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2013 Supreme(Mad) 4169
High Court of Judicature at Madras
V. RAMASUBRAMANIAN, J.
Dr. N. Sethuraman
Versus
Smile Micro Finance Ltd. & Another
O.A. No. 901 of 2013
Decided On : 19-12-2013
R. Murari, Senior Counsel for Thriyambak J. Kannan, Advocate.
The court emphasized the importance of authority and representation in complex agreements, highlighting the need for clarity and consistency in asserting control and management rights.
Headnote:
Arbitration and Conciliation Act - Shareholders Agreement - Subscription Agreement - 1996 - 9
Fact of the Case:
The applicant sought an injunction to restrain the respondents from making major management decisions in the first respondent company, claiming control vested in him as per the Shareholders Agreement and Subscription Agreement. The court analyzed the complex agreements, the revocation of proxies, and the conflict of interest within the group of Promoters.
Finding of the Court:
The court found that the applicant's claim for an injunction was misconceived as he had lost the authority to represent the Promoters due to conflicts of interest and the revocation of proxies. The court also noted that the applicant failed to demonstrate a prima facie case or balance of convenience in his favor.
Issues: Interpretation of complex agreements, revocation of proxies, conflict of interest, and the authority to represent the Promoters.
Ratio Decidendi: The court's decision was based on the analysis of the agreements, the revocation of proxies, and the conflict of interest within the group of Promoters, leading to the finding that the applicant's claim for an injunction was misconceived.
Final Decision: The application was dismissed, and no costs were awarded.
1. This is an application filed by the applicant under Section 9 of the Arbitration and Conciliation Act, 1996, for the grant an order of injunction restraining the respondents from taking any major management decisions in the first respondent company pending arbitration proceedings.
2. I have heard Mr.R.Subramanian, learned counsel for the applicant, Mr.Ramalingam, learned counsel for the first respondent and Mr.R.Murari, learned Senior Counsel for the second respondent.
3. An agreement titled as Shareholders Agreement was entered into on 21.12.2009 by and between -
(i) the first respondent herein;
(ii) the second respondent herein;
(iii) a group of persons collectively described as "Promoters" viz., Dr.N. Sethuraman, who is the applicant herein, Dr.Brathibha (daughter of the applicant herein), N.Bhuvaneswari, Dr.S.Guru Shankar (son of the applicant herein) and S. Ramesh (son of the applicant herein); and
(iv) another group of persons collectively described as "Existing Shareholders", numbering about 17.
4. In other words, there were 4 parties to the Shareholders Agreement dated 21.12.2009. While the first respondent was one party, the second respondent was another party. The third party was termed as "Promoters" and all of them were represented by the applicant herein as their Power of Attorney Holder. Apart from being the Power of Attorney Holder, the applicant herein is the father of 3 out of 5 persons who constituted the third party to the agreement. Dr.S.Brathibha, Dr.S.Guru Shankar and S.Ramesh who were part of the group described as "Promoters" and whose details were furnished in Schedule-1 to the Shareholders Agreement are admittedly the daughter and sons of the applicant herein.
5. The fourth party to the agreement comprised of a group of about 17 persons whose names and addresses were given in Schedule-2 to the Shareholders Agreement. They were collectively described as "Existing Shareholders" and they were also represented by the applicant as their Power Agent in the Shareholders Agreement.
6. One more interesting aspect of the Shareholders Agreement is that the first party to the agreement viz., SMILE Micro Finance Ltd., which is the first respondent herein, was also represented only by the applicant, as he was the Chairman of the said company at that time and it was he who signed the Shareholders Agreement on behalf of the first respondent herein.
7. The object of the Shareholders Agreement was to enable the second respondent herein, to make investment in the first respondent company, by the acquisition of the equity shares. It is relevant to note here that the second respondent is a company incorporated under the provisions of the Cyprus Companies Law.
8. On the same day on which the Shareholders Agreement was entered into, viz., 21.12.2009, another agreement titled as "Subscription Agreement" was also entered into. To this agreement, there were only 3 parties viz., (i) the first respondent herein (ii) the second respondent herein and (iii) the applicant, his daughter, his 2 sons and another lady by name Bhuvaneswari, collectively described as "Promoters" whose particulars were furnished in Schedule-1 to the agreement. The object of this agreement was to enable the second respondent herein to subscribe to the equity shares in the first respondent company.
9. Though both the Subscription Agreement and the Shareholders Agreement were entered into, on the same date viz., 21.12.2009, it appears that the Subscription Agreement should be understood to be the elder among the twins. Under this Subscription Agreement, the second respondent was supposed to bring in a total amount of Rs.50 crores in the form of investments in shares. This amount was required to be brought in 3 stages which are termed in the agreement as "First Tranche", "Second Tranche" and "Third Tranche".
10. On the date of the Subscription Agreement, the first respondent company had an authorised share capital of Rs.20 crores divided into 2 crores equity sha
