Mr. Vikram Bakshi vs Mrs. Sonia Khosla and Others

Vipin Sanghi, J.—I had reserved the orders on 19.10.2010 when the matter was taken up for the first time. Respondent No. 3, Deepak Khosla had put in appearance and made his submissions to oppose the grant of any ad interim orders of injunction in favour of the Petitioner. After the arguments were over, I had permitted the Petitioner to file copies of two judgments. Mr. Deepak Khosla was also permitted to file a couple of judgments on which he desired to place reliance at this preliminary stage. Mr. Khosla, however, mentioned the matter on a couple of occasions thereafter, and sought more time to file the copies of the judgments. His request was granted. Eventually, Mr. Khosla has filed a large compilation of judgments with detailed written submissions running into two volumes on 29.10.2010.

I have considered the matter. I am inclined to issue notice to the Respondents. Accordingly, I direct that notice be issued to the Respondents, returnable on 22.12.2010.

At this preliminary stage, I proceed to consider the issue whether pending further hearing of this petition after grant of sufficient opportunity to all the parties, the request for grant of ad interim orders of injunction as prayed for by the Petitioner should be granted so as to preserve the rights of the parties and to prevent any prejudice being suffered by the parties on account of the conduct of the opposite parties in the meantime.

Broadly speaking, the case of the Petitioner is that the Petitioner was approached by Mr. Deepak Khosla, Respondent No. 3, with a proposal to finance and develop a resort cum real estate development venture at Kasauli, Himachal Pradesh.

The Petitioner, Respondent No. 2 R.P. Khosla, Respondent No. 3 Deepak Khosla, and M/s. Montreaux Resorts Pvt. Ltd. (hereinafter referred to as "the Company") entered into a Memorandum of Understanding on 21.12.2005 to implement a Joint Venture Project involving the lands contracted to be purchased in the name of the Company as well as in the names of the members of the Khosla Family to which the Respondent Nos. 1 to 4 belong which were to be assigned in favour of the Company. The Company was chosen as the Special Purpose Vehicle for implementation of the project. The share holders of the Company agreed to transfer their entire shareholding in the said company to the Bakshi family, of which the Petitioner is a representative, or their nominees upon payment of consideration.

The MOU broadly set out the various rights and obligations of the parties. At the time of the signing of the said MOU, the Petitioner made payment of Rs. 10 lakhs to Respondent No. 2 Shri R.P. Khosla. Two nominees of the Petitioner (Mr. Wadia Prakash and Mr. Vinod Sharma) were brought on the Board of Directors of the Company.

The Petitioner submits that believing the representation of Respondents No. 2 & 3, that the proposed project had been accorded all requisite approvals and sanctions by the concerned authorities, and that there was no court injunction or pending litigations in any Court, he entered into an Agreement dated 31.03.2006 with the Respondents No. 1, 2 and the Company. In the agreement, it was represented that the Company had authorized subscribed and fully paid-up share capital of Rs. One lakh divided into 10,000 shares of Rs. 10 each. Mr. Vini Ahuja and Respondent No. 1 were the original shareholders of the Company. At the time of signing of the Agreement dated 31.03.2006, the shareholding of the Company was:

(a)Vikram Bakshi (Petitioner): 5,100 shares

(b)Sonia Khosla (Respondent No. 1): 4,900 shares

The agreement recorded, inter alia, that by a separate share purchase agreement, the Khosla family had agreed to sell and transfer their entire 100% equity shares in the Company in favour of the Petitioner and/or his nominee for Rs. 1,00,000 i.e at face value. It also records that 51% of the existing shareholding in the Company i.e. 5,100 shares of Rs. 10 each had been transferred by the Khosla family and Mr. Vini Ahuja free from all claims, liens, charges, encumbrances and equities together with all rights attached or accruing thereto in the name of Vikram Bakshi - the Petitioner herein and his nominees, and the said transfer was registered in the books of the Company by the then Directors of the Company.

Under the Agreement, an amount of Rs. 6,44,38,898 crores was required to be paid to the Khoslas as per the schedule contained therein. It appears that an amount of Rs. 1.94 crores out of the said amount stands paid. According to the Petitioner, the said payment is in excess of what the Petitioner was obliged to pay in terms of the Agreement, as the Khosla Group did not achieve the milestones required to be achieved before becoming entitled to receive the payment. In this regard, my attention is drawn to Clause 8 of the Agreement dated 31.03.2006, which lays down the payment schedule. It is stated that on transfer of 22 bighas of land belonging to Respondent No. 2. Shri R.P. Khosla in favour of the Company by 31.03.2006, the instalment of Rs. two crores was to be paid. This transfer has, however, not been made. Even then the Petitioner has paid an amount of Rs. One crore. All earlier payments under Sub-clauses (a), (b) and (c) of Clause 8 were made and accepted by the Khoslas.

Clause 10 of the Agreement provided that out of Rs. 10,00,000 paid to Shri R.P. Khosla Respondent No. 2, at the time of the execution of the MOU by the Petitioner, Rs. 51,000/- shall be treated as consideration from the Petitioner for transfer of 5,100 equity shares in the Company which had already been done from Mr. Vini Ahuja and Mrs. Sonia Khosla, Respondent No. 1 in favour of the Petitioner Vikram Bakshi.

Under the Agreement, Clause 24 provided that Khosla family shall be represented on the Board of Directors through their nominees with one seat, even when their entire shareholding is transferred in favour of the Petitioner. The nominee of the Khosla family was to remain on the Board of the Company till one of the projects, namely, Mashobra Projects was completed and 5% of the sale proceeds of Mashobra land was settled. The Khosla family undertook not to transfer the shares in the Company or induct new Directors from the date of signing of this Agreement, other than what is permitted and stated in the Agreement.

Clause 29 of the said Agreement provided for resolution of disputes through arbitration.

The Respondent No. 1 preferred a petition u/s 397, 398, 402 and 403 of the Companies Act before the Company Law Board, New Delhi as a minority shareholder in relation to the Company, wherein she had stated that her shareholding constituted 49%/36.5% of the legally issued, subscribed and fully paid-up share capital. At the same time, she also stated that the Petitioner, Shri Vikram Bakshi (who was arrayed as Respondent No. 2 in the Company Petition) holds 5,100/6,350 shares in the Company.

In para 6.8 of the Company Petition, Respondent No. 1 had admitted that at the time of the execution of the MOU, 5,100 equity shares held by her and Mr. Vini Ahuja (a family associate) in the Company were, in good faith, transferred to the Petitioner herein. Therefore, Respondent No. 1 admitted the transfer of the said 5,100 equity shares of the Company in favour of the Petitioner herein, and that he was the majority shareholder, holding 51% stake in the company.

In the said Company Petition, an application u/s 8 of the Arbitration & Conciliation Act was preferred by placing reliance on the Arbitration Agreement contained in Clause 29 in the said Agreement.

An application u/s 11 of the Arbitration & Conciliation Act was also preferred before this Court being Arbitration Petition No. 93/2008. The Court disposed of the said arbitration petition which resulted in constitution of an arbitral tribunal consisting of Mr. Justice Arun Kumar, former Judge, Supreme Court of India as the Chairman, Mr. Justice R.C. Chopra (Retd.), and Ms. Justice Usha Mehra (Retd.).

The Petitioner submits that Respondent No. 3, who also represented the other members of the Khosla family did not permit the arbitration proceedings to proceed and, consequently, members of the Tribunal tendered their resignation. He has placed reliance on the order dated 20.03.2009 passed by the arbitral tribunal in this behalf.

During the pendency of the aforesaid company petition preferred by the Respondent No. 1 herein, the Khoslas sought to disturb the composition of the board of directors of the company. The Respondents claimed that the two nominee directors, nominated by the Petitioner herein, namely, Sh. Wadia Prakash and Sh. Vinod Surha had ceased to remain Additional Directors w.e.f. 30.09.2006 as they were not confirmed in the AGM held on that day, and that the Petitioner herein, who was appointed as Additional Director on 19.03.2007 could also not hold office as he had been appointed by the board consisting of the said two Additional Directors, namely, Sh. Wadia Prakash and Sh. Vinod Surha, who had already ceased to be Directors. The Company Law Board (CLB) passed a detailed order on 31.01.2008 discussing the conduct of the Khoslas and directed restoration of status quo with regard to the composition of board of directors and shareholders as it is existed on the day of filing of the company petition and directed the Registrar of Companies (ROC) not to take on record any document filed by the company on or after 01.12.2007. The shares purported to have been issued after the filing of the company petition on 18.12.2007 stood cancelled and the Additional Directors appointed on 11.12.2007 and 18.12.2007 ceased to be Additional Directors with immediate effect. It was further directed that the company/board of directors of the company shall maintain status quo with regard to the shareholding and fixed assets of the company as it stood at the time of filing of the petition, and the board shall not take any substantive decision on the finances of the company.

To challenge the order dated 31.01.2008 of the CLB, Mr. R.P. Khosla, Respondent No. 2 herein, preferred Company Appeal (SB) No. 07/2008, which was taken up by the learned Company Judge on 11.04.2008. This appeal was heard in the presence of the counsels for the parties. The consent of the parties was recorded by the Court. The operative part of the order reads as follows:

Respondent No. 3, Mrs. Sonia Khosla, feeling herself in minority filed a petition under Sections 397 and 398 of the Companies Act, 1956 being CP No. 114/2007 before the Company Law Board and alleged operation against her by the majority shareholders. The parties have agreed that the petition being CP No. 114/2007 filed before the Company Law Board shall be withdrawn by Mrs. Sonia Khosla [Respondent No. 3] because the arbitration has already been invoked before deciding the present proceedings in terms of agreement dated 31.03.2006. Both the parties have agreed that they shall maintain status quo with regard to the shareholdings and fixed assets of the Respondent company as it stood at the time of filing of the petition before the Company Law Board under Sections 397 and 398 of the Companies Act, 1956 and that the Board of the said Company shall not take any substantive decision on the finances of the said Company without prior permission of the arbitral tribunal before whom the disputes between the parties are pending in terms of agreement dated 31.03.2006. Mr. Bakhru, learned Counsel appearing on behalf of Respondent [Bakshi Group], says that his client shall not oppose the withdrawal of the company petition pending before the Company Law Board. Both the parties have further agreed that they shall approach the arbitral tribunal for any interim relief, if felt necessary from time to time. The functioning of the Respondent No. 1 company shall be subject to the orders to be passed by the arbitral tribunal from time to time.

In view of the above, this appeal is not pressed by the learned Senior Counsel appearing on behalf of the Appellant for any further relief.

(emphasis supplied)

The Respondent No. 1 also preferred Company Appeal (SB) No. 06/2008 before the Company Court. This appeal was dismissed by the learned Company Court on 22.04.2008 in view of the order passed in the Company Appeal No. 07/2008, as aforesaid. The operative part of the order passed by the learned Company Judge reads as follows:

Be that as it may, the fact is that the parties have been directed to maintain status quo with regard to composition of Board and shareholdings of Appellant No. 2 company as it existed on the day of filing of the petition. This Court is of the opinion that having regard to the controversy, which is sub judice before the panel of Arbitrators, it would be appropriate that the parties maintain status quo with regard to the composition of Board and shareholdings as it existed on the day of filing of the petition by Appellant No. 1 [Ms. Sonia Khosla] before the Company Law Board, which was filed on 13.08.2007. This conclusion is supported by the order passed by the Arbitral Tribunal on 09.04.2008 and also the order passed by this Court on 11.04.2008 in the appeal of Mr. R.P. Khosla.

In view of the above, I do not find any merit in this appeal, which fails and is hereby dismissed in limine.

Any observation made in this order will not influence the merit of the case pending before the Arbitral Tribunal.

(emphasis supplied)

Despite the aforesaid orders passed by the CLB and by the Company Judge in the aforesaid two appeals, according to the Petitioner, the Respondents have once again started taking steps to manipulate the Board of Directors of the Company, in contravention of the aforesaid orders. The Petitioner states that Respondent Nos. 3 & 4 herein have signed and filed various forms with the Registrar of Companies without any lawful authority in relation to the company, which apparently is in violation of the orders of the Company Law Board dated 31.01.2008 and of the learned Company Judge dated 11.04.2008 and 22.04.2008 and, also contrary to the agreement dated 31.03.2006 between the parties. The details of the forms signed and filed by the Respondent Nos. 3 & 4 are tabulated in para 62 of the petition and the said tabulation is reproduced hereunder for ready reference:

S. No.

Form No.

Date of Filing

Particulars

Signed by

1.

Form 32

28.08.10

This form is filed showing appointment of Vineet Khosla as Director w.e.f. 29.06.2010

Form is digitally signed by Respondent No. 3 as director.

2.

Form 67

06.09.10

This form is filed as a response to the query raised by Registrar of Companies.

In response to the query Respondent No. 3 has made certain false and misleading

The form is signed by Respondent No. 2 as Chairman and Managing Director.

statements while interpreting the certain court orders.

3.

Form 67

09.09.10

This form is also filed as a response to the query of Registrar of Companies. A patently false and misleading undertaking/ declaration is submitting alongwith this form under the signature of Respondent No. 3 claiming himself as Chairman and Managing Director.

The form is signed by Respondent No. 3 as Managing Director.

4.

Form 20B (Annual Return)

10.09.10

This form is filed as alleged revised Annual Return for the year 2005-06. The particular filed in this form are in contradiction to the terms of MOU dt. 21.12.05 and agreement dated 31.03.2006.

The electronic form is digitally signed by Respondent No. 3 as Managing Director and manual Form attached to the electronic form is signed by Respondent No. 3 and 4 both.

5.

Form 20B (Annual Return)

10.09.10

This form is filed as alleged revised Annual Return for the year 2006-07. The particular filed in this form are in contradiction to the terms of MOU dt. 21.12.05 and agreement dated 31.03.2006.

The electronic form is digitally signed by Respondent No. 3 as Managing Director and manual Form attached to the electronic form is signed by Respondent No. 3 and 4 both.

6.

Form 20B

10.09.10

This form is filed as alleged revised Annual

The electronic form is digitally

(Annual Return)

Return for the year 2007-08. The particular filed in this form are in contradiction to the terms of MOU dt. 21.12.05 and agreement dated 31.03.2006.

signed by Respondent No. 3 as Managing Director and manual Form attached to the electronic form is signed by Respondent No. 3 and 4 both.

7.

Form 20B (Annual Return)

10.09.10

This form is filed as alleged revised Annual Return for the year 2008-09. The particular filed in this form are in contradiction to the terms of MOU dt. 21.12.05 and agreement dated 31.03.2006.

The electronic form is digitally signed by Respondent No. 3 as Managing Director and manual Form attached to the electronic form is signed by Respondent No. 3 and 4 both."

The Petitioner further submits that despite the aforesaid orders the Respondent No. 1, Sonia Khosla, had issued a notice dated 16.04.2010 claiming herself to be the sole remaining director of the company. By the said notice an extraordinary general meeting of the company was purported to be called for appointing, inter alia, Respondent No. 2 as a director.

In OMP No. 660/2009 preferred by the Petitioner before this Court u/s 9 of Arbitration & Conciliation Act, 1996, the Petitioner sought restraint against the holding of the said extraordinary general meeting or passing the proposed resolutions thereat. This Court vide order dated 27.04.2010, in the presence of Sh. Deepak Khosla, Respondent No. 3 herein, passed an order of restraint, restraining Respondent No. 1 in that petition, namely, Sonia Khosla from giving effect to any resolution or decision which may be taken in the extraordinary general meeting or proceeding to attend or hold in any capacity of hers in the company. It is stated that the said interim order of injunction continues to remain in force. The appeal before the Division Bench from the order dated 27.04.2010 has also been rejected by the Division Bench on 01.06.2010.

Mr. Deepak Khosla, on the other hand, has sought to place strong reliance on the order dated 26.04.2010 passed in CCP (CO) No. 11/2009 whereby a learned Single judge of this Court had restrained the Petitioner, Sh. Wadia Prakash and Sh. Vinod Surha from transacting business on behalf of the company as its directors. I may note that this order was relied upon by the Respondent while making his submissions in OMP No. 660/2009 as well. The learned Single Judge rejected the reliance placed on the said order by the Respondent in the following words:

Having considered the submissions, the Court is of the opinion that the interim order made on 26.04.2010 in CCP 2/10 and CCP (CO) 11/2009 cannot be construed as an impediment to the maintainability of the present application. The present application is treated as one for the second applicant, who claims to be a signatory of the agreement dated 31.03.2006. As to what are the inter se rights of the parties is not a matter for the Court to consider at this interim stage. However, what is apparent is that the orders of this Court in the company appeals have become final....

A perusal of the order dated 26.04.2010 passed in CCP (CO) No. 11/2009 shows that the same is an ex parte order passed at the very preliminary stage of hearing of the said contempt petition. I fail to understand how an ex parte order passed even without issuance of notice to the Respondent can be cited by the Respondent at this stage to claim that the same constitutes a binding precedent on this Court.

I may also note that the submissions made by Sh. Deepak Khosla before me are more or less the same as those made before the learned Single Judge dealing with OMP No. 660/2009 and which are recorded in the order dated 27.04.2010.

One of the submissions of Mr. Deepak Khosla is that the Petitioner has impleaded various other Respondents, who are not even the party to the agreement dated 30.03.2006. He submits that the present petition is not maintainable against those who are not party to the said agreement as they are not parties to the arbitration agreement. In support of his submission he relies on the order dated 29.05.2009 passed in OMP No. 316/2009 Montreaux Resorts (P) Ltd. and Ors. v. Vikram Bakshi wherein a learned Single Judge of this Court had taken a view that the petition u/s 9 of the Arbitration & Conciliation Act, could be filed only against those who are parties to the arbitration agreement. Those who are not parties to the arbitration agreement cannot be dragged to the Court and cannot be made a party u/s 9 of the Act. It was held that the petition was, therefore, not maintainable.

Mr. Khosla has also sought to urge that the company is not bound by the agreement entered into between its shareholders and, therefore, the board of directors of the company cannot be restrained in the manner sought by the Petitioner. In this regard, he has placed reliance on the decision in Ador Samia Limited v. Indocan Engineering Limited (2000) 100 CC 370, a decision of the CLB.

The agreement dated 31.03.2006 is an agreement between the Petitioner Sh. Vikram Bakshi, Mrs. Sonia Khosla, Mr. R.P. Khosra and the company. As the company is also a party to the said agreement, prima facie, it cannot be said that the company is not bound by the said agreement in the facts of this case. Under sub-clause ''B'' of Clause 25 of the Agreement dated 31.03.2006, the company agreed and confirmed "that it shall unequivocally abide by the terms of this Agreement, and shall ensure that the same is honored in its letter and spirit and shall incorporate the amendments to its articles of association if required." The Company is a private limited company and the Petitioner holds 51% shares i.e. majority shares in the company. The company has already acted upon the said agreement partially. In Ador Samia Limited (supra), the CLB was dealing with the prayer that the Petitioner should have three nominee directors on the board of the concerned company in terms of the MOU between the parties in that case. The CLB took note of the fact that the Petitioner held only 18% of the shareholding and its right to have 3 nominee directors was premised on the Petitioner holding 60% shareholding in the company. It was in that background that the CLB recognised the right of the Petitioner to have 1 nominee director on the Board of the said company. In the present case, the reliefs are directed primarily against the Khoslas and those who have been installed by them as Directors of the company, apparently in breach of the orders of the CLB and the learned Company judge.

In M.S. Madhusoodhanan and Another Vs. Kerala Kaumudi Pvt. Ltd. and Others, , the Supreme Court has held that a holder of shares in a private company may agree to sell his shares to a person of his choice and such agreements are specifically enforceable u/s 10 of the Specific Relief Act, 1963. Mrs. Sonia Khosla and Mr. R.P. Khosla i.e. Respondent Nos. 1 & 2, are, in any event, undoubtedly bound by the said agreement. One of the undertakings furnished by the Khosla family under Clause 25 of the said agreement was to the effect that the Khosla family shall not transfer the shares in the company or induct any new directors from the date of the signing of the agreement other than what is permitted or stated in the agreement. If the Khoslas could not have, prima facie, inducted in fresh shareholders/Directors in the first place they cannot purport to breach the said obligation through their appointees on the Board of Directors of the company.

The agreement provided for transfer of 100% shareholding of the company in favour of the Petitioner and his nominees against payment of consideration. Though it has been argued by Mr. Bakhru that Sh. R.P. Khosla failed to transfer 22 bighas of land belonging to him, mentioned in Annexure-I to the said agreement, in favour of company, no explanation has been furnished by Mr. Deepak Khosla at this stage for the said alleged default. During his submissions he has not even controverted this assertion of Mr. Bakhru. It is not even the case of Mr. Khosla that the Respondents were ready and willing to transfer the additional land of 5 bighas belonging to Mr. R.P. Khosla in favour of the company at any stage, which was a condition precedent for payment of further amount of Rs. 6,44,38,892/-.

Mr. Khosla has also not controverted the position that contrary to the representations given by the Khoslas, to the effect that there were no pending litigations or encumbrances in relation to the lands in question, as a matter of fact, litigation is pending in the Courts in Himachal Pradesh in relation to the said land.

Prima facie, the endeavor of the Khoslas appears to be to wriggle out of the agreement dated 31.03.2006 after having pocketed a huge amount of Rs. 1.94 crores. Under the agreement, not only the entire shareholding in the company but even the control over the company was to vest in the Bakshi group, represented by the Petitioner. The endevour of the Khosla group, prima facie, appears to be unfairly wrest control of the company and change the shareholding pattern to again reassert their majority, which they lost upon transfer of 51% shares in favour of the Petitioner/his nominee. It, prima facie, also appears that the Khoslas are not willing to let the disputes get resolved through arbitration. In the meantime, despite orders of the CLB, the Company Judge and this Court, repeatedly steps are sought to be taken to alter the status quo.

Mr. Khosla has filed two very large compilations before this Court containing judgments on various propositions, which were not even urged at the hearing. All these propositions would need examination with regard to their relevance and applicability to the facts of the case. The purpose of dumping such large compilation of judgments appears to be to scuttle the present proceedings.

For the present, the rights of the Petitioner cannot be permitted to be put in jeopardy and the Respondents cannot be permitted to continually act in contravention of the orders passed by the CLB, the two orders passed by the Company Court as also the order passed by the learned Single Judge in OMP No. 660/2009.

So far as the maintainability of this petition against those who are not parties to the arbitration agreement is concerned, prima facie, in view of the decisions relied upon by the Petitioner in Arun Kapur Vs. Vikram Kapur and Others, and Girish Mulchand Mehta v. Mahesh S. Mehta 2010 (1) BCR 31, I am of the view that this petition is maintainable.

I am of the view that, having regard to the urgency in the matter and the past conduct of the Respondents of continuing to alter the composition of the board of directors of the company, despite interim directions passed by the Company Law Board; the Company Judge, and; also by this Court, unless injunction as sought for is granted the Respondent would cause prejudice to the rights of the Petitioner, as the composition of the Board of Directors and Members of the company is likely to be further altered. The induction of Respondent Nos. 3 as the Managing Director and Mr. Vineet Khosla- Respondent No. 4 as a Director of the company, prima facie, is in breach of the aforesaid orders of the CLB, the learned Company Judge and the orders passed in O.M.P. No. 660/2009. The same would eventually affect the arbitral proceedings and also affect the rights of the parties. Consequently, at this stage, I pass interim orders of restraint against the Respondents in terms of prayers (a) to (d) of this petition, which shall remain in force till the next date of hearing.

Needless to state that the view taken by me at this stage is tentative.