would

consist of four nominees each of WBIDC, CP(M)C and

two from the Tata group. This was followed by a

Joint Venture Agreement, hereinafter referred to as

“JVA”, between the three parties on 20

th

August,

1994, incorporating the terms which had been agreed

upon by the parties. It was decided that both WBIDC

and CP(M)C would invest Rs.300 crores each and the

Tatas would invest Rs.100 crores, while Rs.500

crores was to be obtained from the public,

including Non-Resident Indians and Financial

Institutions, towards equity, keeping the debt

equity ratio at 2:1. Certain other terms and

conditions agreed between the parties were also

included in the Agreement, of which one of the

specific terms was that in case of disinvestment by

WBIDC, the disinvested shares would be offered to

CP(M)C. One of the other terms agreed to by the

3

parties is that they would be entitled to seek

specific performance of the terms and conditions of

the agreement in accordance with the provisions of

the Specific Relief Act, 1963, and the agreement

would remain in force as long as the parties held

the prescribed percentage of shares.

2.After the said agreement was executed, four

other letters dated 30

th

September, 1994, 6

th

October, 1994 and 5

th

January, 1995, were exchanged

between the parties, whereby it was agreed that

between 24 months of commencement of commercial

production or within 60 months of the date of the

JVA, whichever was later, at least 60% of the

shareholding of the WBIDC would be offered to

CP(M)C at Rs.14/- per share. It was provided that

the role of the Government in the Company would be

limited to its promotion and guidance through the

initial phases of the project and that the nominee

of CP(M)C would be the Managing Director. In

March, 1995, the Articles of Association of the

4

Company were altered to bring it in line with the

terms of the JVA. An addendum to the JVA was

executed on 30

th

September, 1996/4

th

October, 1996,

by which the project cost was revised to Rs.5170

crores and the equity participation was revised to

Rs.432.857 crores to be provided by WBIDC and by

CP(M)C, while Tatas were to provide Rs.144.286

crores. The remaining equity participation of

Rs.969 crores was to be from the public.

3.The project started in 1997 and commercial

production commenced in August, 2001. Thereafter,

further agreements were entered into between the

parties and the first of such agreements was

entered into on 12

th

January, 2002, whereby CP(M)C,

the Government of West Bengal, WBIDC and HPL, inter

alia, agreed on a certain course of action in

regard to HPL’s need of financial and managerial

restructuring. The object and exercise of such

restructuring was that CP(M)C would acquire a

controlling interest of 51% shares in the equity of

5

the Company and would have complete control over

the day-to-day affairs of the Company, including

the right to appoint key executives. WBIDC also

agreed to vote along with CP(M)C on all issues in

the shareholders meeting and its nominee would also

vote along with the nominee Directors of the

CP(M)C. It was specifically agreed that all other

rights and obligations of CP(M)C in terms of the

earlier agreement would continue till CP(M)C

acquired majority shares in the Company.

4.The aforesaid agreement was followed by

another agreement dated 8

th

March, 2002, wherein it

was recorded that in terms of the agreement dated

12

th

January, 2002, 155,099,998 equity shares of

WBIDC had been transferred and delivered to

CP(I)PL, on 8

th

March, 2002. It was also mentioned

that the said shares were pledged with WBIDC and,

accordingly, the shares had been duly lodged along

with the share certificates with WBIDC and the

pledge had been acknowledged. Certain other

6

agreements in regard to the shareholding pattern

and the management of the Company were entered

into, wherein after allotment of shares to Winstar,

which had been brought in to infuse Rs.127.4 crores

towards equity, the collective shareholding of the

Appellants was shown to be 58.62% with a rider that

155 million shares transferred by WBIDC to CP(M)C

was subject to registration and lenders’ approval.

We may have recourse to refer to some of the said

agreements at a later stage.

5.One other agreement which is relevant to the

facts of this case was entered into between PC and

the Government of West Bengal, represented by the

Respondent No.8, Shri Sabyasachi Sen, on 14

th

January, 2005, wherein it was indicated that the

Government of West Bengal would sell its entire

shareholding in HPL to CP(M)C, and that the price

of the shares would be determined by an independent

valuer selected by the Government of West Bengal

from amongst a panel of firms to be prepared by

7

CP(M)C. It was further declared that the

recommendation of the valuer would be binding both

on the Government of West Bengal and CP(M)C.

6. In the months of January and February, 2005,

HPL had approved the issuance and allotment of

equity shares worth Rs.150 crores at par to Indian

Oil Corporation (IOC). Objecting to the proposed

allotment of shares to IOC and also on the ground

that WBIDC and the Government of West Bengal had

failed to fulfil their commitment to transfer their

balance 36% shares to the Appellants, the

Appellants filed Company Petition No.58 of 2009

before the Company Law Board under Sections 397,

398, 399, 402, 403 and 406 of the Companies Act,

1956, inter alia, for the following reliefs :-

“a)An order be passed directing the

company to take immediate steps for

modifying and/or altering and/or

amending the Articles of Association

of the Company to incorporate therein

the complete agreement by and between

the joint venture partners and special

rights of the petitioner in relation

8

to the Company, as provided in the

Agreements dated 20

th

August, 1994, 12

th

January, 2002, 8

th

March 2002 and 30

th

July, 2004.

b)Appropriate orders be passed directing

the entire shareholding of the

respondent No.2 in the Company to be

transferred in favour of the

petitioner at the agreed price of

Rs.14/- per share in respect of such

number of shares of HPL registered in

the name of Respondent No.2

constituting 60% of the holding of the

respondent No.2 in the Company and on

such valuation in respect of the

balance shares held by Respondent No.2

as this Hon’ble Board may think fit

and proper;

c)Declaration that the resolution passed

at the EGM of the Company held on

January 14, 2005, is illegal,

inoperative, null and void and not

binding on the Company or any person

connected therewith;

d)Permanent injunction restraining the

respondents whether by themselves or

by their servants or agents or assigns

or otherwise howsoever from giving any

effect or further effect to the

resolution passed on the EGM held by

the Company on January 14, 2005 in any

manner whatsoever;

e)Permanent injunction restraining the

Company from receiving any money or

encashing any cheque that may have

been issued by the Respondent No.6 to

9

the Company in pursuance of the

Memorandum of Association and the

resolution passed by the EGM of the

Company held on January 14, 2005;

f)Permanent injunction restraining the

Company and its Board of Directors

from taking any major decision or

policy decision relating to the

management and affairs of the Company

before the majority shareholding and

management control in the Company is

effectively established as per the

Agreements dated 12

th

January, 2002,

and 30

th

July, 2004, including the due

recognition of the nominee of

petitioner No.2 as Director of the

Company pursuant to the letter of

Petitioner No.2 dated 1

st

August, 2005;

g)Permanent injunction restraining the

Company and its present board from

dealing with or disposing of or

alienating or encumbering any asset or

property of the Company except

strictly in the course of the business

of the Company;

h)Permanent injunction restraining the

Company and its Board of Directors

from taking any decision in relation

to the management and administration

of the Company except with the

previous approval of the petitioner;

i)Permanent injunction restraining the

respondents and each of them from in

any manner acting in derogation of the

petitioner’s rights as majority

shareholders in the company and the

10

petitioner’s right to control the

management of the Company, including

without limitation by way of sale of

shares of the Company held by any of

them to any third party except the

petitioners;

j)……………………………………………………………………………………………………

k)……………………………………………………………………………………………………

l)Direct the reconstitution of the Board

of the Company to reflect the majority

control and the special rights

accorded under the Agreements between

the shareholders to the petitioners;

m)……………………………………………………………………………………………………

n)……………………………………………………………………………………………….”

Subsequently, on coming to learn that the

shares in question had already been allotted to

IOC, the Appellants filed an application for

amendment of the petition to challenge the

allotment in favour of IOC and seeking cancellation

thereof.

7.Before the Company Law Board, hereinafter

referred to as “the CLB”, not only was it

reiterated by the Chatterjee Group that PC had to

11

rejuvenate the Company and to implement the

project, for which he was recognized as a

“promoter” in the Memorandum of Understanding

entered into on 3

rd

May, 1994, but that there was a

clear understanding that the Chatterjee Group would

have management interest in the Company. Before

the CLB it was further contended that the Company

was really a quasi-partnership with each of the

three groups having financial stakes and management

participation. The Chatterjee Group further claimed

that the Memorandum of Understanding not only

provided for the Appellants to hold 3/7

th

of the

shares of the Company, but also 2/5

th

of the

Directorship therein. WBIDC was also to have a

3/7

th

share in the Company so that the Company

remain as a private company.

8.The Chatterjee Group also reiterated that in

the JVA dated 20

th

August, 1994, the Chatterjee

Group had been given a right of pre-emption to

acquire the shares of WBIDC if it chose to

12

disinvest its shares. Before the CLB it was also

emphasized that at the time of entering into a

Memorandum of Understanding on 3

rd

May, 1994, it had

been clearly understood between the parties that

the Company would remain in the private sector.

Repeating what has been indicated hereinbefore,

learned counsel for the Chatterjee Group submitted

before the CLB that in addition to the JVA, 4

letters had been exchanged between the Chatterjee

Group and the WBIDC/GoWB providing for the

Chatterjee Group to acquire at least 60% of the

shares held by WBIDC at Rs.14/- per share upon the

happening of certain events within a particular

timeframe. Before the CLB the Chatterjee Group also

contended that it was understood by the parties

that the role of the Government would gradually be

confined to promotion and guidance during the

initial stages of the project, after which the

control of the management would be in the private

sector and the nominee of the Chatterjee Group

13

would be the Managing Director of the Company.

9.In support of its contention of mismanagement

and oppression by the Company towards the

Chatterjee Group, it was alleged that the decision

to allot 150 million shares to IOC by WBIDC/GoWB

had been taken behind its back with the sole

intention of preventing the Chatterjee Group from

acquiring the control of the Company’s affairs, as

was promised and understood at the initial stage

when PC agreed to participate in the equity

holdings of the Company. One of the major acts of

oppression complained of by the Chatterjee Group

before the CLB was that despite having received

payment in respect of 155 million shares and having

transferred the same to the Chatterjee Group, it

did not complete the transfer by registering the

transfer with the Company and altering its Register

of Members accordingly, which effectively deprived

the Chatterjee Group of having the promised

majority shareholding in the Company. Before the

14

CLB it was further contended that had the said

shares been registered in the name of the

Chatterjee Group, the total shareholding of the

Chatterjee Group would have been 51% which would

have given them control of the affairs of the

Company. Hence, a prayer had been made before the

CLB for a direction upon WBIDC/GoWB to complete the

transfer of the 155 million shares in favour of the

Chatterjee Group.

10.On behalf of the Chatterjee Group it had also

been contended before the CLB that it had agreed to

induct IOC as a portfolio investor in the Company

at the instance of GoWB. However, subsequently, by

its letter dated 20

th

September, 2004, the

Chatterjee Group had indicated that in view of the

proposed public offer, there was no further

necessity of inducting any portfolio investor, but

the investment of Rs.150 crores by IOC could be

considered. A resolution was adopted by the Company

on 2

nd

November, 2004, to allot shares to IOC,

15

although the Chatterjee Group was against such

allotment. In order to maintain the private

character of the Company, the Chatterjee Group

called upon WBIDC to sell 60% of its shareholding

to the CP(M)C at the agreed price of Rs.14/- per

share as recorded in the letter dated 30

th

September, 1994. It was further submitted before

the CLB that upon such demand being made,

discussions were held and it was mentioned that the

GoWB and WBIDC would give in writing that the

entire shareholding of WBIDC in the Company would

be sold to the Chatterjee Group. It was, therefore,

submitted that pursuant to such discussions and

representations that an Agreement was reached on

14

th

January, 2005, between one Dr. Sabyasachi Sen

and PC in the presence of Mr. Tarun Das, wherein

they agreed to vote in support of the Resolution to

allot 150 million HPL equity shares to IOC at par.

The grievance of the Chatterjee Group before the

CLB was that inspite of several letters written on

16

behalf of the Chatterjee Group, no steps were taken

by the Company to give effect to the Resolution

dated 14

th

January, 2005.

11.Another major grievance of the Chatterjee Group

before the CLB was that sometime before 15

th

July,

2005, doubts regarding IOC’s investment in HPL were

substantiated when the letter dated 10

th

November,

2004, written by the WBIDC to IOC was discovered.

It was contended before the CLB that by

deliberately suppressing the discussions between

WBIDC and IOC which would give IOC control over the

management of HPL, WBIDC/GoWB wrongly obtained the

consent of the Chatterjee Group to the Resolution

of the Extra-Ordinary General Meeting held on 14

th

January, 2005, to allot shares at par to the

Respondent No.6 IOC. The Chatterjee Group also

complained that neither GoWB nor WBIDC had ever

intended to honour the agreement dated 14

th

January,

2005, and from the letter dated 10

th

November, 2004,

it was clear that GoWB and WBIDC did not intend to

17

sell the HPL shares held by the WBIDC to the

Chatterjee Group.

12.It was also contended before the CLB by the

Chatterjee Group that since HPL was not in

immediate need of funds, the allotment of shares to

IOC was not warranted despite the fact that the

Chatterjee Group was ready and willing to complete

the share purchase deal at the agreed price of

Rs.14/- per share. By virtue of the superior

bargaining power of the WBIDC and GoWB, the

Chatterjee Group could not enforce their special

rights on account of their continuing minority

status in the Company, nor could it acquire control

of the management thereof.

13.It was also contended that even the Articles of

Association had not been modified or altered to

reflect the rights which the Chatterjee Group

enjoyed and the clandestine arrangement arrived at

between the GoWB, WBIDC and IOC undermined the very

18

basis on which the request made by GoWB and WBIDC

had been accepted by the Chatterjee Group.

Accordingly, the said arrangement was required to

be brought to an end for resolving the oppressive

acts of the GoWB and the WBIDC.

14.On the basis of the aforesaid allegations, the

Chatterjee Group contended before the CLB that the

affairs of the Company were being conducted in a

manner which was prejudicial to the public interest

and oppressive to them. It was further contended

that winding-up of the Company would unfairly

prejudice the parties but that otherwise the facts

would justify the making of a winding-up order on

just and equitable grounds.

15.The aforesaid stand taken by the Chatterjee

Group was opposed on behalf of the Company on the

ground that inspite of having made several promises

to infuse equity into the Company, it had failed to

do so and in view of severe fund crunch faced by

19

the Company on account of such failure, the Company

had no other alternative, but to transfer the

shares in question to a party which was willing to

do so. In fact, it was the joint contention of

GoWB and WBIDC that since the Chatterjee Group had

failed to abide by its commitments to infuse equity

into the Company and as the affairs of the Company

were at a point of collapse, with creditors,

particularly the Indian Oil Corporation supplying

Naphtha, which was the essential ingredient in the

manufacturing process of the Company, demanding

their outstanding dues even under the threat of

taking appropriate action under the provisions of

the Companies Act, 1956, the Company had no option

but to transfer the 150 million shares to IOC as

per the decision taken earlier.

16.In addition to the above, it was also submitted

that the Chatterjee Group had agreed to the

decision to induct the IOC in the Company as a

portfolio investor.

20

17.The Company Petition was disposed of by the CLB

by upholding the decision of the Company to allot

150 million shares to IOC, which would be at

liberty to deal with the same in any manner it

thought fit. Similarly, the transfer of 155 million

shares by WBIDC to the Chatterjee Group at Rs.10/-

per share was confirmed. A further direction was

given to GoWB and WBIDC to transfer the 520 million

shares held by them in HPL to the Chatterjee Group.

The Chatterjee Group was also directed to purchase

the 271 million preference shares held by GoWB and

WBIDC at par. The CP(I)PL was directed to pay a

sum of Rs.125 crores to WBIDC towards balance

consideration for the 155 million shares on or

before 28

th

February, 2007. It was further directed

that on payment of the said amount, the shares in

question would be deemed to have been

dematerialized and transferred in the name of

CP(I)PL, without any further deed or act or refusal

from anyone or production of any instruction to

21

transfer. Significantly, the Chatterjee Group was

also given liberty as soon as they paid the

consideration for the 155 million shares, to take

control of the day-to-day management of the Company

as they would then be holding 51% of the equity

shares, with the stipulation that no major

decisions would be taken without the approval of

the Court. The CLB also came to a definite finding

that the 150 million shares allotted to IOC had not

been so transferred suddenly or surreptitiously or

with any ulterior motive and the allegation of a

secret agreement between GoWB and IOC, though of

very little significance, has been magnified by the

Chatterjee Group in the Company Petition.

18.The Government of West Bengal, through its

Joint Secretary in the Department of Commerce and

Industry, filed an appeal before the Calcutta High

Court against the said order of the CLB dated 31

st

January, 2007 under Section 10F of the Companies

Act, 1956, and the same was numbered as A.P.O.No.45

22

of 2007. Among the various grounds taken in the

Appeal, a question was raised as to whether the CLB

could have assumed jurisdiction on the Company

Petition filed by Chatterjee Petrochem (Mauritius)

Ltd. Co., Winstar India Investment Company Ltd.,

India Trade (Mauritius) Ltd. and Chatterjee

Petrochem (India) Pvt. Ltd., to enforce rights

under private contracts. Another ground taken was

that the CLB had erred in applying the doctrine of

legitimate expectation in a Petition under Section

397 read with Sections 398 and 402 of the Companies

Act, 1956, and in treating the Company to be a

quasi-partnership. As a corollary to the said

question, the Government of West Bengal also

questioned the jurisdiction of the CLB to convert

the Company Petition into a Suit for Specific

Performance of Contract. It was also contended

that the issues raised in the Company Petition were

with regard to the disputes of a contractual nature

between shareholders and the non-performance of

23

such contracts between the shareholders could not

be treated to be the “Affairs of the Company”. The

locus standi of the Chatterjee Petrochem (India)

Pvt. Ltd. to maintain a petition under Section 398

of the Companies Act was also questioned since on

the date of filing of the Petition before the CLB,

the said Company was not even a member of the Joint

Venture Company. It was also reiterated that no

case for mismanagement or oppression had been made

out and the application under Section 398 of the

above Act was liable to be dismissed.

19.Upon hearing the parties, the learned Single

Judge held that CP(I)PL had no locus standi to

maintain a petition under Section 397 of the

Companies Act and that CLB could not have assumed

jurisdiction on the Company Petition, in which

CP(I)PL was a petitioner, since CP(I)PL was not a

member of HPL. The learned Single Judge held that

such a petition for the purpose of enforcing rights

under private contracts would not be maintainable

24

and that the agreement entered into between CP(I)PL

and WBIDC for transfer of shares, being a private

contract between two shareholders, the same could

not be the subject matter of a petition under

Section 397 of the Companies Act, 1956. The

learned Single Judge also observed that such

agreements could not be treated to be “affairs of

the Company” and that, in any event, such a ground

had not also been pleaded in the Company Petition.

The learned Judge held that the order of the CLB,

which was based entirely on the question of

transfer of the 155 million shares by WBIDC to

CP(I)PL, stood vitiated by such jurisdictional

error.

20.The learned Single Judge also held that the CLB

was not justified in applying the concept of quasi-

partnership, which had been urged on behalf of the

Chatterjee Group, to HPL. According to the learned

Single Judge, the question as to why a Limited

Company should be considered to be a quasi-

25

partnership, would have to be decided on the facts

of each case. While, on the one hand, it would be

easy to apply the said concept to a closely-held

Family Company or a Private Limited Company, as in

cases where a partnership is converted into a

Company, such an assumption could not be arrived at

merely on the ground that the promoters of the

Company described themselves as partners.

21.The learned Single Judge further held that from

the entire pleadings in the Company Petition no

case whatsoever had been made out that in

conducting the affairs of HPL, the GoWB and WBIDC

had oppressed the Petitioners in any way so as to

attract the provisions of Section 397 of the

Companies Act. The learned Single Judge also held

that the CLB was not right in applying the doctrine

of legitimate expectation to the agreement entered

into between WBIDC and CP(I)PL on 8

th

March, 2002,

thereby converting the Company Petition into a suit

for specific performance of contract. The learned

26

Judge observed that by granting relief in the name

of the doctrine of legitimate expectation, the CLB

has actually enforced specific performance of the

contract and agreements, which was beyond its

jurisdiction.

22.Lastly, on the question of the induction of IOC

and the allotment of 155 million shares to the said

Company, the learned Single Judge held that the

induction of IOC was on the basis of the Debt

Restructuring Package and the Refinancing Scheme,

which were to the advantage of HPL, and had been

decided from time to time at the Board meetings of

the Directors, which had been presided over by PC.

On the basis of his aforesaid findings, the learned

Single Judge, relying on the decision of this Court

in Shanti Prasad Jain Vs. Kalinga Tubes Ltd.

[(1965) 2 SCR 720], held that an order granting

relief under Section 397 could be made only after

affirming and recording an opinion on each of the

three conditions mentioned in Section 397(2)(a) and

27

(b) of the Companies Act, 1956. The learned Single

Judge held that in the instant case, no such

opinion had either been formed or recorded by the

CLB relating to the said three conditions. The

learned Single Judge also rejected the submissions

made on behalf of the Petitioners that an opinion

with regard to the said two conditions would

automatically follow from the opinion formed by the

CLB on oppression, or such opinion could be

gathered from the order of the Board itself. The

learned Single Judge, accordingly, held that the

order passed by the CLB was contrary to the

provisions of Section 402(e) of the above Act,

since no relief under the said Section could be

granted without a finding having been arrived at

that a case of oppression had been made out within

the meaning of Section 397 of the aforesaid Act.

23.Appearing for the Chatterjee Group, Mr. Fali S.

Nariman, learned Senior Advocate, did not seriously

oppose the contention that the prayers in the

28

Company Petition were really for specific

performance of the various agreements entered into

by the parties, but that the same were on account

of the acts of oppression and mismanagement on the

part of GoWB, HPL and WBIDC with regard to the non-

registration of the 155 million shares which had

already been transferred by WBIDC in favour of the

Chatterjee Group. Mr. Nariman urged that although

the said shares had been transferred in favour of

the Chatterjee Group and although the price in

respect thereof had been duly received by HPL, the

Company had not registered the said 155 million

shares with the Company in the name of CP(I)PL and

the transfer of the said shares was also not

reflected in its Register of Members. Mr. Nariman

contended that by not registering the 155 million

shares in the name of the Chatterjee Group, which

deprived the Chatterjee Group of being the majority

shareholder, and, at the same time, allotting 150

million shares to IOC, the acts of the Company

29

reduced the Chatterjee Group from a majority

shareholder to a minority shareholder, which

amounted to oppressive treatment by the Company.

24.Mr. Nariman submitted that at the time of entry

of the Chatterjee Group through the CP(M)C in 1994,

the total issued share capital of HPL was 1010

million shares of Rs.10/- each and the shareholding

pattern was as under :-

CP(M)C - 433 million shares

WBIDC - 433 million shares

Tatas - 144 million shares

25.However, on 28

th

September, 2001, at the Board

Meeting of HPL, a Resolution was taken to offer a

Rights Issue to the existing shareholders so that a

further sum of Rs.223 crores could be infused in

HPL in the ratio of 107:107:36. Although, the

other shareholders subscribed to the Rights Issue,

the Chatterjee Group did not on the ground that

such equity could be infused once the financial

30

restructuring of HPL had been completed.

Accordingly, on 8

th

March, 2002, the shareholding

pattern as per the Register of Members in the share

capital of 1153 million shares was :

CP(M)C - 433 million shares = 37.56%

WBIDC - 540 million shares = 46.83%

Tatas - 180 million shares = 15.61%

26.Mr. Nariman submitted that in the Agreement

dated 30

th

July, 2004, which was supplemental to the

Agreement dated 12

th

January, 2002, executed by the

GoWB, WBIDC, CP(M)C and HPL, it was specifically

mentioned that GoWB had caused WBIDC to transfer to

CP(I)PL, an affiliate of CP(M)C, shares worth

Rs.155 crores and that CP(I)PL had become the

beneficial owner thereof. However, the registration

of the said shares in the books of HPL was kept

pending till approval was obtained from the

Lenders, being the Banks and Financial

Institutions. Mr. Nariman submitted that as a

31

result, despite the transfer by WBIDC of 155

million shares in favour of CP(I)PL, WBIDC

continued to be shown as owner thereof in the Share

Register of the Company. Mr. Nariman submitted that

once clearance had been obtained from the Lenders,

WBIDC could no longer refuse to register the said

155 million shares in the name of CP(I)PL, which

was an integral part of the Chatterjee Group.

27.Mr. Nariman submitted that the number of shares

transferred by WBIDC to CP(I)PL comprised 13.44%

of the total number of shares amounting to 1153

shares, which meant that along with the 36.56% of

the shares held by the Chatterjee Group, the total

worked out to 51% and gave the Chatterjee Group the

management control of HPL and reduced the

shareholding of WBIDC from 46.83% to 36.9%.

28.Mr. Nariman submitted that on the same day on

which the Supplemental Agreement had been signed, a

Share Subscription Agreement was executed by HPL,

32

CP(M)C, WBIDC and WINSTAR which, inter alia,

referred to the agreement entered into by GoWB,

WBIDC, CP(M)C and HPL on 12

th

January, 2002 and that

WBIDC, CP(M)C and CP(I)PL had entered into an

Agreement on 8

th

March, 2002, relating to the

transfer of shares in the Company at Rs.10/- per

share and pursuant to that agreement, CP(M)C came

to be in management control of the Company.

29.Mr. Nariman urged that by signing the Share

Subscription Agreement dated 30

th

July, 2004, WBIDC

and HPL had acknowledged the fact that pursuant to

the Agreements of 12

th

January, 2002 and 8

th

March,

2002, 155,099,998 shares had gone out of the

holding of WBIDC and were held by CP(I)PL, a part

of the Chatterjee Group. However, in the Company

Petition filed before the CLB, WBIDC and GoWB

denied the same and ascertained that the 155

million shares continued to be part of the holding

of the WBIDC and a further stand was taken that at

no point of time had the Chatterjee Group held the

33

majority shares in HPL. In addition to the above,

by transferring 150 million shares to IOC, the

WBIDC/GoWB had reduced the Chatterjee Group from a

majority to a minority, which clearly amounted to

oppressive treatment by the Company.

30.Mr. Nariman contended that on account of the

various defaults committed by the Chatterjee Group

in failing to infuse equity into HPL, in breach of

the Agreement dated 12

th

January, 2002, WBIDC and

the GoWB were absolved of the application to

register the 155 million shares in favour of

CP(I)PL. It was pointed out that under the

aforesaid Agreement, CP(M)C had agreed to infuse

Rs.107 crores into HPL, of which Rs.53.5 crores was

to be paid within 5 working days of signing of the

Agreement, which was executed on 25

th

January, 2002.

Taking into account the aforesaid sum, CP(M)C was

required to arrange for a minimum amount of Rs.500

cores, either as equity or equity-like instruments

and/or advance from outside sources, including

34

strategic partners. The CP(M)C also agreed to

organize Letters of Comfort to be issued within 30

days of signing of the Agreement for the purpose of

overall debt restructuring of HPL which was

concluded by 31

st

March, 2002. There was a further

stipulation that the balance of Rs.53.5 crores, out

of the sum of Rs.107 crores, was to be inducted by

CP(M)C within 5 days of the acceptance of the

Letters of Comfort.

31.Mr. Nariman further contended that the

assurance given in Clause 5 of the Agreement, which

assured CP(M)C 51% of the total paid-up equity of

HPL, was not conditional to the infusion of equity

worth Rs.500 crores by the Chatterjee Group. Such

assurance was subject to compliance with the

requirements of providing Letters of Comfort and

acceptance thereof by the GoWB and upon payment of

Rs.53.5 crores as stipulated. Mr. Nariman urged

that since the said conditions had been fulfilled

by the Chatterjee Group, it was incumbent upon GoWB

35

and WBIDC to transfer the 155 million shares to

CP(M)C which was the beneficial owner thereof. It

was submitted that the failure of WBIDC to effect

such registration and at the same time, registering

150 million shares in favour of IOC, thereby

reducing the Chatterjee Group to a minority

shareholder, was a positive act of oppression on

the part of the majority shareholder, which was

sufficient to attract the provisions of Sections

397 and 398 read with Section 402 of the Companies

Act, 1956. Mr. Nariman urged that even if the

allotment of 150 million shares to IOC was not

taken into consideration, the continuous refusal on

the part of the Company to register the 155 million

shares in the name of CP(I)PL, not only amounted to

breach of the agreement dated 12

th

January, 2002, by

which WBIDC and GoWB had agreed to ensure that the

Chatterjee Group would remain in majority, but that

the same also attracted the provisions of Section

397 of the Companies Act. Mr. Nariman submitted

36

that the said promise contained in the Agreement

dated 12

th

January, 2002, formed the very basis on

which PC had brought equity worth Rs.257 crores

into HPL, but for which the Company would not have

been able to restructure its debts. Learned

counsel submitted that for WBIDC and GoWB to

contend that the induction of the Chatterjee Group

on an understanding that it would always have a

majority control over the Company’s management, was

simply an agreement between two shareholders and

not an affair of the Company, was not acceptable.

Mr. Nariman urged that the refusal of the WBIDC to

register the 155 million shares transferred to the

CP(I)PL affected the shareholding pattern of the

Company and was, therefore, directly an affair of

the Company, which fact had been duly recognized by

the CLB. Mr. Nariman submitted that it is on

account of the various assurances given by WBIDC

and the GoWB that the Chatterjee Group had become

the owner of the 155 million shares, that it had

37

been the consistent stand of the Chatterjee Group

that they were the majority shareholders of the

Company.

32.Relying on the decision of this Court in Needle

Industries (India) Ltd. & Ors. Vs. Needle

Industries Newey (India) Holding Ltd. & Ors.

[(1981) 3 SCC 333], Mr. Nariman submitted that in

determining a question of oppression under Section

397 of the Companies Act, the Company Law Board was

entitled to take into account facts which had come

into existence after the company petition had been

filed. Learned counsel gave several instances

where despite having given assurances that the

shares in question would stand transferred in

favour of CP(I)PL, the GoWB and WBIDC had failed to

complete the transfer on one ground or the other,

despite stating that the GoWB stood committed to

the transfer of the shares to the Chatterjee Group

as per the Agreements dated 12

th

January, 2002, 8

th

March, 2002 and 30

th

July, 2004.

38

33.Mr. Nariman submitted that the clandestine

manner in which WBIDC had transferred 150 million

shares in favour of IOC was in complete breach of

the agreement between WBIDC and PC that the

Chatterjee Group would remain the majority

shareholder and would also have the control and

management over the company’s affairs. Mr. Nariman

submitted that had it been brought to the knowledge

of the Chatterjee Group that such a secret

agreement to transfer 150 million shares to IOC was

being negotiated, it would have never voted at the

Extraordinary General Meeting of the Company on 14

th

January, 2005, in support of the allotment of the

said shares to IOC.

34.Although, Mr. Nariman had made certain

submissions with regard to the Agreement of 8

th

March, 2002, read with the requirements of the

Depositories Act, 1996, SEBI (Depositories and

Participants) Regulations, 1996 and the bye-laws

39

and business rules/operating instructions issued by

the depositories, we shall, if need be, refer to

the same at a later stage of the proceedings.

35.Mr. Nariman submitted that the concept of

oppression for the purposes of Sections 397, 398

and 402 of the Companies Act had been considered by

this Court in various cases. Learned counsel

pointed out that in the Needle Industries case

(supra), this Court had observed that the behaviour

and conduct complained of must be held to be harsh

and wrongful and in arriving at such a finding, the

Court has to look at the business realities of the

situation and not confine itself to a narrow

legalistic view and allow technical pleas to defeat

the beneficial provisions of the Section. Mr.

Nariman submitted that when the Company was in

substance, though not in law, a partnership, there

had to be utmost good faith between the members.

Mr. Nariman submitted that this Court had gone even

further to indicate that even if no oppression was

40

made out in a Petition under Section 397 of the

Companies Act, the Court is not powerless to do

substantial justice between the parties.

36.Learned counsel submitted that Company law had

developed seamlessly from the law of partnership

which is based on mutual trust and confidence, as

was observed by the House of Lords in O’Neill Vs.

Phillips [(1999)2 All ER 961], and in such a

situation, the highest standards of honour had to

be maintained. It was also submitted that the

aforesaid decision of the House of Lords which was

based on the earlier decision in Blisset Vs. Daniel

[68 E.R. 1022], was subsequently reiterated by the

House of Lords in Ebrahimi Vs. Westbourne Galleries

[(1972) 2 All ER 492] and also by this Court in the

Needle Industries case (supra). Mr. Nariman urged

that in Dale & Carrington Invt. P. Ltd. Vs. P.K.

Prathapan [(2005) 1 SCC 217], this Court had held

that if a Member who holds the majority of shares

in a Company is reduced to the position of a

41

minority shareholder by an act of the Company or by

its Board of Directors, the said act must

ordinarily be considered to be an act of oppression

to such Member.

37.Reference was also made to the decision of this

Court in Rajahmundry Electric Supply Corporation

Ltd. Vs. A. Nageswara Rao & Ors. [(1955) 2 SCR

1066], wherein, Venkatarama Ayyar, J., as His

Lordship then was, while referring to an equitable

and just principle, held that when the said

doctrine specifying the ground of winding-up by the

Court is not to be construed as ejusdem generis

then whether mismanagement of Directors is a ground

for passing of a winding up order under the Indian

Companies Act, 1913, becomes a question to be

decided on the facts of each case. Mr. Nariman

pointed out that in the aforesaid judgment, the

learned Judge had referred to the decision in Loch

Vs. John Blackwood Ld. [(1924) AC 783], in which an

order for winding-up of the Company was ordered on

42

the ground of mismanagement by the Directors and

the law was stated as follows :-

“It is undoubtedly true that at the foundation

of applications for winding up, on the ‘just

and equitable’ rule, there must lie a

justifiable lack of confidence in the conduct

and management of the company’s affairs. But

this lack of confidence must be grounded on

conduct of the directors, not in regard to

their private life or affairs, but in regard to

the company’s business. ………………”

38.Mr. Nariman submitted that following the

aforesaid principle, this Court had in M.S.D.C.

Radharamanan Vs. M.S.D. Chandrasekara Raja & Anr.

[(2008) 6 SCC 750], observed that once the Company

Law Board gave a finding that acts of oppression

have been established, an order in terms of

Sections 397 and 402 on the doctrine of winding-up

of the company on just and equitable grounds,

becomes automatic. Accordingly, the interference

43

by the learned Single Judge with the order of the

CLB was wholly unwarranted.

39.Appearing for Winstar India Investment Company

Ltd., Mr. Sudipto Sarkar, learned Senior Advocate,

while adopting the submissions made by Mr. Nariman,

emphasized Mr. Nariman’s submissions on quasi

partnership. In the said context, he submitted

that in dealing with a petition under Section

397/398 of the Companies Act the Court has to

consider business realities, instead of confining

itself to a narrow legalistic view. Learned

counsel argued that in the Needle Industries case

(supra), this Court, inter alia, observed that

technical pleas should not be allowed to defeat the

beneficent provisions of Section 397/398 of the

Companies Act. Mr. Sarkar submitted that the said

principle had been subsequently followed by this

Court in (i) Sangramsinh P. Gaekwad & Ors. Vs.

Shantadevi P. Gaekwad (Dead) through LRs. & Ors.

[(2005) 11 SCC 314]; (ii) Kamal Kumar Dutta & Anr.

44

Vs. Ruby General Hospital Ltd. & Ors. [(2006) 7 SCC

613]; (iii) M.S.D.C. Radharamanan’s case (supra).

Mr. Sarkar submitted that in Sangramsinh P.

Gaekwad’s case (supra) this Court had observed that

the jurisdiction of the Court to grant appropriate

relief under Section 397 of the Companies Act is of

wide amplitude and while exercising its discretion,

the Court was not bound by the terms contained in

Section 402 of the said Act, if in a particular

fact situation a further relief or reliefs was

warranted. Furthermore, in a given case, even if

the Court came to a conclusion that no case of

oppression had been made out, it could still grant

such relief so as to do substantial justice to the

parties.

40.Mr. Sarkar submitted that a Joint Venture

Agreement, in fact, contemplates a partnership, as

was indicated by this Court in New Horizons Ltd. &

Anr. Vs. Union of India & Ors. [(1995) 1 SCC 478],

where the expression “Joint Venture” was examined.

45

It was noted that the said expression connotes a

legal entity in the nature of a partnership engaged

in the joint undertaking of a particular

transaction for mutual profit or an association of

persons or companies jointly undertaking some

commercial enterprise wherein all contribute assets

and share risks. Mr. Sarkar submitted that the

terms and conditions of the Joint Venture Agreement

in the instant case satisfies all the requisites of

a partnership, which made it evident that the Joint

Venture Company was nothing but a quasi-partnership

as per the tests laid down by the House of Lords in

Ebrahimi Vs. Westbourne Galleries Ltd & Ors.

[(1972) 2 All ER 492], followed in Needle

Industries case (supra). Mr. Sarkar submitted that

in Ebrahimi’s case, Lord Wilberforce writing the

main judgment indicated that the reliefs prayed for

were for a direction upon the Respondent No.2 and

his son to purchase the appellant’s share in the

company. In the alternative, an order for winding

46

up of the company was sought. The learned Judge

found that some of the allegations made remained

unproved and that the complaint made did not amount

to such a course of oppressive conduct as to

justify an order under Section 210 of the Companies

Act, 1948, in furtherance of the first relief.

41.Mr. Sarkar then proceeded to the question of

legitimate expectation and contended that in

Company Law there was sufficient room for

recognition of the fact that there could be

individuals with rights, expectations and

obligations which may submerge in the corporate

structure. In this regard, Mr. Sarkar submitted

that the said doctrine of an enforceable

expectation was considered in Re Saul D Harrison &

Sons plc [1995] 1 BCLC 14, approved in O’Neill’s

case (supra). Several other decisions in this

regard were cited by Mr. Sarkar which do not

require elaboration.

47

42.Mr. Sarkar submitted that when joining the

Company in 2004, Winstar had a legitimate

expectation arising from the Subscription Agreement

dated 30

th

July, 2004, which indicated that the

Chatterjee Group was in management and control of

the affairs of HPL and that the Company would also

have its private auditors and had it not been for

the recitals in the Subscription Agreement, Winstar

may not have invested funds in HPL at all. Mr.

Sarkar submitted that the conclusion was

inescapable that even if no case of oppression had

been made out in the Company Petition filed by the

Chatterjee Group, relief under Section 397/398

could still be granted under Sections 397 and 398,

if it was just and equitable to do so. Referring

and placing reliance on a decision of this Court in

V.S. Krishnan & Ors. Vs. Westfort Hi-Tech Hospital

Ltd. & Ors. [(2008) 3 SCC 363], Mr. Sarkar urged

that once the conduct of the management was found

to be oppressive under Sections 397 and 398 of the

48

Companies Act, the discretionary power given to the

CLB under Section 402 of the Companies Act to put

an end to such oppression was very wide. Mr.

Sarkar urged that the expression “legitimate

expectation” had found its place in Indian

Jurisprudence and has been considered by this Court

in Needle Industries case (supra), which was

followed in V.S. Krishnan’s case (supra) and

several other cases. The Agreement of WBIDC to

transfer its entire shareholding to the Chatterjee

Group gave rise to an expectation that such an

expectation would be fulfilled. Mr. Sarkar

contended that since WBIDC did not fulfil its

reciprocal promise to sell its entire shareholding

in HPL to CP(M)C, it was not open to either WBIDC

or GoWB to contend that the direction given by the

CLB upholding the allotment of 150 million shares

to IOC and directing WBIDC/GoWB to transfer its

entire shareholding to the Chatterjee Group was

49

contrary to law or without jurisdiction or

erroneous.

43.Mr. Sarkar submitted that having transferred

155 million shares in favour of the CP(I)PL it was

not open to the GoWB and WBIDC to refuse to

register the same, despite having received the

entire price for the same. Mr. Sarkar also

reiterated that it is such a promise which had been

incorporated in the agreements dated 12

th

January,

2002 and 8

th

March, 2002 as also 30

th

July, 2004,

that had weighed with Winstar to invest Rs.147

crores in the Company. Accordingly, even if it was

held that no case of oppression had been made out

against the Company, it would still be open to the

learned Company Judge to grant suitable relief to

iron out the differences that might appear from

time to time in the running of the affairs of a

Company.

50

44.While considering the submissions made on

behalf of the Chatterjee Group, we might as well

refer to the arguments advanced by Dr. Abhishek

Manu Singhvi, learned Senior Advocate, appearing

for the India Trade (Mauritius) Ltd. (ITML), which

is part of the Chatterjee Group and was the co-

Petitioner No.3 in Company Petition No.58 of 2005

filed by the Chatterjee Group before the Company

Law Board. ITML is also the Appellant in Civil

Appeal No.5437-5440 of 2008. Incidentally, Dr.

Singhvi also appeared for Dr. Purnendu Chatterjee,

who was made Respondent No.20 therein.

45.Dr. Singhvi contended that ITML had infused a

sum of Rs.107 crores into HPL, which amount, along

with Rs.143 crores separately infused in HPL by the

Chatterjee Group of Companies, was vitally

necessary for the financial health of HPL and its

revival and prosperity. Dr. Singhvi submitted that

such investments had been made, without any written

agreement or commitment, on the clear understanding

51

and expectation that it would be a partnership and

a commercial enterprise where the Chatterjee Group

would have a controlling interest and HPL would,

therefore, be a non-government company. Dr. Singhvi

submitted that the subsequent conduct of GoWB, IOC,

Lenders, Chairman and Managing Director of HPL had

resulted in grave irreversible damage to ITML,

involving breach of fiduciary and corporate

obligations which was clearly oppressive and was

sufficient ground for interference by the CLB in

the proceedings initiated by the Appellants under

Sections 397 and 398 read with Section 402 of the

Companies Act, 1956.

46.Dr. Singhvi submitted that despite the attempts

of GoWB and WBIDC to make an issue of the non-

infusion of Rs.107 crores by the Chatterjee Group,

at no point of time had the Chatterjee Group

refused to invest the amount in HPL, though on

certain conditions. Referring to Dr. Chatterjee’s

letter dated 4

th

December, 2001, Dr. Singhvi pointed

52

out that in the said letter it had been clearly

indicated that CP(M)C was prepared to bring equity

into the company in the context of a comprehensive

restructuring of HPL’s balance sheet and management

control in line with the original promise made to

the Chatterjee Group for management control of HPL.

A suggestion was also made to avail of the

corporate debt structuring available under

established Reserve Bank of India procedure. Dr.

Singhvi submitted that the entire sum of Rs.107

crores which CP(M)C had agreed to invest had, in

fact, been infused by the Chatterjee Group, though

not by subscribing to the Rights Issue, but by

arranging loans for the entire amount. Dr. Singhvi

contended that the entire loan amount which had

been arranged by the Chatterjee Group was also

repaid by it without any liability to the Company.

Even the interest accrued on the loan of Rs.107

crores from 12

th

June, 2002, till the date of

repayment, was discharged by the Chatterjee Group

53

in full, which was duly acknowledged by HPL. Dr.

Singhvi submitted that subsequently a further sum

of Rs.53.5 crores was made available to HPL through

HSBC on the understanding that the interest accrued

on the loan, starting from the date of disbursement

of the loan until its conversion, would be borne by

CP(M)C.

47. Dr. Singhvi urged that Dr. Chatterjee had been

invited and had come into the project as an equal

co-owner, unlike the other private investors who

were neither promised nor given equal partnership.

As per the Agreement between GoWB and WBIDC, the

character of HPL was always intended to remain a

private non-Government Company by projecting a

shareholding ratio of 3:1:1 where four out of the

seven parts would be held by Dr. Chatterjee and the

Tatas.

48. Reiterating all that had been said on behalf of

the Chatterjee Group by Mr. Nariman and Mr. Sudipto

54

Sarkar, Dr. Singhvi submitted that the induction of

IOC into the Company was contrary to the wishes of

the Chatterjee Group since by not registering the

155 million shares in favour of the Chatterjee

Group and on the other hand allotting 150 million

shares to IOC, an imbalance was created which led

to HPL becoming a Section 619-B Company under the

Companies Act, 1956, thereby losing its private

character. Dr. Singhvi submitted that it had been

understood by GoWB, WBIDC and the Chatterjee Group,

that IOC would be brought in not as a strategic

partner but as a portfolio investor, but ultimately

negotiations were commenced by GoWB and WBIDC to

bring in IOC as a strategic partner with management

control, although such a proposal had earlier been

categorically turned down by GoWB on 2

nd

July, 2002.

49.Dr. Singhvi submitted that the observations

contained in the impugned judgment of the High

Court that Dr. Chatterjee was not in a position to

complete the deal and was trying to delay matters

55

by asking for transfer of the said 155 million

shares to the Chatterjee Group and the IOC’s

unconditional withdrawal from HPL, as a condition

precedent for completion of the deal, was without

any foundation, since from the records it would be

clear that on 22

nd

July, 2005, GoWB had indicated

that it wanted to conclude the transaction by 25

th

July, 2005. As a matter of fact, by his letter of

25

th

July, 2005, Dr. Chatterjee had indicated his

willingness to conclude the transaction and

provided a letter from the Deutsche Bank, also

dated 25

th

July, 2005, indicating the availability

of funds to the tune of 266 million US dollars to

conclude the transaction.

50.Dr. Singhvi submitted that it was GoWB and

WBIDC which had fraudulently omitted to disclose

the secret arrangement for the induction of IOC

into HPL as a strategic partner in the Explanatory

Statement to the notice for the Extraordinary

General Meeting issued on 21

st

December, 2004. Dr.

56

Singhvi urged that there was no need to induct IOC

for effectuating the debt restructuring process,

since HPL had also taken steps for IPO of 300

million shares which would have fetched at least

Rs.540 crores based on the indicated price of

Rs.18/- per share. Dr. Singhvi submitted that Dr.

Chatterjee objected to the allotment of shares to

the IOC as that would immediately convert the

Company into a Section 619-B Company since 155

million shares transferred by WBIDC in favour of

the Chatterjee Group was yet to be registered.

51.Dr. Singhvi submitted that the allegation made

against Dr. Chatterjee that he had moved in a

calculated manner to obtain majority control of the

Company and to oppose the allotment of 150 million

shares to IOC, was without any foundation, since

155 million shares had already been transferred to

the Chatterjee Group and the same was a concluded

contract. Furthermore, when GoWB made a commitment

to sell to the CP(M)C all the HPL shares held by

57

WBIDC, there was no reason for Dr. Chatterjee to

oppose the induction of IOC as a portfolio

investor. All that Dr. Chatterjee wanted was that

GoWB and WBIDC should effect registration of the

155 million shares already transferred and for

which the price had already been paid. Dr. Singhvi

submitted that the observation made by the learned

Single Judge was wholly misconceived since the GoWB

and WBIDC had in the Agreements dated 12

th

January,

2002 and 8

th

March, 2002, already acknowledged that

on account of the transfer of the said 155 million

shares, the Chatterjee Group was in management and

control of HPL. The further finding of the learned

Single Judge that IOC had threatened civil and

criminal action against HPL and its Directors for

its unpaid dues for supply of Naphtha, was also not

justified, since Dr. Chatterjee had strongly

supported the refinancing package which had been

approved by the Board of HPL. Dr. Singhvi

submitted that Dr. Chatterjee and the Chatterjee

58

Group had always wanted to act in the interest of

the Company upon the assurance given by GoWB and

WBIDC that HPL would always remain a private

company and that the Chatterjee Group would always

have control over the management thereof.

52.Dr. Singhvi then submitted that HPL had played

an active role by supporting GoWB and WBIDC in the

ongoing litigation, contrary to the understanding

in terms of the Agreement dated 12

th

January, 2002

and the Share Subscription Agreement dated 30

th

July, 2004, which contemplated that the Chatterjee

Group was to be in management of the Company. By

allowing the transfer of 150 million shares to IOC

and by not registering the 155 million shares

transferred to the Chatterjee Group by WBDIC, the

Company had created a situation in which the

Chatterjee Group, which was admitted to be in

control of the Company, was reduced to a minority.

Dr. Singhvi pointed out that the direct consequence

of the aforesaid acts of GoWB and WBIDC resulted in

59

decline of profit before tax in 2007-08 and 2008-

09, thereby adversely affecting the interest of the

Company and the shareholders.

53.Dr. Singhvi submitted that the part played by

Mr. Tarun Das, the Chairman of HPL, was also

partisan and was contrary to the interest of the

Chatterjee Group which, it had been agreed, was to

be in management and control of the Company and its

affairs. Reiterating the submissions made by Mr.

Nariman, Dr. Singhvi submitted that the secret and

clandestine move to convert HPL into a 619-B

Company by the arrangement entered into between

WBIDC and IOC went against the very grain of the

agreements entered into between the Chatterjee

Group and WBIDC/GoWB in that regard.

54.Dr. Singhvi submitted that in the entire

exercise, Mr. Tarun Das, the Respondent No.7, who

was also the Chairman of the Company, had

precipitated the allotment of 150 million shares to

60

IOC, although, the Re-financing Package approved by

IDBI on 27

th

May, 2005, and by the Board of HPL on

28

th

May, 2005, did not contemplate allotment of

shares to IOC. Mr. Tarun Das had on his personal

initiatives obtained and circulated an opinion from

a senior counsel relating to the issue of shares to

IOC and even the same had not been circulated to

the Members of the Board in full, and they were

deliberately kept in the dark in respect of certain

portions of the opinion. Dr. Singhvi pointed out

that under Section 289 of the Act the full opinion

was required to be circulated to the Members of the

Board and in the absence thereof, the opinion could

not be relied upon. Dr. Singhvi repeated his

earlier charge that GoWB/WBIDC had acted with the

sole intention of reducing the Chatterjee Group

from a majority shareholder in HPL to a minority,

which was sufficient ground for an application

under Sections 397, 398 and 402 of the Companies

Act, 1956.

61

55.Dr. Singhvi contended that despite having

acknowledged the Chatterjee Group as a prime

sponsor of HPL and that the CDR Package and the Re-

financing Package of HPL had been considered

because of Dr. Chatterjee, the Lenders sacrificed

their own interest by permitting the Chatterjee

Group to be ousted from the management of HPL after

the complaint was filed before the Company Law

Board by the Chatterjee Group.

56.Dr. Singhvi submitted that the appointment of

Mr. S.K. Bhowmick as Managing Director of the

Company, after being appointed as the Additional

Director as there was no vacancy on the Board and

his appointment as Managing Director, was wholly

illegal since only a Director could be appointed to

the said post. Dr. Singhvi submitted that the

Company played a dubious role in disallowing the

claim of Winstar to have a Director on the Board of

HPL on the ground that there was no vacancy,

62

although, a vacancy had arisen on the resignation

of Mr. Ratan Tata, which vacancy was utilized for

regularization of the irregular appointment of Mr.

Bhowmick and his subsequent re-appointment in view

of the Agreements entered into on 12

th

January, 2002

and 30

th

July, 2004, which provide that CP(M)C is to

be in management and control and the Managing

Director is to be nominated and appointed by the

Chatterjee Group. Dr. Singhvi submitted that the

aforesaid acts were sufficient to indicate the

manner in which the Company and the majority

shareholders had acted against the interest of HPL

in general, and had by their acts of oppression and

mismanagement, seriously affected the entire scheme

on the basis whereof the Chatterjee Group had

agreed to invest large amounts in HPL.

57.Learned Senior Advocate, Mr. Ashok Desai,

appearing for Haldia Petrochemicals Ltd., the

Respondent No.1 in all the appeals, repeated and

reiterated the submissions made on behalf of the

63

appellants regarding the manner in which the GoWB

conceptualised HPL as a showcase project of the

GoWB on its coming into existence. Mr. Desai

submitted that apart from equity, for the purpose

of starting the project HPL had planned to avail

credit from financial institutions and banks to the

extent of Rs.2,400 crores. The project involved a

total investment of Rs.3,600 crores. Mr. Desai

submitted that this in itself would indicate that

the principle of quasi-partnership, as urged both

by Mr. Nariman and Mr. Sarkar, could not apply to

the Company, both at the time when it was conceived

and during the subsequent period when the

shareholdings of the parties changed periodically.

Mr. Desai submitted that, in any event, HPL is

today recognized as a deemed Government Company

under Section 619-B of the Companies Act, 1956 and

steps have been taken by the Comptroller and

Auditor General of India under Section 619(2).

However, since its incorporation in 1985, HPL was

64

and continues to remain a Board-managed Company

with 16 Directors on its Board with equal

representation of the two major promoters, namely,

GOWB and the Chatterjee Group having 4 Directors

each, 5 Nominee Directors, 2 independent Directors

and 1 Managing Director.

58.Mr. Desai submitted that although on behalf of

the appellant it was contended that allotment of

shares to IOC was highly improper and oppressive,

such a course of action had to be resorted to since

not only was HPL suffering from severe financial

crunch, but that Naphtha, which is the main raw

material for production of Polymer and Chemicals,

was being supplied by IOC, which has its refinery

by the side of the HPL plant at Haldia. Mr. Desai

submitted that IOC, therefore, had a strong,

commercial and symbiotic relationship with HPL

which had developed over the years and HPL had also

started procuring Naphtha on credit basis and the

dues on such account had also multiplied. It was,

65

therefore, in the interest of HPL that when the

Chatterjee Group failed to infuse equity into the

Company, 150 million shares were allotted to IOC

for providing such equity.

59.Mr. Desai submitted that the case of the

Appellants could be summarised into a few specific

issues, namely,

(a) that the Chatterjee Group had all

along acted on the basis of the

promise which had been held out by

GoWB, WBIDC and the Company that the

Company would always remain a private

Company in which the Chatterjee Group

would have managerial control and that

it was towards that end that 155

million shares were transferred by

WBIDC to the Chatterjee Group, though,

ultimately it went back on its word

and refused to register the same;

66

(b) GoWB, WBIDC and HPL beguiled the

Chatterjee Group into agreeing to the

transfer of 150 million shares to IOC

by entering into agreements in which

it was admitted that upon transfer of

the 155 million shares to the

Chatterjee Group its shareholding was

51% and that the Chatterjee Group was

in management and control of the

affairs of the Company;

(c) even if the ingredients of Sections

397 and 398 of the Companies Act were

not proved during the hearing of the

Company Petition, the Company Law

Board had ample jurisdiction to pass

appropriate orders for the benefit of

and in the interest of the Company,

under Section 402 thereof.

67

60.Mr. Desai submitted that all the aforesaid

submissions made were misconceived and that in

order to file a complaint under Section 397 of the

above Act, the complainant had to be a Member

(emphasis supplied) of the Company, having the

requisite standing under Section 399 of the Act.

It was also urged that the conduct complained of

had to be such as to be oppressive to the

complainant/complainants as shareholders/members.

Inasmuch as, CP(I)PL was not a member of HPL, it

could not have filed and maintained the complaint

under Section 397 before the Company Law Board.

Mr. Desai submitted that it was no doubt true that

upon transfer of the shares, the transferee became

the beneficial owner thereof, but till the shares

were registered in the Company’s Share Register and

subsequently, in the records of the Registrar of

Companies, the transferee did not acquire the right

to vote at a meeting of the Company on the basis of

acquisition of the said shares. Mr. Desai

68

submitted that for all practical purposes the

transferor remained in control of the transferred

shares and also enjoyed the right to vote on the

strength thereof. The failure of the transferor to

have the shares registered with the Company, did

not amount to an act of oppression of the Company,

but was an area of dispute between the transferor

and the transferee and it could not be said that

the inaction of the transferor amounted to

oppression within the meaning of Section 397 of the

Companies Act. Mr. Desai also submitted that the

oppression complained of should be such as would

lead to a conclusion that it would be just and

equitable to wind up the Company under Section

433(f) of the above Act.

61.Referring to the decision of this Court in

Shanti Prasad Jain’s case (supra), Mr. Desai

submitted that in the said decision it had been

emphasized that the oppression complained of had to

be shown as having been brought about by a majority

69

of members exercising a predominant voting power in

the conduct of the Company’s affairs and must

relate to the manner in which the affairs of the

Company were being conducted. Such conduct must

also be shown as being oppressive to a minority of

the members in relation to the shareholding in the

Company. It was also emphasized that although, the

facts disclosed might appear to furnish grounds for

the making of a winding up order under the “just

and equitable” principle, such facts must be

relevant in disclosing that the winding up order

would unfairly prejudice the minority members in

relation to the shareholders. Referring to the use

of the expression “legitimate expectation” by Lord

Justice Hoffmann sitting in the Court of Appeal, in

the decision rendered in Ebrahimi’s case (supra),

Mr. Desai submitted that subsequently in the case

of Saul D Harrison & Sons Plc (1995) 1 BCLC 14,

after referring to the decision in Ebrahimi’s case

(supra), Lord Justice Hoffmann held that such an

70

expression had been borrowed from public law to

describe the correlative right in the shareholder

to which such a relationship might give rise.

62.Mr. Desai also urged that the decision in

Kalinga Tubes Ltd.’s case (supra) was also relied

upon by this Court in the Needle Industries case

(supra), wherein it was held that on a true

construction of Section 397, an unwise, inefficient

or careless conduct of a Director in the

performance of his duties cannot give rise to a

claim for relief under that Section. The person

complaining of oppression must show that he has

been constrained to submit to a conduct which lacks

in probity, conduct which is unfair to him and

which causes prejudice to him in the exercise of

his legal and proprietary rights as a shareholder.

As to the findings of both the Company Law Board

and the High Court in relation to the applicability

of Section 398 of the above Act, Mr. Desai

submitted that since both the Courts had held that

71

the same was not attracted, there was really little

to add to the observations of both the forums that

there was absolutely no reason to say that GoWB and

WBIDC with their associates were conducting the

affairs of HPL in any manner prejudicial to HPL’s

interests. The allotment made in favour of IOC was,

in fact, in the interest of the Company and the

allotment of shares to IOC was part of the terms

and conditions of the debt restructuring package.

63.Regarding the failure of WBIDC to register the

155 million shares in favour of CP(I)PL, Mr. Desai

submitted that, in fact, there was no pleading in

that regard in the Company Petition filed by

CP(I)PL. Accordingly, neither could CP(I)PL

maintain the Company Petition, not being a member

of HPL, nor could any prayer have been made for a

direction upon the Company to register the said

shares in the name of CP(I)PL. Mr. Desai pointed

out that though such a pleading was subsequently

included in the Rejoinder Affidavit, no application

72

was ever made for amendment of the pleadings and

the prayers in the Company Petition.

64.To support his submissions, Mr. Desai referred

to the decision of the Calcutta High Court in Re.

Bengal Luxmi Cotton Mills Ltd. [1969 CWN 137],

Sangramsingh P. Gaekwad & Ors. Vs. Shantadevi P.

Gaekward & Ors. [(2005) 11 SCC 314], R. Ramanathan

Chettiar Vs. A & F Harvey Ltd. & Ors. [967 (37)

Comp. Case 212], wherein the principles laid down

in the Needle Industries case (supra) had been

followed. Mr. Desai submitted that the 155 million

shares transferred to CP(I)PL by WBIDC continued to

be held by WBIDC and were never lodged with the

Company.

65.Lastly, on the question of allotment of 150

million shares to IOC, Mr. Desai referred to the

observations of the Company Law Board which

recorded that such allotment could not be

questioned by the Chatterjee Group, since the same

73

was neither clandestine nor surreptitious and was

under contemplation from 2000 itself and the idea

of inducting IOC was initiated by Dr. Chatterjee

himself, as would be evident from the letter dated

24

th

March, 2000, addressed to the Chief Minister,

as the Company was in dire need of funds. Mr.

Desai pointed out that the said view was endorsed

by the learned Single Judge of the High Court by

observing that the Chatterjee Group had failed to

produce any evidence with regard to the allegations

that the allotment of shares to IOC was pursuant to

a clandestine agreement to permit IOC to

participate in the management of HPL.

66.Mr. Desai submitted that the case made out by

the appellants before the Company Law Board was not

only devoid of substance, but was entirely

misconceived, since the same was not maintainable

at the instance of CP(I)PL which was not a member

of HPL. Even the allegations of oppression remained

unproved, since the entire content related to the

74

transaction between WBIDC and CP(I)PL, which was

not the act of the Company, as contemplated in

Section 397, but a private dispute between two

groups of shareholders. Mr. Desai submitted that

the appeals were liable to be dismissed with

appropriate costs.

67.Mr. Dushyant Dave, learned Senior Advocate,

appearing for the Industrial Development Bank of

India (IDBI) pointed out that a loan agreement had

been entered into between HPL and IDBI for a sum of

Rs.12,500 lakhs and in the event the borrower

defaulted on the loan, the Bank would have the

right to convert upto 20% of the loan into fully

paid up equity of the Company. The Bank was also

given the right to appoint a Nominee Director on

the Board of HPL. Mr. Dave submitted that in 2003

the question of restructuring of the debt came up

for consideration and in its meeting held on 8

th

August, 2003, the Company agreed to allow IDBI to

refer the Company to the Corporate Debt

75

Restructuring (CDR) Cell with a debt restructuring

proposal. Subsequently, on a 22

nd

January, 2004, at

a meeting of the Empowered Group, Dr. Chatterjee

agreed for conversion of debt to equity to the

extent of Rs.140 crores. Thereafter, on 23

rd

March,

2004, the Board of Directors of HPL approved a CDR

package and Dr. Chatterjee’s proposal to convert

debt to equity. Dr. Chatterhee was, in fact,

interested to give effect to the same. Mr. Dave

submitted that subsequently the debt restructuring

plan failed to fructify and the Bank was informed

by the Principal Secretary, Government of West

Bengal, on 27

th

July, 2005, that the permission

which had been granted in the credit restructuring

package, be treated as annulled.

68.In the pending proceeding before the CLB,

Chatterjee Petrochemicals Ltd. had got an interim

order in its favour staying further allotment of

shares of Rs.135 crores to IDBI. However, IDBI was

neither a party to the proceedings nor was any

76

relief, either final or interim in nature sought

against IDBI. But by virtue of the interim order

of injunction passed by the CLB, the allotment of

shares to IDBI was stayed, as that would have

reduced the Chatterjee Group to a minority. Mr.

Dave submitted that the application filed by IDBI

before the CLB was kept in abeyance and no order

was passed thereupon as it was likely to hamper the

progress of negotiation. Mr. Dave submitted that

the writ petition filed by IDBI against the said

order before the Delhi High Court was dismissed by

the learned Single Judge and the appeal preferred

therefrom was also dismissed by the Division Bench.

Ultimately, in its final judgment dated 31

st

January, 2007, the CLB gave directions to the

effect that Chatterjee Group would purchase 155

million shares from GoWB/WBIDC at a minimum price

of Rs.28.80 per share. It was also directed that

the 155 million shares transferred to the

Chatterjee Group would be dematerialized and

77

registered and that the allotment to the IOC would

remain.

69.Mr. Dave submitted that the question of CP(I)PL

having any legitimate expectation did not arise and

such a case was not also pleaded before the Board.

Furthermore, since nothing had been proved before

the Board that the conduct of GoWB and WBIDC was

such as to justify an order of just and equitable

winding up, no order could have been passed by the

Board on the Company Petition filed by the

appellants and the learned Single Judge of the High

Court rightly allowed the appeals preferred against

the order of the Board.

70.Appearing for the Respondent No.16, Mr. Altaf

Ahmed, learned Senior Advocate, submitted that

nowhere in the Company Petition had any allegation

been made against the Managing Director as to his

involvement in any manner in the acts of oppression

alleged to have been committed against the

78

complainant. Accordingly, as had been held by the

CLB in its final order dated 31

st

January, 2007, the

Company Petition, though filed under Sections 397

and 398 of the Companies Act, was essentially one

under Section 397 of the aforesaid Act. Mr. Ahmed

submitted that the said finding of the CLB had been

duly upheld by the High Court.

71.Mr. Ahmed submitted that the question raised by

the Chatterjee Group with regard to the employment

of Mr. Bhowmik as the Managing Committee was

without any basis whatsoever, since he was

appointed unanimously by the Board of Directors

consisting of the nominees of the different

shareholders. Mr. Ahmed also pointed out that the

Respondent No.16 had been responsible for the

resurrection of HPL from the brink of financial

disaster which had been occasioned by the failure

of the promoters to infuse equity into the Company.

It was only after assessment of his performance

during the initial two year period of his tenure

79

that the Board of HPL reappointed him for a further

period of 3 years, inspite of the objection from

the Chatterjee Group.

72.Mr. Ahmed submitted that the Respondent No.16

has moved I.A.Nos.25-28 of 2009 for a direction

upon the Company to pay his arrears of salary as

per the resolution passed by the Board of Directors

on 28

th

May, 2008, for the period covering 29

th

March, 2005 to 31

st

March, 2007. A further prayer

has also been made to fix the pay of the said

Respondent for the period from 1

st

April, 2007, till

31

st

March, 2010, at a rate as might be deemed just,

proper and reasonable.

73.As far as the Tatas are concerned, it was

submitted that the Tata Group was one of the

original promoters of HPL and continues to hold

more than 2% of the shares in the Company. It was

submitted that the Tatas were keen to see HPL

flourishing and had, accordingly, between 1994 and

80

2000 made significant infusion of funds into HPL,

including a sum of Rs.11.89 crores which was given

as an interest free loan. Even in 2000 when the

Company was in dire financial straits, the Tatas

brought in their share of Rs.35.71 crores along

with other shareholders, except for the Chatterjee

Group which failed to bring in its share of

Rs.107.14 crores. It was made clear that the Tata

Group had no faith in the Chatterjee Group since

from the very inception of HPL the Chatterjee Group

wanted control of HPL, without making any effective

contribution at times when such contribution was

most needed and had, therefore, worked against the

interest of the Company, its shareholders and the

public at large.

74.Mr. K.K. Venugopal, learned Senior Advocate,

who appeared for the Government of West Bengal and

its officials, urged that the relief prayed for in

the Company Petition for specific relief, could not

be granted under Section 397 of the Companies Act.

81

Since the said question had been adequately dealt

with on behalf of WBIDC, Mr. Venugopal chose to

deal with the directions given by the CLB to the

GoWB to disinvest its entire shareholding in HPL,

which was a Company set up in public interest and

for which a huge extent of land had been acquired

for the public purpose of maintaining supplies and

services essential to the life of the community, by

setting up a Petro Chemical Complex at Haldia. Mr.

Venugopal contended that it was settled law that

the decision of the Government to disinvest or not

to disinvest was not in the realm of public law and

was not, therefore, amenable to challenge or

interference, unless it amounted to an abuse of

power by the Government.

75.Mr. Venugopal submitted that the order and

directions of the CLB would exclude the State

Government from having any future role to play in

the running and management of HPL. Learned counsel

submitted that in a matter of this nature, the

82

public interest should have been considered first

before such directions are given. Mr. Venugopal

submitted that the proceedings under Section 397 of

the Companies Act should not have been allowed to

be made a vehicle for relief which was available to

the Chatterjee Group under the provisions of the

Specific Relief Act, 1963. It was also submitted

that the Company Law Board erred in applying the

principles of private law in the exercise of its

jurisdiction under Sections 397/398 and 402 of the

Companies Act, since the decision of the State

Government not to disinvest would have to be

decided by applying the public law in appropriate

proceedings. In this regard, Mr. Venugopal referred

to the decision of this Court in BALCO Employees’

Union (Regd.) Vs. Union of India & Ors. [(2002) 2

SCC 333], wherein it was observed that it is

neither within the domain of the courts nor the

scope of judicial review to embark upon an enquiry

as to whether a particular public policy is wise or

83

something better could be evolved. This Court also

observed that the courts are not inclined to strike

down a policy merely because it has been urged that

a different policy was fairer or wiser or more

scientific or more logical. This Court went on to

observe that the procedure of disinvestment is a

policy decision involving complex economic factors

and the courts have consistently refrained from

interfering with economic decisions, unless it was

demonstrated that economic expediency was so

violative of constitutional or legal limits on

power or is so abhorrent to reason, that such

interference was necessary. The Courts would in

given cases interfere if it could be demonstrated

that the policy was contrary to any statutory

provision or the provision of the Constitution or

there was illegality in the decision itself.

76.Mr. K.K. Venugopal submitted that from the very

inception, GoWB had played a major role in

conceptualizing and setting up of HPL with the

84

primary object of industrial development of the

region in particular, and the State in general and

subserving the underlying public interest. Mr.

Venugopal submitted that HPL had been conceived as

a showcase project of the GoWB. It was only

because of the active role of the State Government

that it was also possible to acquire a total of

1031.305 acres of land for the project at Haldia,

without any trouble and disturbance, from the year

1973 onwards. Mr. Venugopal submitted that the

direction given by the CLB would be against the

very grain of the concept of a Joint Venture

between WBIDC, which was owned by GoWB, and the

R.P. Goenka Group (RPG) and subsequently, with the

exit of the RPG Group, the Tata Group as well as

the CP(M)C. It was also submitted that even the

financial institutions, namely, IDBI and SBI, etc.,

who had a total stake of Rs.2989 crores in HPL,

drew great comfort from the continued presence of

the State Government and its active participation

85

in the management of HPL. On the other hand, on

several occasions the very same financial

institutions had expressed their concern regarding

the capability and intentions of the Chatterjee

Group in managing the Company and inducting funds

as necessary for the growth and development

thereof. Mr. Venugopal submitted that the acts of

oppression alleged by the Chatterjee Group and the

relief claimed by them, apart from being based on

alleged breach of contract, aimed at invoking the

jurisdiction of the CLB under Section 397 read with

Section 402 of the Companies Act, 1956, to compel

the Government to disinvest its shareholding in

HPL. Mr. Venugopal submitted that the CLB did not

have the jurisdiction to grant such relief and, in

any event, in view of the overriding public

interest, no relief should be granted to the

appellant in the instant appeals.

77.Mr. Anil Dewan, learned Senior Advocate, who

appeared for Mr. Tarun Das, who was functioning as

86

the Chairman of HPL, adopted the submissions made

by Mr. Desai and Mr. Venugopal and urged that the

Company Petition itself was not maintainable as it

had been filed by a Company which was not a member

of HPL, despite being the owner of 155 million

shares thereof. Mr. Dewan submitted that instead

of assisting the Company in meeting its financial

liabilities, the appellants not only failed to

infuse equity into the Company but also confined

their focus on acquiring only 51% of the

shareholding in order to maintain its control over

the management of the Company. Mr. Dewan submitted

that the judgment of the High Court did not call

for any interference in the instant proceedings.

78. In continuation of Mr. Desai’s submissions,

Mr. C.A. Sundaram, learned Senior Advocate

appearing for the Respondent No.2, reiterated the

factual aspect of the case as portrayed by Mr.

Desai. Mr. Sundaram, however, urged that the stand

now being taken by the Chatterjee Group that the

87

induction of IOC into HPL had adversely affected

their interest and had reduced the Chatterjee Group

to a minority shareholder in the Company, it was,

in fact, Dr. Chatterjee himself, who had initiated

the idea of allotting 150 million shares to IOC.

Dr. Chatterjee was the Chairman of the Committee

which prepared and sent the offer of allotment to

IOC which was accepted by its return letter

enclosing a cheque for Rs.150 crores in favour of

HPL. Between April, 2005 and July, 2005, eight

draft Share Purchase Agreements were exchanged

between the Chatterjee Group and the GoWB regarding

sale of the shares held by WBIDC to CP(M)C.

However, the Chatterjee Group never seemed to be in

a position to complete the transaction and

repeatedly asked for the inclusion of fresh

conditions, such as a pre-condition that IOC should

not be allotted any shares of HPL. In the

meantime, having accepted the offer of allotment of

150 million shares and having sent the price for

88

the same to HPL, IOC sent legal notices to HPL

calling upon the Company to issue and allot the

said 150 million shares to IOC and to credit the

same to the account of IOC after dematerialization.

79.Mr. Sundaram submitted that in the aforesaid

cauldron of events, the GoWB wrote to the

Chatterjee Group on 27

th

July, 2005, stating that it

had decided to defer its proposal to disinvest

shares in favour of the Chatterjee Group as it was

not in a position to conclude matters. On account

of the severe financial crunch being faced by HPL

and in view of the stand of IOC, which was the main

supplier of Naphtha to HPL, on 2

nd

August, 2005, HPL

allotted 150 million shares to IOC and a return of

allotment was also filed with the Registrar of

Companies in respect thereof. On 3

rd

August, 2005,

the cheque given to IOC for Rs.150 crores was

encashed by HPL.

89

80. Mr. Sundaram submitted that it was no doubt

true that at the initial stages it had been the

intention of GoWB and WBIDC to involve Dr.

Chatterjee and his Group of Companies as the prime

stakeholders in HPL with management control, but at

crucial times when support in the form of equity

was required, the Chatterjee Group failed to

provide the same. Mr. Sundaram submitted that even

when on 3

rd

June, 1996, GoWB wrote to Dr. Chatterjee

that on account of HPL’s financial crunch, all

promoters had been requested to induct 50% of the

equity and the last date for such infusion was 18

th

June, 1996, the Chatterjee Group failed to make

such investments, although, both the Tatas and

WBIDC brought in their respective equity

contributions of Rs.35.5 crores and Rs.117 crores.

Once again, since the Lenders were insisting on

immediate infusion of Rs.581 crores into HPL and

HPL was on the threshold of becoming a Non-

Performing Asset, a Rights Issue Offer was made by

90

HPL to the existing shareholders for subscription

of 34,99,99,988 shares at the rate of Rs.10/- per

share. Despite Dr. Chatterjee’s assurance to bring

in Rs.53.5 crores immediately along with additional

fund of Rs.53.5 crores and a further sum of Rs.300

crores, the Chatterjee Group did not subscribe to

the Rights Issue, thereby depriving the Company of

Rs.107 crores at a very crucial time. In order to

re-assure HPL, the Chatterjee Group on 12

th

January,

2002, agreed to induct a minimum of Rs.500 crores

and such other further funds towards equity and

equity-like instruments to effectuate the Corporate

Debt Restructuring. However, despite such

commitment, till today, the Chatterjee Group has

not brought in the amount of Rs.500 crores

committed by it. On the other hand, acting on the

assurance given by the Chatterjee Group, WBIDC

agreed to transfer shares worth Rs.360 crores to

the Chatterjee Group to ensure that it controlled

51% of paid-up equity to enable it to remain in the

91

majority. Mr. Sundaram submitted that out of the

said number of shares, 155 million shares were, in

fact, transferred to CP(I)CL to maintain a

shareholding of 51%. However, WBIDC even agreed to

transfer shares beyond the said 155 million shares

to ensure that the 51% shareholding of CP(M)C was

maintained. It was also agreed that the transfer

would be effected within 10 days of the acceptance

of Letter of Comfort by WBIDC. Mr. Sundaram

submitted that although the shares were transferred

in the name of CP(I)CL, the said transfers were

never completed as they were not registered either

in the Company’s books or with the Registrar of

Companies and WBIDC continued to have voting rights

on the said 155 million shares. Mr. Sundaram

submitted that to cap it all, instead of bringing

in equity of an amount of Rs.53.5 crores, as

promised as per the decision taken by the Company

on 3

rd

June, 1996, to induct 50% of its equity, the

Chatterjee Group brought in only Rs.61.5 crores and

92

that too as debt and not equity, despite the fact

that post-dated cheques issued to vendors were

still bouncing and other commitments were not met.

In addition, the Corporate Debt Restructuring could

not be implemented since CP(M)C could not induct a

strategic investor. Ultimately, out of sheer

compulsion in order to save the Company from

becoming a Non-Performing Asset, a decision had to

be taken to induct IOC as a portfolio investor,

though there may have been discussion to bring in

IOC as a strategic investor.

81.Mr. Sundaram submitted that one of the

questions which arise in these proceedings is

whether the Company Law Board, acting under

Sections 397 and 398, read with Section 402 of the

Companies Act, could direct sale of shares in the

absence of a finding that there had been oppression

by one body of shareholders against another or

mismanagement of the Company. According to Mr.

Sundaram, the second question, which is directly

93

connected with the first, is whether in the absence

of such a finding the Company Law Board could

direct sale of shares in the absence of a further

finding that such sale of shares was necessary in

the interest of the Company. The third question

posed by Mr. Sundaram was whether in addition to

the findings indicated above, the Company Law Board

could direct sale of shares under Sections 397 and

398 read with Section 402 of the above Act in the

absence of a finding that without giving such a

direction it might be just and equitable to wind-up

the Company.

82.On the aforesaid issues, Mr. Sundaram

reiterated the submissions made by Mr. Desai that

the said questions have been answered by this Court

in Shanti Prasad Jain’s case (supra) and in the

subsequent decisions in Sangramsinh P. Gaekwad

(supra), M.S.D.C. Radharamanan (supra), V.S.

Krishnan (supra), the Needle Industries (supra) and

94

in the case of Hanuman Prasad Bagri Vs. Bagress

Cereals Pvt. Ltd. [(2001) 4 SCC 420].

83.Mr. Sundaram submitted that the next issue

involved the question as to whether the concept of

legitimate expectation of a body of shareholders

would be applicable to a large public limited

company or only in quasi partnerships and family

companies and whether in those situations also the

sale of shares could be directed in order to break

a deadlock. In this regard, reference was made to

the decision of this Court in Kilpest Pvt. Ltd. &

Ors. Vs. Shekhar Mehra [(1996) 10 SCC 696] and Hind

Overseas Pvt. Ltd. Vs. Raghunath Prasad

Jhunjhunwalla & Anr. [(1976) 3 SCC 259]. In Hind

Overseas Pvt. Ltd.’s case, this Court had held that

when more than one family or several friends and

relations together form a company and there is no

right as such agreed upon for active participation

of members who are excluded from management, the

principles of dissolution of partnership cannot be

95

liberally invoked. It was further observed that it

is only when shareholding is more or less equal and

there is a case of a complete deadlock in the

running of the company on account of lack of

probity in the management and there is no hope or

possibility of smooth and efficient continuance of

the company as a commercial concern, a case for

winding up may arise. However, in a given case, the

principles of dissolution of partnership may apply

if the apparent structure of the company is proved

not to be the real structure and on piercing the

veil it is found that in reality it is a

partnership. Mr. Sundaram submitted that, in any

event, the application of the just and equitable

clause would depend upon the facts and

circumstances of each case. A note of caution was

also introduced that even admission of a petition

could prejudice and cause immense injury to a

company in the eyes of the investors, if ultimately

the petition is dismissed. Mr. Sundaram urged that

96

in a petition under Section 397/398 of the

Companies Act, it was not always incumbent on the

CLB to order the winding up of a company on the

just and equitable principle, but in order to pass

any order under Section 397, the Company Law Board

would have to arrive at a specific finding that

there was just and equitable reason to order such

winding up.

84.The next issue canvassed by Mr. Sundaram is

that the Court would have to examine as to whether

the direction given for sale of shares was in order

to maintain the status quo which was being

disturbed on account of the oppressive measures

taken. In this regard, Mr. Sundaram referred to

the decisions of this Court in Dale & Carrington

Invt. (P) Ltd. Vs. P.K. Prathapan & Ors. [(2005) 1

SCC 212] and M.S.D.C. Radharamanan’s case (supra),

along with the decision in Allianz Securities Ltd.

Vs. Regal Industries Ltd. [2002 (11) CC 764 =

(2000) 25 SCL 349 (CLB)]. On the concept of

97

legitimate expectation, Mr. Sundaram submitted that

it has to be considered whether the same should be

restricted to maintaining the state of affairs at

the time when the parties became shareholders or

whether any subsequent understanding arrived at by

private treaty between the shareholders would fall

under the purview of the Company Law Board to

enable it to deal with such questions between

private shareholders.

85. Mr. Sundaram repeated that in this regard it

would have to be decided as to whether the CLB

could direct sale and transfer of shares to a group

to give it majority control on an application under

Section 397/398 read with Section 402 of the

Companies Act and to enforce specific performance

of agreement between the parties whether legitimate

or not, especially when such specific performance

was not necessary in the interest of the company,

or to prevent winding up of the company. Another

question of equal importance in this connection was

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whether specific performance could be directed at

the instance of a party whose own conduct had been

inequitable in failing to carry out its promises,

to the severe prejudice of the company.

86.Another issue raised by Mr. Sundaram, which has

a direct bearing to the facts of this case, is

whether a Company can effect transfer of shares in

the absence of transfer deeds and a request for

transfer, and whether the transfer of shares is

complete only when such transfers are duly

registered and entered in the Register of Members

of the Company. In this regard, Mr. Sundaram

referred to the decisions of this Court in Howrah

Trading Company Vs. CIT [AIR 1959 SC 775]; Life

Insurance Corporation of India Vs. Escorts Ltd.

[(1986) 1 SCC 264], Mannalal Khetan Vs. Kadarnath

Khetan [(1977) 2 SCC 424], Claude Lila Parulekar

(Smt.) Vs. Sakal Papers (P) Ltd. [(2005) 11 SCC

73], J.P. Srivastava & Sons Pvt. Ltd. Vs. Gwalior

Sugar Co. Ltd. [(2005) 1 SCC 172], Mathrubhumi

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Printing & Publishing Co. Ltd. Vs. Vardhman

Publishers Ltd. [(1992) 73 CC 80] and several other

decisions to which we shall shortly refer as they

have a bearing on the issue involving the rights

acquired by the Chatterjee Group on the transfer of

155 million shares by WBIDC, which were not,

thereafter, registered in the name of the

Chatterjee Group in the Register of Members of the

Company, nor was the factum of such transfer

communicated to the Registrar of Companies.

87.Mr. Sundaram also raised another question as to

why on failure of reciprocal promises in a contract

on account of non-performance of the promises made

by one of the parties, the benefits accrued to such

party through part performance should not be

restituted to the other party. In this regard,

reference was made to Sections 51 to 54 of the

Contract Act and the decision of the Privy Council

in Satgur Prasad Vs. Harnarayan Das [(AIR 1932 PC

89] and the decision of the Delhi High Court in

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Suit No.1481 of 1996, to which reference may be

made, if required.

88.Lastly, on the question of allotment of the 150

million shares by WBIDC to IOC, Mr. Sundaram

submitted that on account of the failure of the

Chatterjee Group to bring in equity when the

Company was in dire need of funds, such allotment

was fully justified under the doctrine of Indoor

Management. However, even if a legitimate dispute

could be raised in regard to such transfer, such

transaction could not be avoided by the Company Law

Board as the same was in the interest of the

Company, which would otherwise have been converted

into a Non Performing Asset.

89.What emerges from the materials on record and

the submissions made on behalf of respective

parties is that HPL was incorporated in 1985 by the

West Bengal Industrial Development Corporation and

the R.P. Goenka Group, and their nominees were the

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subscribers to the Memorandum of Association. Soon

thereafter, in 1990, the Goenka Group left the

Company and Tata Chemicals and Tata Tea were

inducted into the project between 1990 and 1993.

However, since the TATAs were not very keen to

continue with the Project, in June 1994, Dr.

Purnendu Chatterjee, a Non-Resident Indian

industrialist and financier, evinced his interest

in implementing the project. Accordingly, a

Memorandum of Understanding was entered into

between WBIDC and the Chatterjee Petrochem

(Mauritius) Company and the Tatas on 3

rd

May, 1994.

Certain assurances were given to Dr. Chatterjee

that the Company would remain a private enterprise

with the Chatterjee Group in control of the

management thereof. A further assurance was given

to the effect that WBIDC/GoWB would transfer their

entire shares in the Company to the Chatterjee

Group, which would then acquire a complete majority

102

for the purposes of management and control of the

Company.

90.In addition to the above, certain duties and

obligations to be performed by the Chatterjee Group

were also indicated, mainly confined to the

question of bringing in equity in an otherwise

cash-strapped situation then prevailing in relation

to the Company’s finances. It also appears that

the assurances given by WBIDC/GoWB were on account

of the aforesaid assurances given by the Chatterjee

Group to bring in equity. Inasmuch as, the

Chatterjee Group failed to abide by its

commitments, the Company had no other alternative,

but to bring in IOC by selling and transferring 150

million shares to the said Company.

91.The parties also agreed that they would be

entitled to seek specific performance of the terms

and conditions of the Agreement in accordance with

the provisions of the Specific Relief Act, 1963.

103

Various other terms and conditions were included

with the intention of guaranteeing that CP(M)C

would acquire a controlling interest to the extent

of at least 51% shares which would also give it

complete control over the day-to-day affairs of the

Company. In addition, it was agreed that in future

the composition of the Board would be altered to

reflect the revised shareholding structure and

WBIDC would vote along with CP(M)C on all issues in

the shareholders meeting and its nominee would also

vote along with the nominee Directors of the

CP(M)C.

92.Despite the concessions given and/or afforded

to the Chatterjee Group, it had failed to take

advantage of the same and a subsequent Agreement

dated 8

th

March, 2002, had to be entered into for

recording the fact that in terms of the Agreement

dated 12

th

January, 2002, 155,099,998 equity shares

of WBIDC had been transferred/delivered to CP(I)PL

on the same day. It was also indicated in the

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Agreement that all the aforesaid shares which had

been transferred and delivered to the Petitioner

No.4 would be pledged with WBIDC and, accordingly,

their shares had been duly lodged along with their

share certificates with WBIDC and such pledge had

been acknowledged.

93.It is in the aforesaid background that we have

to consider the Petition filed by the Chatterjee

group before the Company Law Board under Sections

397, 398, 399, 402, 403 and 406 of the Companies

Act, 1956, and the reliefs prayed for therein.

94.The law relating to grant of relief on a

petition under Sections 397, 398 and 402 of the

Companies Act, 1956, has been crystallised in

various decisions of this Court, including those

cited on behalf of the parties. 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

105

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. For better appreciation of the above,

Section 397 of the above Act is extracted

hereinbelow :

“397. Application to [Tribunal] for relief

in cases of oppression.—

1) Any member of a company who complains

that the affairs of the company are being

conducted in a manner prejudicial to

public interest or] in a manner oppressive

to any member or members (including any

one or more of themselves) may apply to

the Tribunal for an order under this

section, provided such members have a

right so to apply in virtue of section

399.

(2) If, on any application under sub-

section (1), the Court is of opinion—

(a) that the company’s affairs are

being conducted in a manner

prejudicial to public interest or

in a manner oppressive to any

member or members; and

(b) that to wind up the company

would unfairly prejudice such

member or members, but that

otherwise the facts would justify

the making of a winding-up order

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on the ground that it was just and

equitable that the company should

be wound up,

the Tribunal may, with a view to bringing

to an end the matters complained of, make

such order as it thinks fit.”

However, as was observed by this Court in Shanti

Prasad Jain’s case (supra) the law has not defined

as to what would amount to “oppressive” for the

purposes of Section 397 and it is for the Courts to

decide on the facts of each case as to whether such

oppression exists which would call for action under

Section 397. It was also emphasized that the

conduct of the majority shareholders should not

only be oppressive to the minority, but must also

be burdensome and operating harshly upto the date

of the petition.

95.The main grievance of the Appellants appears to

be that having been induced into investing large

sums of money in establishing the petrochemical

complex on various promises, particularly that the

Company would continue to retain its private

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character and the Chatterjee group would have

control over its management, such promises,

although, reduced into writing in the form of

agreements, not only remained unfulfilled, but even

the character of the Company was altered with the

transfer and sale of 150 million shares by the

Company in favour of IOC. Coupled with the above,

is the other grievance that despite having

transferred 155 million shares in favour of

CP(I)PL, and having received the full price

therefor, the Company had not registered the same

in the Company’s Register of Share-holders, thereby

depriving the Chatterjee Group from exercising its

right to vote in respect of the said shares. The

third grievance of the Chatterjee Group is that by

not registering the transfer of the 155 million

shares in their favour, but, on the other hand,

transferring 150 million shares in favour of IOC,

the character of the Company was altered from a

Private Company into a Government Company and also

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reduced the Chatterjee Group to a minority, despite

the promises held out earlier and as incorporated

in the Agreements dated 20

th

August, 1994, 12

th

January, 2002 and 8

th

March, 2002.

96.Let us examine as to whether any of the

complaints contained in the Company Petition before

the CLB make out a case that the affairs of the

Company are being conducted in a manner prejudicial

to public interest or in a manner oppressive to any

member or members, which was sufficient to justify

the passing of a winding-up order on the ground

that it was just and equitable that the Company

should be wound-up, but that to wind-up the Company

would prejudice such member or members. In Shanti

Prasad Jain’s case (supra), referred to

hereinabove, in a similar situation, it was

observed by this Court as follows :-

“It is not enough to show that there is

just and equitable cause for winding up

the Company though that must be shown as a

preliminary to the application of Section

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397. It must further be shown that the

conduct of the majority shareholders was

oppressive to the minority as members and

this requires that events have to be

considered not in isolation but as part of

a consecutive story. There must be

continuous acts on the part of the

majority shareholders, continuing up to

the date of petition, showing that the

affairs of the company were being

conducted in a manner oppressive to some

part of the members. The conduct must be

burdensome, harsh and wrongful, and mere

lack of confidence between the majority

shareholders and the minority shareholders

would not be enough unless the lack of

confidence springs from oppression of a

minority by a majority in the management

of the Company’s affairs and such

oppression must involve at least an

element of lack of probity or fair dealing

to a member in the matter of his

proprietary rights as a shareholder.”

It will be evident that in order to pass orders

under Section 397 of the Companies Act, 1956, the

CLB has to be satisfied that the Company’s affairs

are being conducted in a manner oppressive to any

member or members and that the facts would justify

the making of a winding-up order on the just and

equitable principle, but that such an order would

unfairly prejudice the Applicant before the CLB.

110

As was discussed by this Court in the Needle

Industries case (supra), unwise, inefficient or

careless conduct of a Director cannot give rise to

claim for relief under Section 397 of the Act. For

relief under this Section, the Applicant would have

to prove that the conduct of the majority of the

shareholders lacked probity and was unfair so as to

cause prejudice to the Applicant in exercising his

legal and proprietary rights as a shareholder.

This, in fact, is the golden thread of the various

decisions in relation to petitions under Section

397, 398 and 402 of the above Act. All the various

decisions cited by the learned counsel for the

various parties are ad idem on this issue and

applying the said principles, each complaint under

Section 397 will have to be judged on its own merit

for the CLB to arrive at a conclusion as to whether

the ingredients of Section 397 were satisfied and

pass appropriate orders thereafter.

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97.As has been indicated in some of the cases

cited, the language of Section 397 suggests that

the oppressive manner in which the Company’s

affairs were being conducted could not be confined

to one isolated incident, but that such acts would

have to be continuous as to be part of a concerted

action to cause prejudice to the minority

shareholders whose interests are prejudiced

thereby.

98.In the aforesaid context, what do the facts

reveal in the instant case and do they bring the

acts of oppression complained of within the purview

of Section 397 for grant of relief under Section

402 of the Companies Act?

99.The case of the Chatterjee Group is woven

around two particular issues, namely, that it had

been induced to invest in HPL so as to make it a

successful commercial enterprise on the promise

that the Company would always retain a private

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character and the Chatterjee Group would have

control over its management, but such a promise had

not been adhered to and, on the other hand,

negotiations were undertaken by WBIDC to induct

IOC, a Central Government Company, with the

intention of ultimately handing over the management

of the Company to IOC. The aforesaid case of the

Chatterjee Group is also based on the grievance

that while keeping the Chatterjee Group under the

impression that it intended to ensure that the

Chatterjee Group had the requisite number of shares

to allow it to have a majority shareholding and

thereby control of the Company’s management, the

Company carried on clandestine negotiations with

WIBDC to transfer all the shares held by it in the

Company to IOC to give it management and control

over the Company’s affairs.

100. The second ground, as made out by the

Chatterjee Group, was that despite having

transferred 155 million shares in favour of CP(I)PL

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on 8

th

March, 2002, it did not register the same in

the name of CP(I)PL, which remained the beneficial

owner, the right to vote on the basis thereof

remained with WBIDC. This was done despite the

fact that the price for the said shares had been

received by way of a private arrangement and the

Lenders and financial institutions had given their

consent to the same. According to the Chatterjee

Group, this one act of omission on the part of the

Company was sufficient to attract the provisions of

Section 397 of the Companies Act and for the CLB to

pass appropriate orders on account thereof. It is

on account of the second ground on which the

Company Petition was filed that a prayer had been

made therein for a direction upon WBIDC and IOC to

immediately register the transferred 155 million

shares in the name of CP(I)PL.

101.From the facts as revealed, it is clear that

when Dr. Purnendu Chatterjee expressed his interest

in setting up of the Haldia Petrochemicals Ltd.,

114

various incentives had been offered to him by the

GoWB and WBIDC to invest in the Company and to make

it a successful commercial enterprise. Such

investments were, however, contingent upon Dr.

Chatterjee’s bringing in sufficient equity to set

up and run the Company. As would be seen, at the

very initial stage all the understanding between

Dr. Chatterjee and GoWB & WBIDC, both WBIDC and the

Chatterjee Group were to hold 433 million shares

each, while Tata was to hold 144 million shares.

The promise extended by WBIDC and GoWB to the

Chatterjee Group to provide at least 60% of the

shares held by WBIDC at Rs.14/- per share to the

Chatterjee Group so as to give the Chatterjee Group

the majority shareholding in the Company, as was

indicated in the Agreements dated 12

th

January,

2002, 8

th

March, 2002 and 14

th

January, 2005, did not

ultimately materialise and, on the other hand, the

Chatterjee Group was reduced to a minority on

account of its decision not to participate in the

115

Rights Issue, and, thereafter, by transfer of 150

million shares by WBIDC in favour of IOC.

102. Although, the Chatterjee Group has complained

of the manner in which it had been reduced to a

minority in the Company, it is also obvious that

when the Company was in dire need of funds and the

Chatterjee Group also promised to provide a part of

the same, it did not do so and instead of bringing

in equity, it obtained a loan from HSBC through the

Merlin Group, which only increased the debt equity

ratio of the Company. Furthermore, while promising

to infuse sufficient equity in addition to the

amounts that would have been brought in by way of

subscription to the Rights Issue, the Chatterjee

Group imposed various pre-conditions in order to do

so, which ultimately led GoWB and WBIDC to

terminate the agreement to transfer sufficient

number of shares to the Chatterjee Group to enable

it to have complete control over the management of

the Company and also to retain its private

116

character. It is at a stage when there was a

threat to the supply of Naphtha, which was the main

ingredient used by HPL for its manufacturing

process, that it finally agreed to induct IOC into

the Company as a member by transferring 150 million

shares to it. It may not be out of place to mention

that it was on Dr. Chatterjee’s initiative that it

had been decided to induct the IOC as a member of

the Company at meetings of the Directors which were

chaired by Dr. Chatterjee himself. Of course, as

explained on behalf of the Chatterjee Group, even

the induction of the IOC as a member of the Company

is concerned, was part of a conspiracy to deprive

the Chatterjee Group of control of the Company

since GoWB and WBIDC never intended to keep its

promise regarding transfer of at least 60% of its

shareholdings in favour of the Chatterjee Group.

Such a submission has to be considered in the

context of the financial condition of the Company

and the response of the Chatterjee Group in meeting

117

such financial crunch. In our view, if in the

first place, the Chatterjee Group had stood by its

commitment to bring in equity and had subscribed to

the Rights Issue, which was a decision taken by the

Company to infuse equity in the running of the

Company, it would neither have been reduced to a

minority nor would it perhaps have been necessary

to induct IOC as a portfolio investor with the

possibility of the same being converted into a

strategic investment.

103. The failure of WBIDC and GoWB to register the

155 million shares transferred to CP(I)PL could

not, strictly speaking, be taken to be failure on

the part of the Company, but it was the failure of

one of the parties to a private arrangement to

abide by its commitments. The remedy in such a case

was not under Section 397 of the Companies Act. It

has been submitted by both Mr. Nariman and Mr.

Sarkar that even if no acts of oppression had been

made out against the Company, it would still be

118

open to the learned Company Judge to grant suitable

relief under Section 402 of the Act to iron out the

differences that might appear from time to time in

the running of the affairs of the Company. No

doubt, in the Needle Industries case, this Court

had observed that the behaviour and conduct

complained of must be held to be harsh and wrongful

and in arriving at such a finding, the Court ought

not to confine itself to a narrow legalistic view

and allow technical pleas to defeat the beneficial

provisions of the Section, and that in certain

situations the Court is not powerless to do

substantial justice between the parties, the facts

of this case do not merit such a course of action

to be taken. Such an argument is not available to

the Chatterjee Group, since the alleged breach of

the agreements referred to hereinabove, was really

in the nature of a breach between two members of

the Company and not the Company itself. It is not

on account of any act on the part of the Company

119

that the shares transferred to CP(I)PL were not

registered in the name of the Chatterjee Group.

There was, therefore, no occasion for the CLB to

make any order either under Section 397 or 402 of

the aforesaid Act. If, as was observed in M.S.D.C.

Radharamanan’s case (supra), the CLB had given a

finding that the acts of oppression had not been

established, it would still be in a position to

pass appropriate orders under Section 402 of the

Act. That, however, is not the case in the instant

appeals.

104. In our view, the appellants have failed to

substantiate either of the two grounds canvassed by

them for the CLB to assume jurisdiction either

under Section 397 or 402 of the Companies Act,

1956, and it could not, therefore, have given

directions to WBIDC and GoWB to transfer 520

million shares held by them in HPL to the

Chatterjee Group and the High Court quite rightly

120

set aside the same and dismissed the Company

Petition.

105. Consequently, all the appeals are dismissed.

Having regard to the peculiar facts of the case,

the parties shall bear their own costs.

…………………………………………J.

(ALTAMAS KABIR)

New Delhi …………………………………………J.

Dated: 30.09.2011 (CYRIAC JOSEPH)

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