LexCHATTERJEE PETROCHEM (I) PVT. LTD. versus HALDIA PETROCHEMICALS LTD. & ORS.
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[2011] 15 (ADDL.) S.C.R. 135 CHATIERJEE PETROCHEM (I) PVT. LTD. v. HALDIA PETROCHEMICALS LTD.& ORS. (Civil Appeal Nos. 5416-5419 of 2008) SEPTEMBER 30, 2011 [ALTAMAS KABIR AND CYRIAC JOSEPH, JJ.] A B Companies Act, 1956 - ss. 397, 398 and 402 - Company petition under - Grievance of applicant-Chatterjee Group that due to non-registration of transfer of 155 million C shares in their favour, and, on the other hand, transfer of 150 million shares in favour of IOC, the character of the Company in question (HPL) was altered from a Private Company into a Government Company and also reduced the Chatterjee Group to a minority shareholder, contrary to promises held D out earlier and as incorporated in the agreements between the parties - Held: In order to succeed in an action under ss.397 and 398, the complainant has 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 E members - However, the law has not defined as to what would amount to •oppressive" for the purposes of s.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 s.397 - The conduct of the majority shareholders should not only F be oppressive to the minority, but must also be burdensome and operating harshly upto the date of the petition - On facts, although, the Chatterjee Group complained of the manner in which it had been reduced to a minority in the Company in question, it is also obvious that when the Company was in dire G 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 135 H 136 SUPREME COURT REPORTS (2011] 15 (ADDL.) S.C.R. A Company - 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 - If in the first place, the Chatterjee B 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 c a portfolio investor with the possibility of the same be!ng converted into a strategic investment - The failure of West Bengal Industrial Development Corporation (WBIDC) and Government of West Bengal (GoWB) to register the 155 million shares transferred to CP(l)PL could not, strictly 0 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 s.397 of the Companies Act- The alleged breach of the agreements, was really in the nature of a breach between two members of the Company and not the E Company itself- It is not on account of any act on the part of the Company that the shares transferred to CP(l)PL were not registered m the name of the Chatterjee Group - There was, therefore, no occasion for the Company Law Board (CLB) to make any order either under s.397 or 402 - The appellants F failed to substantiate either of the two grounds canvassed by them for the CLB to assume jurisdiction either u/s.397 or s.402, 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 G rightly set aside the same and dismissed the Company Petition. Mis Haldia Petrochemicals Ltd. (HPL) was incorporated for establishing a green field petrochemical H complex in Haldia in the State of West Bengal to be ,• CHATTERJEE PETROCHEM (I) PVT. LTD. v. HALDIA 137 PETROCHEMICALS LTD. established by the West Bengal Industrial Development A Corporation (WBIDC) and the R.P. Goenka Group. The Goenka Group left the Company and Tata Chemicals and Tata Tea were inducted into the project. However, since the TATAs were not very keen to continue with the Project, Dr. Purnendu Chatterjee, a Non-Resident Indian B industrialist and financier, evinced his interest in implementing the project. Accordingly, a M
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