SEBI and Corporate Laws – July 15, 2019

2019] 169
undervaluation
is
also
not
correct.
HQRL
could
not
have
raised
any
objection
regarding^
the
aforesaid
transaction
between
Moral
and
Mr.
R.P.
Mittal.
The
claim^
made
by
Hillcrest
that
they
were
entitled
to
vote
on
resolution
dated
10. 5. 2005
is
not
correct
proposition
of
law.
In
this
regard
reliance
has
been
placed^
upon
section
205
of
the
Companies
Act.
Learned
counsel
has
also
urged
that^
position
of
shareholders
in
a
company
is
analogous
to
that
of
partners

inter se

,
is
wholly
inaccurate.
Company
is
a
separate
juristic
entity
from
share
holders. -
For
this
purpose,
he
has
relied
upon
a
decision
of
this
Court
in
Mrs.
Bacha F. Guzdar

v

. CIT

AIR

1955

SC

74.

It

was

contended

on

behalf

of

respondents

that

out

of

Rs. 45

crores

that

Moral^

financed

the

amount

raised

through

Bank

loans

approximately

Rs. 33. 25

crores^

which

was

obtained

on

the

creditworthiness

of

Mr.

Ashok

Mittal

and

against^

personal

guarantees

of

Mr.

R.P.

Mittal,

and

Mr.

Ashok

Mittal.

Mr.

R.P.

Mittal^

contributed

approximately

Rs. 6. 23

crores

to

Moral

and

Mr.

Ashok

Mittal^

approximately

Rs. 5. 5

crores.

Thus

they

had

substantial

interest

in

the

company.^

Though

he

held

only

one

share

in

the

company.

Mr.

Ashok

Mittal

was^

one

of

the

Directors

of

the

company.

Investment

of

Rs. 28. 29

crores

was

made^

by

Hillcrest

and

remaining

amount

of

Rs. 40

crores

was

raised

by

way

of^

bank

loans

against

the

personal

guarantees

of

Mr.

R.P.

Mittal

and

Mr.

Ashok

Mittal.^

The

EOGM

was

held

on

4. 10. 2005.

The

resolution

taken

at

the

EOGM

has^

prima facie

been

upheld

by

the

court.

After

taking

over,

Mr.

Ashok

Mittal

has^

invested

Rs. 49. 5

crores

which

consists

of

Rs. 9. 5

crores

directly

invested

by^

Mr.

Ashok

Mittal

to

pay

out

bank

dues

and

other

personal

creditors

and

on^

13. 7. 2005

another

Rs. 40

crores

was

raised

through

rights

issue.

R.P.

Mittal

group^

was

offered

shares

in

proportion

to

the

shareholding

but

they

declined

to^

take

any

shares.

Mr.

Ashok

Mittal

is

the

major

investor

in

the

company.

He^

holds

92 %

of

the

equity

shares

and

Mr.

R.P.

Mittal

owns

approximately

8 %^

of

the

shares.

The

matter

as

to

taking

over

of

management

by

Mr.

Ashok

Mittal^

in

2009

and

rights

issue

in

July,

2009

are

the

subject

matter

of

sepa

rate -

proceedings

and

are

not

required

to

be

gone

into

in

the

present

matter.

The^

interim

arrangement

ordered

by

this

Court

in

Ram Purshottam Mittal

v.

Hillcrest

(

supra

)

is

binding.

No

notice

was

given

to

Mr.

Ashok

Mittal,

the

then

Director^

of

the

company.

Accordingly,

all

the

three

meetings

convened

under

Section^

286

of

the

Companies

Act.

For

this

purpose,

reliance

has

been

placed

on^

Parmeshwari Prasad Gupta

(

supra

).

The

resolutions

are

also

violative

of

section^

300

of

the

Companies

Act

of

1956.

There

was

repeated

violation.

The

action^

taken

as

per

the

impugned

resolutions

were

oppressive

as

they

involved

repeated^

violation

of

the

mandatory

provisions

of

the

Companies

Act

of

1956

and^

was

done

surreptitiously

without

giving

any

notice

to

Mr.

Ashok

Mittal

or

Hillcrest.^

The

attempt

to

convert

the

statutory

status

of

HQRL

vis-à-vis

public

company,^

Moral

by

transferring

the

shares

of

Moral

in

HQRL

was

against

the

interest^

of

the

preference

shareholders

of

Hillcrest,

therefore,

it

is

oppressive.

Hillcrest^

and

Mr.

Ashok

Mittal

have

also

supported

the

aforesaid

submissions.

Ram Parshotam Mittal

v.

Hotel Queen Road (P.) Ltd. (SC)