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