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INTRA MOOT COURT COMPETITION 2009
Team Code: 1
In the Hon’ble Company Law Board
Western Region Bench at Mumbai
Suit No …
[Under Section 10E read with Section 397 and 398 of the Companies Act, 1956]
________________________________________________________
Indian Schools Association and Indian Educational Alliance
… Petitioners
v.
Educational Reform and Solutions Development Ltd. and Ors.
… Respondents
________________________________________________________________
In the matter of conflict on allotment of shares to WWF
__________________________________________________
Memorial on Behalf of the Petitioners
Counsels for the Petitioners
Memorial on behalf of Petitioners
INTRA MOOT COURT COMPETITION 2009
TABLE OF CONTENTS
ABBREVIATIONS........................................................................................... i-ii
INDEX OF AUTHORITIES.......................................................................... iii-vi
Books Referred iii
Cases Referred iv-v
Statutes v
Websites vi
Miscellaneous vi
STATEMENT OF JURISDICTION................................................................. vii
STATEMENT OF FACTS............................................................................viii-x
ISSUES FOR CONSIDERATION.................................................................... xi
SUMMARY OF ARGUMENTS................................................................ xii-xiv
ARGUMENTS ADVANCED....................................................................... 1- 12
[1] WHETHER THE PETITIONERS HAVE LOCUS STANDI TO FILE THE CASE? ........ 1
[2] WHETHER THERE IS OPPRESSION OF MINORITY AND MISMANAGEMENT ON
THE PART OF BOARD OF DIRECTORS AND SUB- COMMITTEE? ........................... 2-6
[3] WHETHER THE BOARD OF DIRECTORS COMPLIED WITH THE PROVISIONS
OF THE COMPANIES ACT, 1956? .................................................................................... 7-9
[4] WHETHER THE ALLOTMENT OF SHARES BY COMPANY IS IN COMPLIANCE
WITH THE ARTICLES OF ASSOCIATION OF THE COMPANY? ............................ 10-12
PRAYER.......................................................................................................13
Memorial on behalf of Petitioners
INTRA MOOT COURT COMPETITION 2009
ABBREVIATIONS
S.NO. ABBREVIATION EXPANSION
1. AIR All India Reporter
2. AOA Articles of Association
3. Bom Bombay
4. CC Company Cases
5. CLB Company Law Board
6. CWN Calcutta Weekly Notes
7. Cal Calcutta
8. Co. Company
9. Corp Corporation
10. Comp LJ Company Law Journal
11. Crs. Crores
12. Del Delhi
13. Ed Edition
14. Hon’ble Honourable
15. Inc Incorporation
16. Ltd. Limited
Memorial on behalf of Petitioners Page i
INTRA MOOT COURT COMPETITION 2009
17. Ori Orissa
18. NIESAR National Institute of Educational
Studies and Research
19. p. Page
20. P. Private
21. SC Supreme Court
22. SCC Supreme Court Cases
23. Sec. Section
24. v. Versus
25. WWF White Waterfall Funds
26. www World Wide Web
Memorial on behalf of Petitioners Page ii
INTRA MOOT COURT COMPETITION 2009
INDEX OF AUTHORITIES
Books
1. Datey, V.S., Corporate Laws and Secretarial Practice, Taxman’s Allied Services Pvt.
Ltd., New Delhi, 9th Edition, 2007.
2. Jain, N.K., Company Law “Law and practice”, Deep & Deep Publications Pvt. Ltd.,
New Delhi, 2007.
3. Jain, N.K., Corporate Laws Administration and Management, Deep & Deep
Publications Pvt. Ltd., New Delhi, 2007.
4. Majumdar, A.K. & G.K. Kapoor, Company Law and Practice, Taxman’s Publications
Pvt. Ltd., New Delhi, 13th Edition, 2008.
5. Paranjape, N.V., Company Law, Central Law Agency, Allahabad, 3rd Edition, 2003.
6. Ramaiya, A., Guide to Companies Act, Wadhwa and Company, Nagpur, 16th Edition,
Vol.1, 2006.
7. Ramaiya, A., Guide to Companies Act, Wadhwa and Company, Nagpur, 16th Edition,
Vol.2, 2006.
8. Sethna, Jehangir M.J., Indian Company Law, Modern Law Publications, Allahabad,
11th Edition, Vol.1, 2005.
9. Sethna, Jehangir M.J., Indian Company Law, Modern Law Publications, Allahabad,
11th Edition, Vol.2, 2005.
10. Singh, Avtar, Company Law, Eastern Book Company, Lucknow, 15th Edition, 2008.
Memorial on behalf of Petitioners Page iii
INTRA MOOT COURT COMPETITION 2009
Cases
[A]
Adbarali A. Kalvert v. Konkan Chemicalls P. Ltd., (1997) 88 Com Cas 245 (CLB)
[B]
Bhajirao G. Ghatke v. Bombay Docking Co. (p) Ltd., (1984) 56 Comp Cas 428 (Bom)
[C]
Castelino v. Alpha omega Shipment p Ltd., (2001) 104 Comp case 687 CLB
Claude- Lila Parulekar v. Sakal Papers (P) Ltd., (2005) 11 SCC 73
[D]
Deepak C. Shriram v. General Sales Ltd, (2001) 34 SCL 365
[F]
Floating services Ltd. v. MV San Fransceco Dipalola, (2004) 52 SCL 280 (SC)
[G]
Gluco Series P. Ltd., In Re, (1987) 61 Comp Cas 227 (cal)
[K]
Kishan Khariwal v. Ganganagal Industries Ltd., (2004) 50 SCL 567
Kshounish Choudhary v. Kero Rajendra Monolithic Ltd, (2002) 110 comp cas 441
[M]
Mohan lal chandu mal v. Punjab co. Ltd., (1962) 32 Comp Cas 937
Martin Castelino v. Alpha omega Shipment p Ltd., (2001) 104 Comp Cas 687 (CLB)
Memorial on behalf of Petitioners Page iv
INTRA MOOT COURT COMPETITION 2009
[N]
N.R. Murthy v. Industrial Development Corporation of Orissa Ltd., (1977) 47 Comp Cas 389
(Ori)
Nanalal Zaver v. Bombay Life Assurance Co, AIR 1949 Bom 56
Needle Industries (India) Ltd. v. Needle industries Newey (India) Holding Ltd., (1981) 3 SCC
333
Nibro Ltd. v. National Insurance co. Ltd., (1991) 70 comp Cas 388 (del)
[P]
Pearson Education Inc v. Prentice Hall of India (P) Ltd., (2007) 136 Comp Cas 294 Del.
[R]
Rajiv Nag v. Quality Assurance Institute (India) Ltd. (2000) 4 Comp LJ 385 CLB
Re, Albert David, (1964) 68 CWN 163
[S]
Sishu Ranjan Dutta v. Bholanath Paper House Ltd., (1988) 53 Comp Cas 888 (Cal)
SP Jain v. Kalinga Tubes Ltd., AIR 1965 SC 1535
Sunil Dev v. Delhi and District Cricket Association, 80 CC 174
Statutes
1. The Companies Act, 1956.
2. The Foreign Exchange Management Act, 1999.
Memorial on behalf of Petitioners Page v
INTRA MOOT COURT COMPETITION 2009
Websites
1. www.indlaw.com
2. www.lawsforindia.com
3. www.manupatra.com
Miscellaneous
1. Aiyar P Rammanatha, Concise Law Dictionary, Wadhwa & Co. Nagpur, Nagpur, 3rd
Edition, 2007.
2. Black Henry Campbell, Black’s Law Dictionary , 6th Edition , 1990
3. Julia Elliot, Oxford Dictionary & Thesaurus, Oxford University Press, New York,
2001.
Memorial on behalf of Petitioners Page vi
INTRA MOOT COURT COMPETITION 2009
STATEMENT OF JURISDICTION
The petitioners approached the Hon’ble Company Law Board of Mumbai under the
Provisions of Section 10E read with Section 397 and Section 398 of the Companies Act,
1956. The petitioners Indian School Association and Indian Educational Alliance have
submitted to the jurisdiction of the Hon’ble Company Law Board of Mumbai.
Memorial on behalf of Petitioners Page vii
INTRA MOOT COURT COMPETITION 2009
STATEMENT OF FACTS
1. Educational Reforms and Solutions Development Limited Company is a public limited
liability company duly incorporated in 1965 under section 25 of the Indian Companies
Act, 1956, having registered office in Mumbai, Maharashtra, India.
2. The company had set out a Memorandum of Association which runs as follows: the
Company is principally engaged in developing, promoting and disseminating educational
pedagogies and methods for educational institutions with the main objects of promoting,
supporting and assisting enterprises and organizations that impart and promote education
in schools, colleges or training centres.
3. Article 4 of Articles of Association says that shares shall be allotted or transferred only to
organizations engaged in education related activities or owner or owners of an
educational institution established in India.
4. Mr. Alpha is the founder of the company and has been co-opted on board of directors of
the company along with Ms. Zeta by the remaining directors. The company had been a
star performer for number of years from its inception; however the company has been
encountering financial difficulties for the last few years.
5. A meeting of the board of directors was convened on August 1, 2008, there taking note of
the business and financial position of the company, in which two directors namely Mr.
Charlie & Ms. Theta were absent. The board of members had appointed a subcommittee
of 3 directors, viz., Mr. Alpha, Mr. Beta, and Ms. Zeta.
6. However, in the sub committee’s minutes of meeting, there was no mention or clarity as
to: (a) whether the sub-committee had met at any earlier point of time; how the
competitive offers were invited; (b) From whom were these offers invite; under whose
authority, they were invited/received; (c) detailed manner and method of evaluation;
Memorial on behalf of Petitioners Page viii
INTRA MOOT COURT COMPETITION 2009
(d) Why independent merchant bankers were not appointed in the exercise; and (e)
whether the fund requirements of the Company were accurately determined.
7. The subcommittee meeting held on August 5, 2008 which considered two offers for
acquiring unsubscribed shares. One offer was from National Institute of Educational
Studies and Research, a not for profit company and the other offer was from White
Waterfall Funds (WWF), for profit fund set out of New York, U.S.A and has additional
country presence in Brazil, China, India, Russia, Singapore and United Arab Emirates.
8. WWF invests money into sectors including education. There has been unsubstantiated
allegations in media that WWF, through its control over the investee company, often
engages in the practice of asset striping to increase the return to the concerned company
and it also owns a significant ownership and controlling stake in a for profit social
business enterprise in the education sector which is a competitor of the company.
9. The subcommittee decided to consider the offer of WWF and it recommended acceptance
of this offer to the meeting of the board of directors of the company convened at 4:30
p.m. on August 15, 2008, the notice and the agenda of which was duly given in
accordance with applicable law but Mr. Charlie and Ms. Theta were again marked as
absent.
10. Based on the recommendations of the subcommittee and the acceptance by the Board of
Directors, the company approached WWF for infusion of funds into the company based
on the subscription the Company and the WWF signed a share subscription-cum-
shareholders agreement dated September 30, 2008, with some conditions.
Memorial on behalf of Petitioners Page ix
INTRA MOOT COURT COMPETITION 2009
11. In the duly convened and quorate board meeting and extraordinary general meeting held
on October 25, 2008. The board and shareholders approved the issuance and allotment of
unsubscribed equity shares worth Rupees 1, 47, 50, 000.
12. It was noted that the meetings convened on October 25, 2008, Mr. Charlie and Ms. Theta
were again absent from the meetings of board of directors on account of illness and
outstation travel respectively and they were also absent from extraordinary meeting as
well.
13. Share certificates were handed over to WWF on October 27, 2008. In a duly convened
board meeting on the same day in the afternoon, 6 nominees of WWF were appointed as
Additional Directors pursuant to a request made by WWF by a letter dated October 26,
2008.
14. Additionally, a management committee was also constituted on October 27, 2008,
consisting of 5 members of which WWF has appointed 3 members and it presented a
detailed and comprehensive road map prepared for the revival of the company which the
board declined to consider without assigning any reason, and the committee was
disbanded in the same board meeting held on December 24, 2008
15. Drafts minutes recording the proceedings of the board meetings dated October 25, 2008
and 27, 2008 as well as extra-ordinary meeting of shareholders allotting the shares to
WWF and appointing the nominee director of WWF to the board of the company was
circulated to Mr. Charlie and to Ms. Theta.
Memorial on behalf of Petitioners Page x
INTRA MOOT COURT COMPETITION 2009
ISSUES FOR CONSIDERATION
1. WHETHER THE PETITIONERS HAVE LOCUS STANDI TO FILE THE CASE?
2. WHETHER THERE IS OPPRESSION OF MINORITY AND MISMANAGEMENT
ON THE PART OF BOARD OF DIRECTORS AND SUB- COMMITTEE?
2.1 That the allotment of shares resulted into prejudice to the company’s interest and
oppressive to the minority.
2.2 That there is mismanagement by the board of directors.
3. WHETHER THE BOARD OF DIRECTORS COMPLIED WITH THE
PROVISIONS OF THE COMPANIES ACT, 1956?
3.1 That the Agenda for the meeting of board of directors is not in consonance with
the provision of the Act.
3.2 That the allotment of share is not done in accordance with the procedure of the
Act.
4. WHETHER THE ALLOTMENT OF SHARES BY COMPANY IS IN
COMPLIANCE WITH THE ARTICLES OF ASSOCIATION OF THE COMPANY?
Memorial on behalf of Petitioners Page xi
INTRA MOOT COURT COMPETITION 2009
SUMMARY OF PLEADINGS
1. WHETHER THE PETITIONERS HAVE LOCUS STANDAI TO FILE THE
CASE?
It is humbly submitted before this Hon’ble bench that the petitioners have the locus standi to
file the case before the Hon’ble Company Law Board as Section 399 allows filing a case
before the Hon’ble CLB in the cases of oppression and mismanagement. According to the
Section 399, the petitioners if holding more than 10% of shares capital can approach to the
CLB.
2. WHETHER THERE IS OPPRESSION OF MINORITY AND
MISMANAGEMENT ON THE PART OF BOARD OF DIRECTORS AND SUB-
COMMITTEE?
a. That the allotment of shares resulted into prejudice to the company’s interest and
oppressive to the minority.
It is humbly submitted before this Hon’ble bench that there is oppression in the instant case
and it is evident from the Section 399 of The Companies Act, 1956 that for a case of
oppression the affairs of the company are being conducted either in a manner prejudicial to
the public interest or in a manner oppressive to any member. In the instant case the affairs of
the company are being conducted in both the senses. In the instant case the allotment of
shares to the WWF and creating a new majority in its favour is an act of oppression which
will have permanent and continuous effect.
Memorial on behalf of Petitioners Page xii
INTRA MOOT COURT COMPETITION 2009
b. That there is mismanagement by the board of directors.
It is humbly submitted that there is mismanagement by the board of directors and the
subcommittee made thereof. Section 398 provides the instances in which there can be
mismanagement. In the instant case the allotment of share to the WWF is invalid hence, the
appointment of 6 nominated board of directors is illegal and till the time the new nominated
directors will be continued on the board the illegality will also be continued and will amount
to the mismanagement and prejudicial to public interest.
3. WHETHER THE BOARD OF DIRECTORS COMPLIED WITH THE
PROVISIONS OF THE COMPANIES ACT, 1956?
A. That the Agenda for the meeting of board of directors is not in consonance with the
provision of the Act.
In the instant case the agenda sent along with the notice for the meeting of board of directors
convened on 1, August, 2008 was not proper as it did not contain the explanatory statement
of all types of business which is to be convened on the meeting.
B. That the allotment of share is not done in accordance with the procedure of the Act.
The provisions of the Companies Act, 1956 vested the power, to issue further share capital, in
the shareholders by passing a special resolution in the general meeting. So the same cannot be
done by the board of directors in their meeting as there is restriction on the powers of the
board of directors.
4. WHETHER THE ALLOTMENT OF SHARES BY COMPANY IS IN
COMPLIANCE WITH THE ARTICLES OF ASSOCIATION OF THE
COMPANY?
Memorial on behalf of Petitioners Page xiii
INTRA MOOT COURT COMPETITION 2009
It is humbly submitted that the board of directors did not comply with the provisions of AOA
while allotting the shares to the WWF as Article 4 says that shares can only be allotted to an
organisation which is engaged in educational related activities established in India. WWF is
engaged in investment and not in education related activities.
Memorial on behalf of Petitioners Page xiv
INTRA MOOT COURT COMPETITION 2009
PRAYER
In light of the issues raised, arguments advanced and authorities cited, it is humbly prayed
before this Hon’ble Company Law Board that it may be pleased to:
1. Allow the petition;
2. Declare that allotment of share to the WWF by the board of director is invalid;
3. Declare the alteration in AOA and MOA as null and void;
4. Issue an order to remove the existing directors other than the petitioners; and
5. Issue an order to remove 6 additional directors appointed on the board
Pass any other order in favour of petitioners that it may deem fit in the ends of justice, equity
and good conscience.
And the Petitioners shall ever beseech the HON’BLE COURT for this cognitive
consideration.
All of which is respectfully submitted,
Counsels for the Petitioners
Memorial on behalf of Petitioners Page xv
Recommended