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Bombay High Court

Arunachalam Muthu And 3 Ors vs Nafan B.V. And 4 Ors on 29 October, 2015

Bench: N.M. Jamdar

bsb 1 COAPPL21.15+5.doc IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION COMPANY APPEAL NO. 21 OF 2015 IN CLB COMPANY PETITION NO. 62 OF 2009 Nafan B.V., Regd. Office at Locatellikade 1 - Parnassustoren - 1076AZ Amsterdam, Postal Address: POSTBUS 75215 - 1070AE Amsterdam. ... Appellant Vs. 1. SAF Yeast Company Pvt. Ltd., Regd. Office at: 419, Swastik Chambers, Chembur, Mumbai. 2. Mr.Arunachalam Muthu, son of Shri TNM Arunachalam, 1, Hermes House, 7/7B, Worli Sea Face, Mumbai. 3. Mr.A.M.Arunachalam, son of Mr.Aruanachalam Muthu, 1, Hermes House, 7/7B, Worli Sea Face, Mumbai. 4. Mr.A.M. Muthiah, son of Mr.Arunachalam Muthu, 1, Hermes House, 7/7B, Worli Sea Face, Mumbai. 5. Mr.TNM Arunachalam, son of Shri Muthiah Chettiar, 1, Hermes House, 7/7B, Worli Sea Face, Mumbai. ::: Uploaded on - 31/10/2015 ::: Downloaded on - 01/11/2015 00:00:19 ::: bsb 2 COAPPL21.15+5.doc (Deceased). 6. Helios Food Additives Pvt. Ltd., Regd. Office at 421, Swastik Chambers, Umarshibappa Chowk, Chembur, Mumbai - 400 071. 7. Sharp & Tannan, Chartered Accountants, Office at - Ravindra Annexe, 194, Churchgate Reclamation, Dinshaw Vachha Road, Mumbai - 400 020. 8. Lesaffre Et Cie, Principal Office at 137, Rue Gabriel, Peri, 59 700 Marcq-En-Baroeul, France. ... Respondents WITH COMPANY APPLICATION NO. 11 OF 2015 IN COMPANY APPEAL NO. 21 OF 2015 IN CLB COMPANY PETITION NO. 62 OF 2009 Nafan B.V. Regd. Office at Locatellikade 1 - Parnassustoren - 1076AZ Amsterdam, Postal Address: POSTBUS 75215 - 1070AE Amsterdam & ors. ... Applicant V/s. SAF Yeast Company Pvt. Ltd., Regd. Office at: 419, Swastik Chambers, Chembur, Mumbai, & Ors. ... Respondents ::: Uploaded on - 31/10/2015 ::: Downloaded on - 01/11/2015 00:00:19 ::: bsb 3 COAPPL21.15+5.doc WITH COMPANY APPEAL NO. 22 OF 2015 IN CLB COMPANY PETITION NO. 62 OF 2009 M/s Sharp & Tannan, Chartered Accountants Office at - Ravindra Annexe, 194, Churchgate Reclamation, Dinshaw Vachha Road, Mumbai - 400 020.... Appellant V/s. SAF Yeast Company Pvt. Ltd. Regd. Office at: 419, Swastik Chambers, Chembur, Mumbai. ... Respondents WITH COMPANY APPEAL NO. 23 OF 2015 IN CLB COMPANY PETITION NO. 62 OF 2009 Arunachalam Muthu, 1, Hermes House, 7/7B, Worli Sea Face, Mumbai & ors. ... Appellants V/s. Nafan B.V. Regd. Office at Locatellikade 1 - Parnassustoren - 1076AZ Amsterdam, Postal Address: POSTBUS 75215 - 1070AE Amsterdam & ors. ... Respondents ::: Uploaded on - 31/10/2015 ::: Downloaded on - 01/11/2015 00:00:19 ::: bsb 4 COAPPL21.15+5.doc WITH COMPANY APPLICATION NO. 12 OF 2015 IN COMPANY APPEAL NO. 23 OF 2015 IN CLB COMPANY PETITION NO. 62 OF 2009 Arunachalam Muthu 1, Hermes House, 7/7B, Worli Sea Face, Mumbai & ors. ... Applicants V/s Nafan B.V., Regd. Office at Locatellikade 1 - Parnassustoren - 1076AZ Amsterdam, Postal Address: POSTBUS 75215 - 1070AE Amsterdam & ors. ... Respondents WITH COMPANY APPEAL NO. 24 OF 2015 IN CLB COMPANY PETITION NO. 62 OF 2009 Lesaffre Et CIE Principal Office at 137, Rue Gabriel, Peri, 59 700 Marcq-En-Baroeul, France. ... Appellant V/s. SAF Yeast Company Pvt. Ltd. Regd. Office at: 419, Swastik Chambers, Chembur, Mumbai, & ors. ... Respondents ::: Uploaded on - 31/10/2015 ::: Downloaded on - 01/11/2015 00:00:19 ::: bsb 5 COAPPL21.15+5.doc Mr. F.E. De' Vitre, Senior Advocate, with Mr. Pravin Samdani, Senior Advocate, Mr. Ciccu Mukhopadhaya, Mr. Vaibhav Mishra, Mr. Omar Ahmed, Mr.Yashesh Pajwani and Mr. Arun Siwach i/by Amarchand Mangaldas and Suresh A. Shroff & Co. for the Appellant in Company Appeal No.21 of 2015; and for applicant in Company Application No.11 of 2015 in Company Appeal No.21 of 2015; for Resp. No.2 in Company Appeal No.22 of 2015 and for Resp. No.1 in Company Appeal No.23 of 2015 and Company Application No.12 of 2015 and for Resp. No.8 in Company Appeal No.24 of 2015. Mr. T.N.Subramanian, Sr. Advocate with Mr. Mayur Khandeparkar i/by Kanga & Co. for the Appellants in Company Appeal No.22 of 2015; for Resp. No.7 in Company Appeal No.21 of 2015 and Company Appeal No.24 of 2015 and for Resp. No.3 in Company Appeal No.23 of 2015. Mr. Janak Dwarkadas, Senior Advocate with Mr. N.H. Seervai, Senior Advocate, Mr. Sharan Jagtiani, Mr. Chirag Kamdar, Mr. Gerald Misquitta, Mr. Alok Patel i/by Mahendra Patel & Associates, for Resp. Nos.2, 3, 4 and 6 in Company Appeal No.21 of 2015 and for Company Application No.11 of 2015; for Resp. Nos.3, 4, 5 and 6 in Company Appeal No.22 of 2015 and for appellants in Company Appeal No.23 of 2015 and for applicants in Company Application No.12 of 2015 in Company Appeal No.23 of 2015 and for respondent Nos.2, 3, 4 and 6 in Company Appeal No.24 of 2015. Mr. Darius Khambata, Senior Advocate with Ms. Namrata M. Shah, Mr. Prashant Bari i/by Beri & Co. for Respondent No.8 in Company Appeal No.21 of 2015 and Company Application No.11 of 2015; and for Respondent No.7 in Company Appeal No.22 of 2015 and for Respondent No.2 in Company Appeal No.23 of 2015 and Company Application No.12 of 2015; and for the appellant in Company Appeal No.24 of 2015. Mr. C.J. Joy with Mr. G.Hariharan i/by H.P. Chaturvedi for the Union of India. None present for Resp. No.1 (SAF Yeast) in Company Appeal No.21 ::: Uploaded on - 31/10/2015 ::: Downloaded on - 01/11/2015 00:00:19 ::: bsb 6 COAPPL21.15+5.doc of 2015 and in Company Application No.11 of 2015 and Company Appeal No.22 of 2015 and Company Appeal No.24 of 2015 and Respondent No.5 in Company Appeal No.23 of 2015 and Company Application No.12 of 2015. CORAM: N.M. JAMDAR, J. JUDGMENT RESERVED ON : 22 APRIL 2015 JUDGMENT PRONOUNCED ON: 29 OCTOBER 2015 JUDGMENT:

This group of Company Appeals arises from the order passed by the Company Law Board, Mumbai Bench, Mumbai, on 28 March 2013, in Company Petition No.62 of 2009 filed by M/s. Nafan B.V. The Company Law Board, by the impugned order, has directed Nafan B.V. and Lasaffre Et Cie, to transfer 80722 shares i.e. 51% of shareholding to the respondents in that petition, referred to as Muthu Group.

2. Company Appeal No.21 of 2015 (Company Appeal (L) No. 30 of 2013) is filed by M/s.Nafan B.V.; Company Appeal No.22 of 2015 (Company Appeal (L) No. 33 of 2013) is filed by M/s. Sharp and Tannan, Chartered Accountants; Company Appeal No.23 of 2015 (Company Appeal (L) No. 34 of 2013) is filed by Mr.Arunachalam Muthu & Ors.; Company Appeal No.24 of 2015 (Company Appeal (L) No. 35 of 2013) is filed by M/s. Lesaffre Et CIE. Company Application No.11 of 2015 (Company Application (L) No. 37 of ::: Uploaded on - 31/10/2015 ::: Downloaded on - 01/11/2015 00:00:19 ::: bsb 7 COAPPL21.15+5.doc 2013) is taken out in Company Appeal No.21 of 2015 and Company Application No.12 of 2015 (Company Application (L) No. 43 of 2013) is taken out in Company Appeal No.23 of 2015. All these appeals and applications were filed in the year 2013; however, regular numbers were given in the year 2015.

INTRODUCTION

3. The dispute pertains to the control and management of M/s.

SAF Yeast Company Pvt. Ltd. (hereinafter referred to as SAF Yeast), a Private Limited Company, having registered office at 419, Swastik Chambers, Chembur, Mumbai. SAF Yeast has one plant in Chiplun, Maharashtra and another at Sandhila, Uttar Pradesh. SAF Yeast is a joint venture company. The joint venture is between Nafan B.V. and Mr.Arunachalam Muthu and M/s.Helios Food Additives Pvt. Ltd.

SAF Yeast carries on business of manufacture of yeast and is a dealer and exporter in the yeast products, bread, bread-improvers, their derivatives, and allied products. The authorized share capital of SAF Yeast originally was `25,00,000/- divided by 25000 equity shares of `100/- (each). The authorized share capital was increased from time to time and at the time of filing of the Company Petition, the authorized share capital of SAF Yeast was `3 crores (Rupees three crores only) divided by 300000 equity shares of `100/- (each). The approximate value and paid up capital of SAF Yeast at the relevant time was `1,58,37,500/- comprising of equity shares of `100/- each.

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4. The shareholding of SAF Yeast is as follows: Nafan B.V. owns 80,772 equity shares, approximately constituting 51% of the total shareholding. Mr.Arunachalam Muthu holds 16,800 equity shares constituting approximately 10.607% of the total shareholding.

Mr.A.M. Arunachalam holds 10396 equity shares constituting approximately 6.56% of the total shareholding. Mr.A.M. Muthiah holds 10397 equity shares, constituting approximately 6.57% of total shareholding. Mr.TNM Arunachalam, who passed away during the proceedings, held 1,800 equity shares constituting 1.13% of total shareholding. Helios Food Additives Pvt. Ltd. holds 38010 equity shares constituting approximately 24% of total equity share capital. Mr.B.B. Pay Master, who is no more, held nominal 200 equity shares of SAF Yeast.

5. Nafan B.V. (referred to as Nafan) is a Company incorporated under the laws of Netherlands, having its registered office at Loatellikade I-Parnassustoren - 1076 AZ Amsterdem. Nafan is subsidiary of Lesaffre Et Cie (referred to as Lesaffre); a Company incorporated in France having its Principal Office at 137 Rue Gabriel, Peri, 59700 NACQ-EN-BAROEUL, France. Nafan, at the relevant time, had four nominee directors on the Board of Directors of SAF Yeast. They were Mr.Denis Lesaffre, Mr.Moris Lesaffre, Mr.Alain Laloum, and Ms. Corinne Wisniewski. Mr.Arunachalam Muthu (referred to as Muthu) worked for Shaw Wallace & Co. from 1965 to 1980. He was working as a Senior Manager in yeast and ::: Uploaded on - 31/10/2015 ::: Downloaded on - 01/11/2015 00:00:19 ::: bsb 9 COAPPL21.15+5.doc brewery division in Shaw Wallace & Co. He was involved in setting up a yeast factory and a plant at Uran, Maharashtra. A.M. Arunachalam is the son of Muthu. A.M. Muthiah is the second son of Muthu. M/s. Helios Food Additives Pvt. Ltd. is owned and controlled by Muthu and his family members. Arunachalam Muthu, when referred to individually, is referred as Muthu. When Arunachalam Muthu, his two sons and Helios Food Additives Pvt. Ltd. are referred together, they are referred as the Muthu Group.

M/s. Sharp & Tannan are Chartered Accountants, having its office at Ravindra Annexe, 194, Churchgate Reclamation, Dinshaw Vaccha Road, Mumbai - 400 020. M/s. Sharp & Tannan are the statutory auditors of SAF Yeast.

FACTS Pleadings

6. Muthu group has made a grievance that Nafan did not disclose various facts and they were brought on record by subsequent affidavits and rejoinder. Hence, the facts are narrated as per the pleadings placed on record by way of petitions, reply, rejoinder, additional affidavits, in that order.

Petition by Nafan

7. Company Petition No.62 of 2009 was filed by Nafan under Sections 111, 235, 237, 397, 398, 402 and 403 of Companies Act, ::: Uploaded on - 31/10/2015 ::: Downloaded on - 01/11/2015 00:00:19 ::: bsb 10 COAPPL21.15+5.doc 1956 (the Act), briefly on the following averments:

(i) Lesaffre is one of the leading company in the world in the manufacture of yeast. Lesaffre family set up the manufacture of yeast in France around the year 1873. Muthu met Alain Laloum in an international fair in Germany, sometime in May 1980. Muthu was keen to have a joint venture with Lesaffre. SAF Yeast was incorporated on 3 August 1981, pursuant to an agreement dated 6 June 1981, between Lesaffre and Muthu. At the relevant time, due to restrictions in India regarding foreign investment, Lesaffre was not in a position to set up a 100% subsidiary or to hold majority shares. It was therefore provided in the agreement dated 6 June 1981 that in the event the laws of India are amended and it is made legally permissible to hold the majority interest, Muthu would transfer the necessary shares to Lesaffre or its subsidiary, and that they would then hold majority of equity capital. When SAF Yeast was incorporated, the word 'SAF' was derived from the name Lesaffre and the interim license agreement was entered into between Lesaffre and SAF Yeast on 11 December 1982, after obtaining requisite approvals. Lesaffre was issued 6000 equity shares comprising of 40% of equity capital. On 22 March 1991, Lesaffre and Muthu entered into a participation agreement to up- date the agreement of 6 June 1981. Article 6 of participation agreement required that Memorandum of Articles of Association of SAF Yeast would reflect the terms of participation agreement. In accordance with Article 7 of the Participation Agreement, Lesaffre ::: Uploaded on - 31/10/2015 ::: Downloaded on - 01/11/2015 00:00:20 ::: bsb 11 COAPPL21.15+5.doc was entitled to have majority in the Board of Directors of SAF Yeast.

Article 7.4 provided for scheme of appointing an alternate Director. Article 7.6 lay down the day-to-day management of SAF Yeast to be in the Board of Directors, except as delegated to the Managing Director by the Board. Lesaffre was entitled to nominate the Chairman. The appointment, re-appointment, or removal of the Managing Director was subject to approval of majority of Directors, which majority was to include at least one Director nominated by Lesaffre. It was provided that, meetings of the Board could be held in or outside India. Fourteen days' notice was required under Article 7.10(b) for every meeting of Board of Directors to be given in writing to every Director in India or outside India. Under Article 13, it was a duty of Muthu to ensure that all relevant documents were open to inspection for Lesaffre.

(ii) The Government of India in an around January/February 1992 brought a change in policy. With the

approval of Government of India, on 17 January 1992, the shareholding of Lesaffre was increased to 51% and subsequently around the year 2000 Nafan B.V. became owner of 51% shares and relevant entries were carried out in Members Register. Nafan was the owner of the shares as an assignee of Lesaffre.

(iii) SAF Yeast was functioning smoothly, with substantial technological and financial assistance from Lesaffre however, Muthu Group started acting oppressively to take over the powers of ::: Uploaded on - 31/10/2015 ::: Downloaded on - 01/11/2015 00:00:20 ::: bsb 12 COAPPL21.15+5.doc the Board of Directors and fraudulently and illegally usurp Nafans shareholding. Pursuant to a transaction, sometime in the year 1997, involving SAF Yeast and Credit Agricole Indosuez (Calyon Bank) and another Company NCS Estate Pvt. Ltd., the Calyon Bank filed cases against SAF Yeast and SAF Yeast also filed criminal case No.238 of 2000 under Sections 408, 420, 477A, 467, 471 read with Section 34 of Indian Penal Code against Calyon Bank. A First Information Report was registered against Calyon Bank and proceedings were filed in the Court of Chief Judicial Magistrate, Hardoi, Uttar Pradesh. After considerable lapse of time after filing the complaint, the nominee Directors of Nafan were informed about the dispute with the Calyon Bank. All concerned including Muthu felt that the issue with Calyon Bank needed to be amicably resolved. Muthu proposed a settlement on certain conditions with the Calyon Bank by letter dated 2 March 2001. It was suggested that the offences were non-compoundable and Court at Hardoi had taken cognizance against the Calyon Bank. Muthu sought intervention through a Judge and after certain discussions, proposed certain terms and settlement. The nominee Directors of Nafan, bonafide believed that reasonable settlement with Calyon Bank as the bankers would be in the interest of SAF Yeast; however, the terms put-forth by Muthu were not reasonable.

(iv) Meeting of Board of Directors was held on 14 April 2005 in France. The pending cases with the Calyon Bank were discussed. The meeting was attended by Muthu, Lucian Lesaffre, ::: Uploaded on - 31/10/2015 ::: Downloaded on - 01/11/2015 00:00:20 ::: bsb 13 COAPPL21.15+5.doc Alain Laloum, and Alain De Gouy. In the meeting, a resolution was passed that it would be in the interest of SAF Yeast to settle the dispute with the Calyon Bank against the payment of compensation of Euros 5,00,000 and a draft of discussion was forwarded to Calyon Bank and to Muthu.

(v) After the meeting, Muthu's attitude underwent a change. Muthu group was under a belief that the dispute with the Calyon Bank was something that could be used to their advantage by placing Nafan in difficulties. Muthu started his attempts to force Lesaffre to sell 51% shares held by Nafan so that he could control SAF Yeast. The minutes of the meeting of 14 April 2005 were incorrectly recorded and when it was pointed out, Muthu disputed the position. Correspondence ensued between the parties. Alain De Gouy informed Muthu that on Lesaffres intervention, the Calyon Bank was agreeable to certain terms and conditions. Alain De Gouy asserted that Lesaffre was not acting against the interest of SAF Yeast and it was not a shareholders' dispute.

(vi) Muthu started addressing correspondence complaining that he was being forced to take certain decisions in respect of Calyon Bank, clearly trying to make out a case against Nafan. Nafan never attempted to order Muthu in this regard and acted only to ensure that the decisions were taken in the best interest of SAF Yeast. Muthu purportedly held a Board meeting on 26 July 2005, without any notice to the nominee Directors of Nafan where ::: Uploaded on - 31/10/2015 ::: Downloaded on - 01/11/2015 00:00:20 ::: bsb 14 COAPPL21.15+5.doc he sought to approve his own version of minutes of meeting of 14 April 2005. When requests were made to make the copies of minutes available, Muthu refused and did not provide the same. A request made for holding an annual general meeting for the year ending 31 March 2005, but was not heeded to, and when Nafan carried out inspection of documents, it found that the meeting was purportedly held on 23 November 2005. No notice was given to Nafan.

(vii) Nafan was instrumental in SAF Yeast's initial survival. It became a success due to Nafan and Lesaffres financial and technical contribution. In spite of benefiting from this substantial financial and technological assistance, Muthu attempted to discredit Nafan, as a part of a design to take control of SAF Yeast.

Muthu indulged in various acts of oppression and mismanagement against Nafan in relation to SAF Yeast.

(viii) The Nominee Directors of Nafan made several requests to provide copies of minutes of meeting of Board of Directors. Letters were sent on 17 January 2006, 18 January 2006, and 5 May 2006, and in the year 2007 to 2009. Muthu failed to provide copies of the minutes and sought to run SAF Yeast as his exclusive domain. Muthu failed to provide statutory records, such as minutes of shareholders' meetings etc. ::: Uploaded on - 31/10/2015 ::: Downloaded on - 01/11/2015 00:00:20 ::: bsb 15 COAPPL21.15+5.doc

(ix) Muthu, as the Managing Director, earlier used to provide finance statement and monthly information statements to Nafan through Lesaffre. However, for the financial year 2005-06 Nafan did not receive any financial report. Muthu stopped sending reports. Nafan sought for these reports and financial information by letters dated 20 February 2006 and 18 March 2006. In spite of this position, the information was not supplied.

(x) Muthu purportedly held a Board meeting on and around 26 July 2005, without any notice to Nafan. Nominee Directors of Nafan came to know of the meeting on 26 July 2005 for the first time when it was referred to in Muthu's letter on 2 March 2006 addressed to Alain Laloum. Muthu attempted to falsify the record of SAF Yeast. Such meeting was invalid and illegal.

Nafans Nominee Directors also sought for convening of Annual General Meeting and an explanation for not holding the same on time. Letters were written on 21 February 2006, 5 May 2006.

These letters invoked no response and it is only when Nafan took inspection that it found out that the meeting was held on 23 November 2005. Nafan was deliberately not given notices of Annual General Meeting to avoid the majority shareholders from raising their funds, to change the number of directors and for declarations of dividend. Nafan requested Muthu to provide copies of various litigations in respect of Calyon Bank, however, Muthu failed to give these documents. Instead, Muthu persisted in his baseless allegations that Nafan was forcing him to settle with ::: Uploaded on - 31/10/2015 ::: Downloaded on - 01/11/2015 00:00:20 ::: bsb 16 COAPPL21.15+5.doc Calyon Bank. When Nafans nominee directors came to know that Muthu had held a meeting without notice to them, they thought it necessary to appoint alternate directors. It was felt that the Company Secretary be appointed to maintain proper records and to avoid holding any meeting without notice to the Directors outside India.

(xi) A notice for Board meeting was issued on 4 May 2006 by Chairman of SAF Yeast. It was to be held on 23 May 2006 at Paris, as Lucian Lesaffre's health did not permit him to travel to India. It was for appointment of alternate directors and company secretary.

On 10 May 2006, Muthu informed that he was unable to attend due to his father's ill health and the atmosphere was not conducive because of the disputes. On 11 May 2006, Alain Laloum informed Muthu and other Directors to attend by telephonic conference. By letter dated 17 May 2006, Muthu threatened that the action of Nafan was a criminal contempt, as it was an interference with judicial proceedings. By letter dated 22 May 2006, Alain Laloum made it clear that the meeting was only for alternate Directors and Company Secretary and it had nothing to do with the dispute with Calyon Bank. In spite of the same, SAF Yeast, upon instructions of Muthu, filed a criminal contempt petition against the nominee Directors of Nafan. The petition was filed by one employee of SAF Yeast and not by Muthu. There was no order of restraint by any Court and the meeting of the Board of Directors was held as scheduled on 23 May 2006 at Paris. Four nominee Directors of Nafan attended the meeting and unanimous resolution was passed ::: Uploaded on - 31/10/2015 ::: Downloaded on - 01/11/2015 00:00:20 ::: bsb 17 COAPPL21.15+5.doc for alternate Directors for four nominee Directors of the Petitioner pursuant to Article 43 of the Articles of Association and Participation Agreement. The fact that Muthu did not attend the meeting did not make any difference, as the resolution would have in any way been passed by majority and in view of the casting vote.

On 28 May 2006, Muthu wrote a letter making incorrect and false allegations against the nominee Directors of Nafan that was replied to. Minutes of Board meeting were circulated on 19 June 2006.

Muthu wrote to alternate Director threatening him with criminal contempt to dissuade him from acting as an alternate Director, who later on succumbed to the pressure, and resigned. Muthu continued to make baseless allegations and threatening the alternate Directors.

(xii) On 14 July 2006, an application was made by Alain Laloum and Lesaffre and others seeking exemption from personal appearance which was rejected by the High Court of Allahabad where the contempt proceedings were pending. A Special Leave Petition was filed in the Apex Court and the Apex Court by order dated 17 July 2006 directed dispensation of personal appearance. A senior advocate on behalf of SAF Yeast opposed the Special Leave Petition, and even requests for adjournments were opposed. Meetings were held between the parties. Heads of Agreement were entered into on 14 August 2007.

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Registrar, Pune as to why action should not be taken for non-filing of annual returns and balance sheet for the year ending 31 March 2006 to 31 March 2008. A notice for calling a meeting at Brussels or Geneva was sent to Muthu. In the meanwhile, Alain Laloum informed that he had been induced to sign some papers by Muthu for their Montreux (Switzerland) and pursuant to that; he has received some valuation made by Sharp & Tannan. The valuation had no sanctity and validity and it was just a scrap of paper. Nafan had not called it and therefore it was to be ignored. On 3 May 2009, Muthu made the usual allegations and referred to a Memorandum of Understanding (MOU) allegedly signed by Lesaffre Group. On 28 May 2009, Muthu again sought to rely on the alleged MOU, which was not signed by Nafan for sale of its shares. If the MOU were to be produced, Nafan would raise and plead its objections.

(xiv) It appears that, in the light of notice of meeting on 29 May 2009 at Paris, alleged meeting of Board of Directors was shown to be held in Mumbai on 25 May 2009, without notice. It was alleged that the deposit was made with SAF Yeast for alleged value of shares in accordance with Article 18 of Articles of Association and Nafans name was struck off from the Members Register and the name of someone from Muthu Group was entered. Each share was valued at `4315/-. Such valuation was fraudulent and ridiculously low and the true and fair valuation would be at least 18 million to 20 million Euros. The valuation was clearly fraudulent and arrived ::: Uploaded on - 31/10/2015 ::: Downloaded on - 01/11/2015 00:00:20 ::: bsb 19 COAPPL21.15+5.doc at in collusion by Muthu with Sharp & Tannan. Nafan was willing to straightway pay double of the alleged fair value of `4,315/-.

(xv) The deletion of Nafans name from members register was fraudulent and void ab initio and the alleged M.O.U. had no sanctity. Muthu Group could not unilaterally take law into its own hands. Muthu Group committed fraud, mismanagement, and oppression by deleting the name of Nafan from the statutory records.

(xvi) The Board meeting dated 29 May 2009 as scheduled was held at Paris. Denis Lesaffre and Ms. Corinne Wisniewski were appointed as Additional Directors, along with some other Directors. The issue holding of alleged Board meeting on 25 May 2009 as communicated by Muthu and the deletion of name of Nafan were taken up. It was resolved that since nominee Directors of Nafan received no notice of alleged meeting of 29 May 2006, such meeting, if held, was void. The deletion of Nafans name from members register was non-est. The steps taken by the Muthu Group, and Muthu in particular were oppressive, fraudulent, unjust, and unfair. They had acted contrary and against the Articles of Association and the Participation Agreement of SAF Yeast. They acted in breach of fiduciary duty. Nafan had lost confidence in Muthu Group and since SAF Yeast essentially have been a quasi- partnership between two groups; Nafan was no longer in position to carry on business with the Muthu Group as a business partner.

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8. Nafan prayed for following reliefs:-

(a) To pass an order thereby directing the Respondent Nos.1 to 6 to rectify the Register of Members (ROM) of the Respondent No.1 Company by inserting name of the Petitioner in relation to 80722 shares held by the Petitioner.

(b) To pass an order terminating the appointment of the Respondent No.2 as Managing Director and the Respondent No.3 as Joint Managing Director with immediate effect and remove them from the Board without prejudice to the rights of the Respondent No.1 Company to appoint any professional Managing Director.

(c) To pass an order removing the Respondent No.2 to Respondent No.4 as directors and/or any other nominee directors of the Respondent No.2.

(d) To pass an order directing that the board of Respondent No.1 Company be reconstituted at a suitable general meeting of its shareholders.

(e) To pass an order declaring Articles 14 to 18 of the Articles of Association of the Respondent No.1 Company as null and void.

(f) To pass an order thereby directing the Respondent Nos.2 to Respondent No.6 to sell the shares held by them in Respondent No.1 Company to the Petitioner and/or its nominees at a value which is double the value relied on the Respondent No.2 i.e. `8,630/- per share.

Reply by Sharp & Tannan

9. Sharp & Tannan as the Respondent No.7 in the petition, filed its reply on 11 August 2009 contending briefly, as follows:

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bsb 21 COAPPL21.15+5.doc The allegations made against Sharp & Tannan, statutory auditors are baseless and denied. The SAF Yeast furnished a copy of the MOU dated 29 January 2009 to the statutory auditors. It was recorded in the memorandum that Muthu Group would buy shareholding in Nafan and SAF Yeast and fair valuation is to be done by the auditors. Since Sharp & Tannan were the statutory auditors, after request was made to carry out the valuation, Sharp & Tannan issued certificate of valuation on 9 February 2009. Since there was an urgency, the valuation report was prepared expeditiously. It was forwarded to Laloum under cover of its letter dated 10 February 2009.

10. In response to the query raised by Foreign Exchange Department of Reserve Bank of India, Sharp & Tannan confirmed that it had followed Controller of Capital Issues ( CCI) guidelines for valuation of equity shares of the Company. It is incorrect to state that the valuation is a scrap of paper, without sanctity and validity. It is denied that the valuation is fraudulent or ridiculously low or there has been any collusion. It is denied that the valuation was carried out to cause wrongful loss to Nafan and give advantage to the Muthu Group.

11. Sharp & Tannan has nothing to do with the dispute, as it was never a party to any decision for deletion of the name of Nafan from the members register.

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12. On 25 March 2010 Muthu on behalf of himself and respondent Nos.3 and 4 filed a reply. They took a stand that the correct facts were suppressed from the Board and sought to place their version of the dispute. Allegations were denied and following contentions, in short, were taken:

(i) Muthu is a Mechanical Engineer with 45 years' experience in production, distribution, and use of yeast in baking and production of alcohol. He was instrumental in setting up a brewery and a yeast factory for his past employer - Shaw Wallace & Co. He met Laloum in May 1980 at an exhibition and Laloum showed interest in setting up a factory in India since he had connections with India. He was impressed with Muthu's knowledge. Lasaffre Group had no experience of manufacturing yeast outside of Europe or any experience of using 100% yeast, and of the Indian conditions. They, therefore, had no option but to tie up with someone like Muthu. A joint venture was formed on 6 June 1981. SAF Yeast was incorporated on 12 August 1981. There were three Directors, Muthu, B.B. Paymaster, and Lucian Lesaffre. Muthu was the Managing Director right from the inception. It was the obligation of the Lesaffre Group to provide technical assistance, which they failed to do.

::: Uploaded on - 31/10/2015 ::: Downloaded on - 01/11/2015 00:00:20 ::: bsb 23 COAPPL21.15+5.doc (ii) Muthu single handedly set up a factory at Chiplun,

without any assistance from Lesaffre. He raised loans from various banks and gave personal guarantees. Lesaffre Group did not give any such guarantee. When the factory became functional, it was found that strength of yeast given by Lesaffre was unsuitable and Lesaffre had rendered no technical assistance or advise. Muthu made efforts to get the correct strength. As the factory at Chiplun progressed, a second factory was set up at Sandhila through efforts of Muthu. The assertion of Nafan that the name SAF comes from Lesaffre is not correct. The participation agreement dated 22 March 1991 was not to be acted unless the clauses were consequential to the Articles of Association. The participation agreement was never in accordance with the Articles of Association.

(iii) The participation agreement was never acted upon and the parties always acted in accordance with the Articles of Association. Several Board meetings were held in India when none of the Lesaffre nominees attended and in spite of this position, the decisions were accepted. This was because Articles of Association clearly stipulated that for Board meeting held in India, there is no requirement to give notice to the Directors based outside India.

(iv) The valuation of equity shares of SAF Yeast was carried out by M/s. Sharp & Tannan in January 1992 and fair valuation as on 31 March 1991 was `237 per share. The shareholding of ::: Uploaded on - 31/10/2015 ::: Downloaded on - 01/11/2015 00:00:20 ::: bsb 24 COAPPL21.15+5.doc Lesaffre was increased to 51% around 1992-93 pursuant to further issue of the capital by SAF Yeast. Consequently, shareholding in SAF Yeast underwent a change and share of Muthu Group was reduced to 49%. A financial and technical collaboration agreement was executed on 19 March 1993 in furtherance of the agreement dated 19 October 1981. This agreement dealt with dividend by SAF Yeast to Lesaffre Group. The Government of India through Ministry of Industries approved increase of the shareholding of Lesaffre in SAF Yeast from 40% to 50% and certain conditions regarding foreign exchange dividend payment were laid down. Sometime in the year 1996, Lesaffre requested SAF Yeast to obtain molasses from one Ganesh Benzoplast for exporting it to Lesaffre Group. Certain dispute arose between SAF Yeast and Ganesh Banzoplast. Arbitration proceedings were filed. Initially, the Arbitrator gave an award in favour of SAF Yeast, directing Ganesh Benzoplast to release molasses to one M/s. NSC Estates Pvt. Ltd. M/s. NSC Estates Pvt. Ltd., on 31 January 1997 assigned molasses in favour of SAF Yeast pursuant to an export contract. It was on the condition that NSC Estates Pvt. Ltd. would be liable to make good the loss. SVG Amsterdam, a Dutch company was to make payment for the export contract under a letter of credit by Meespierson NV Bank. Calyon Bank, which was completely aware of the terms of the contract, agreed to act as an Advisor and Negotiator for the export transactions.

(v) SAF Yeast supplied molasses as per the purchase order ::: Uploaded on - 31/10/2015 ::: Downloaded on - 01/11/2015 00:00:20 ::: bsb 25 COAPPL21.15+5.doc

and letter of credit dated 4 February 1997. SAF Yeast raised an invoice of US $ 5,59,621.92. Calyon Bank on 24 February 1997, after satisfying itself with the documents, issued a credit advice in the account and credited US $ 5,54,638.99, minus the commission in the account of SAF Yeast. Calyon Bank wrote to SAF Yeast on 4 March 1997, enclosing a telex message of Meespierson NV, stating that an amount of US $ 1,01,531.25 was being deducted as demurrage charges and an amount of US $ 4,58,040.67 was being paid under letter of credit.

(vi) Lesaffre transferred its entire shareholding in SAF Yeast through Nafan. J.L. Meurant on behalf of Lesaffre informed SAF Yeast and Muthu of the transfer and request was made to SAF Yeast to take all necessary legal steps to register the transferred shares.

(vii) Calyon Bank filed a civil suit, which was, transferred to Debt Recovery Tribunal, against SAF Yeast for recovery of an amount approximately, `45.76 lacs including interest. Prior to filing a suit, the Calyon Bank issued the caution notice against SAF Yeast, Muthu, and Pay Master to the State Bank of India and Indian Bank Association. The State Bank of India circulated the caution notice widely to all their branches across the country. This caused serious damage to the reputation of SAF Yeast. The Calyon Bank thereafter proceeded to misappropriate about Rs.13.79 lacs and did not permit SAF Yeast to withdraw its funds even though it filed a suit for Rs.45.76 lacs, falsely claiming it to be adjusted against ::: Uploaded on - 31/10/2015 ::: Downloaded on - 01/11/2015 00:00:20 ::: bsb 26 COAPPL21.15+5.doc interest.

(viii) A criminal complaint was filed by SAF Yeast against Calyon Bank for the misappropriation. Chief Judicial Magistrate, Hardoi (UP) issued process and F.I.R. was also registered pursuant to orders of the Magistrate and after investigation, the police filed a charge sheet against the officials of Calyon Bank and the Chief Judicial magistrate took cognizance thereof.

(ix) The appeal came up for hearing before the Debt Recovery Appellate Tribunal on 14 July 2003. The appeal was filed against the interim order passed by the D.R.T. in the application filed by the Calyon Bank against SAF Yeast. The Debt Recovery Appellate Tribunal passed strictures regarding the conduct of Calyon Bank, terming it as blameworthy. Thereafter the Debt Recovery Tribunal, on 1 April 2004 decided the proceeding against the Calyon Bank.

(x) On 14 April 2005, a meeting of the nominee Directors of Nafan and Muthu was held to discuss the dispute between Calyon Bank and SAF Yeast. Thereafter, in the Board meeting held on 26 July 2005, the minutes of the meeting dated 14 April 2005 were confirmed. In the meeting of 20 September 2005, the minutes of the meeting dated 26 July 2005 were confirmed. Again, a meeting was held on 30 October 2005, Alain Laloum attended it. Even in this meeting also, the minutes of 26 July 2005 along with ::: Uploaded on - 31/10/2015 ::: Downloaded on - 01/11/2015 00:00:20 ::: bsb 27 COAPPL21.15+5.doc 20 September 2005 were confirmed. In this meeting, the Annual Accounts and Directors reports were adopted, also holding of the Annual General Meeting for the year ending 31 March 2005 was approved, and Alain Laloum signed it.

(xi) Laloum, sometime at the end of the year 2005 when he visited India, carried with him a Deed of Settlement, which Nafan and Lesaffre wanted to SAF Yeast to sign with Calyon Bank.

Lesaffre and Nafan, by virtue of their shareholding were forcing SAF Yeast to settle this dispute in a particular manner. Lucien Lesaffre on behalf of Nafan objected to the minutes of the meeting dated 14 April 2005 and 4 November 2005 prepared by Muthu. Lucien Lesaffre stated that the representative of the majority shareholder did not approve the manner in which the minutes were drafted. Muthu sent an e-mail on 13 November 2005 denying the contentions. He pointed out that it was unfortunate that in spite of the fact that SAF Yeast was struggling against Calyon Bank, Nafan and Lesaffre were not giving any support, on the contrary, they were forcing SAF Yeast to settle with Calyon Bank on unreasonable terms.

(xii) Muthu wrote to Alain De Gouy on 21 November 2005 complaining about the attempts of Lesaffre to force SAF Yeast in settling with Calyon Bank, in terms proposed by it. Muthu asserted that, in the meeting of 14 April 2005, Lucien Lesaffre had stated that SAF Yeast would have to accept the proposal for settlement. It ::: Uploaded on - 31/10/2015 ::: Downloaded on - 01/11/2015 00:00:20 ::: bsb 28 COAPPL21.15+5.doc was further stated that Lesaffre and Calyon Bank were proposing to settle the terms without consulting SAF Yeast or its Directors. Muthu made the grievance that, throughout the dispute with Calyon Bank, Nafan and Lesaffre were supporting Calyon Bank and not SAF Yeast. Muthu also pointed out that Nafan and Lesaffre were threatening to use their majority shareholding to achieve its objects of forcing SAF Yeast to settle with Calyon Bank. Muthu also wrote to Denis Lesaffre reminding him that the Directors of SAF Yeast owed fiduciary duty to SAF Yeast and not to Calyon Bank. He asserted that it is not correct that Lesaffre sought to benefit from its relationship with Calyon Bank at the cost of SAF Yeast. He also stated that the Muthu Group was open for fair settlement with the Calyon Bank.

(xiii) On 8 December 2005, Lucien Lesaffre wrote to Muthu that he being Managing Director should not mix shareholders issues and should separately address them to Nafan. Lucien Lesaffre differed from Muthu regarding the minutes and sought to prepare a new draft reflecting the correct proceedings and the decision taken. Alain De Gouy also wrote to Muthu that shareholders of SAF Yeast must take up the issues independently.

He mentioned that Calyon Bank was also willing to increase the amount of compensation. Alain De Gouy stated that they would wait for Muthu's response as regard the deed of settlement. Muthu again wrote on 3 January 2006 to Alain De Gouy stating that in the dispute of SAF Yeast with Calyon Bank, Lesaffre was taking the side ::: Uploaded on - 31/10/2015 ::: Downloaded on - 01/11/2015 00:00:20 ::: bsb 29 COAPPL21.15+5.doc of Calyon Bank.

(xiv) On 2 March 2006, Muthu set out his grievance in a letter. He stated that Nafan was trying to force SAF Yeast in accepting the Calyon Bank's settlement proposal. Muthu reiterated that the minutes of the meeting dated 14 April 2005 were correct and they were confirmed in the subsequent meeting. Muthu placed on record the intimidation on the part of Nafan's Nominee Director to force Muthu for signing the deed of settlement with Calyon Bank. It was pointed out that though the Calyon Bank may address a letter to the State Bank of India, it was still up to the State Bank of India to delete the blacklisting of SAF Yeast. Muthu stated that there was a loss of confidence between Nafan and Lesaffre on one hand and Muthu Group on the other. He suggested that Muthu Group was willing to buy Nafan's shareholding in SAF Yeast. He also addressed an e-mail to Alain De Gouy and Lucien Lesaffre complaining of illegal and unethical conduct of the Calyon Bank and the incalculable hardship caused by it to SAF Yeast. He again reiterated that Nafan and Lesaffre were consistently siding with Calyon Bank. On 12 April 2006, Nafan and SAF Yeast asked Muthu for minutes of general meeting since 2003, details of transfer of shares and present list of shareholders. Muthu, by reply dated 19 April 2006 stated that, in view of the situation that developed and the correspondence, he was not responding to the said request.

(xv) On 5 May 2006, Alain Lesaffre replied to Muthu ::: Uploaded on - 31/10/2015 ::: Downloaded on - 01/11/2015 00:00:20 ::: bsb 30 COAPPL21.15+5.doc

denying that there were any pressurizing or forcible views of majority shareholders and reiterated stand of Nafan in settling the dispute with Calyon Bank in such a manner that would benefit SAF Yeast. Laloum also stated that there was no evidence that SAF Yeast was finding it difficult to raise finance through banks and in fact, it appeared that SAF Yeast was doing well. Laloum also asserted that offer of USD one million made by Calyon Bank, as a compensation was a fair offer. Laloum objected to the meeting of 26 July 2005 without notice to nominee Directors of SAF Yeast and approval of the minutes of the meeting dated 14 April 2005. Laloum sought appointment of alternate Directors in India and to convene a Board meeting in Paris. Laloum also stated that is is more than 15 months since a general meeting was held which was contrary to Articles of Association. Muthu wrote back on 10 May 2006 stating that it will not be possible for him to attend the meeting at Paris due to personal difficulty. He also pointed out that the atmosphere resulting due to the exchange of correspondence was not conducive for meaningful Board meeting to be held.

Around this time, Muthu Group had received various caveats filed by Nafan and Lesaffre Group. Laloum asked for a dial-in- conference with Muthu and other directors. In spite of the e-mail written by Muthu to Laloum, Alain De Gouy, and Lucien Lesaffre stating that there were genuine difficulties to attend the Board meeting at Paris, the Directors of SAF Yeast in France decided to go ahead with the meeting. It was pointed out that meeting by teleconferencing is not permitted in Indian law. He also pointed ::: Uploaded on - 31/10/2015 ::: Downloaded on - 01/11/2015 00:00:21 ::: bsb 31 COAPPL21.15+5.doc out that, such meeting would be illegal and it would be nothing but an attempt to force a settlement with Calyon Bank.

(xvi) SAF Yeast, on 29 May 2006 filed a contempt petition in Allahabad High Court, Lucknow Bench, against Calyon Bank and the nominee directors of SAF Yeast from France. Alain Laloum on 22 May 2006 informed Muthu that the Board meeting to be held on 23 May 2006 would not be illegal. Muthu Group replied to Alain Laloum placing on record their disapproval in respect of appointment of Company Secretary and an appointment of alternate directors. The vote of disapproval was communicated without prejudice to their stand that the meeting itself would be illegal. On 19 June 2006, Muthu Group received the copies of minutes of meeting dated 23 May 2006. In the minutes, the Indian directors were shown as absent and it was stated that even if the votes in respect of the resolution were four in favour and four against that the resolution, Laloum who occupied the Chair voted exercising his casting vote in favour of the resolution. On 23 June 2006, Muthu informed the alternate directors about pending criminal proceedings and the attempt of Lesaffre and French directors of SAF Yeast to force SAF Yeast into accepting the settlement with Calyon Bank. Muthu also addressed an e-mail with a copy to Alain Laloum, copy to Lucien Lesaffre, Alain de Gouy, and Maurice Lesaffre. In spite of receiving the minutes of 23 May 2005, a month late, he reiterated his objection to the meeting and pointed out that it is illegal. He also pointed out that the alternate directors ::: Uploaded on - 31/10/2015 ::: Downloaded on - 01/11/2015 00:00:21 ::: bsb 32 COAPPL21.15+5.doc were appointed, without circulating their qualifications and credentials to occupy the position. On 7 May 2006, a meeting took place between Muthu and Lucien Lesaffre, wherein it was agreed to work together on 50:50percentage basis and signing a Heads of Agreement, which could culminate into a shareholders agreement.

Again, a meeting was held in December 2006 between Lucien Lesaffre and Muthu in London. On 24 September 2007, the Lesaffre Group and Muthu Group finalized the Heads of Agreement setting out certain broad terms and as to how their relationship in SAF Yeast would continue. It was agreed that the shareholding of both the groups be 50:50percentage. The agreement, however, did not fructify into final agreement. Thereafter correspondence ensued between Alain Laloum, Lucien Lesaffre with Muthu between October 2007 to November 2008, in which it appeared that the relation between the parties had not deteriorated further.

(xvii) On 29 April 2008 Alain de Gouy resigned from the Board of Directors and Lucien Lesaffre resigned on 6 June 2008.

Lesaffre appointed a new group Managing Director Jean Louis Meurant. Meetings were held between Muthu and Alain Laloum between February 2008 to August 2008 to resolve the differences, at Montreux, Geneva, and London. A meeting was held in Montreux in February 2008 on invitation of Alain Laloum where several modes of resolution were discussed. Muthu made it clear that his shareholding was not for sale.

::: Uploaded on - 31/10/2015 ::: Downloaded on - 01/11/2015 00:00:21 ::: bsb 33 COAPPL21.15+5.doc (xviii) Laloum had been to Algeria for resolution of some issues on behalf of Lesaffre. On 10 January 2009, Laloum

telephoned Muthu to come to Montreux to resolve the dispute.

Laloum made travel arrangement and sent text messages to Muthu. A meeting was fixed on 23 January 2009 and text messages were exchanged. Muthu was received at Geneva Airport and was taken to Montreux Palace Hotel. At around 7.30 p.m. Laloum telephoned Muthu, and came to Muthu's room for dinner and agreed to meet next morning. On 23 January 2009 Laloum and Muthu had a meeting in the hotel. Before the meeting, Muthu spoke to J.L. Meurant on Laloum's phone. Muthu reiterated that Muthu Group is not interested in selling its shareholding. Laloum stated that Lesaffre Group should make an offer of sale of their shares in SAF Yeast. It was agreed that, to arrive at a fair value of shares, Articles of Association would be considered. Articles were faxed from the head office of SAF Yeast to the Conference Department of the hotel. After the Articles were read, Muthu agreed to suggestion made by Laloum that Muthu Group would pay Lesaffre Group a price of shares as determined by the Auditors in accordance with Article 17. At the instructions of Laloum, Muthu wrote the MOU. Laloum carried out corrections to the document in his own handwriting and initialed them. Immediately on signing the MOU, Laloum informed Meurant who also spoke to Muthu and thanked him for long association with the Lesaffre Group. Alain Laloum also forwarded a copy of the MOU on 24 January 2009 to Meurant, which Nafan had suppressed.

::: Uploaded on - 31/10/2015 ::: Downloaded on - 01/11/2015 00:00:21 :::

bsb 34 COAPPL21.15+5.doc (xix) A meeting of SAF Yeast was held on 29 January 2009 in Mumbai where Muthu tabled the MOU before the Board. The MOU was taken on record as a notice in writing under Article 15 and it was resolved to refer the issue of fair value to Sharp & Tannan as per Article 17 of the Articles of Association. Laloum, on 7 February 2009, sent a telex message to Muthu stating that he had returned home and was awaiting copy of the valuation report.

(xx) SAF Yeast requested Sharp & Tannan on 9 February 2009 to work out the fair value of equity shares of SAF Yeast as on 31 March 2008. Sharp & Tannan carried out valuation exercise and valued the equity shares of SAF Yeast at `4315/- per share. Laloum telephoned Muthu on 10 February 2009 about the valuation report and Muthu informed him that Sharp & Tannan would send it shortly. Thereafter Sharp & Tannan sent their certificate of valuation on 11 February 2009 to Laloum with a copy to Meurant. Muthu sent an e-mail to Meurant with a copy to Laloum about the further steps taken pursuant to the MOU. Muthu tried to call Meurant on several occasions from 11 February 2009 to 18 February 2009 but Meurant was not available in the office. Laloum informed Muthu that Nafan could not locate the original share certificate. Between March and April 2009, Muthu took the matter of transfer of shares pursuant to the MOU and copy to Laloum and Corinne Wisniewski regarding the steps of process for completing the transaction.

::: Uploaded on - 31/10/2015 ::: Downloaded on - 01/11/2015 00:00:21 ::: bsb 35 COAPPL21.15+5.doc (xxi) On 3 May 2009, Muthu sent an e-mail to Denis Lesaffre

replying to the e-mail sent by Corinne Wisniewski dated 30 April 2009 and mentioned regarding several meetings and telephonic calls. Corinne Wisniewski replied and demanded meeting of Board of Directors of SAF Yeast. An issue was raised by Corinne Wisnieswski regarding letter from ROC, Pune. Muthu clarified that it was a non-issue at the registered office of SAF Yeast was at Mumbai and not within the jurisdiction of ROC, Pune, and the steps have been taken to close the file. Muthu also stated that the permission of the Reserve Bank of India was obtained in reference to the MOU and called upon Nafan to honour and abide by the MOU.

(xxii) In the meanwhile, the Apex Court disposed of the Special Leave Petition filed by the French Directors of SAF Yeast and official of Calyon Bank on 14 May 2009 and the matter was remanded to the Lucknow Bench, High Court of Allahabad. On 14 May 2009, Corrine Wisniewski wrote to the Directors of Muthu Group forwarding a notice dated 30 April 2009 calling for a meeting of Board of Directors at Paris on 29 May 2009. On 16 May 2009, Muthu wrote to SAF Yeast informed about the default of Nafan in respect of transfer of the shares pursuant to the MOU. Muthu called upon SAF Yeast to act according to the relevant provisions of the Articles of Association of SAF Yeast, particularly, Article 18 of the Articles of Association. He also called upon SAF ::: Uploaded on - 31/10/2015 ::: Downloaded on - 01/11/2015 00:00:21 ::: bsb 36 COAPPL21.15+5.doc Yeast to proceed to accept the consideration based on the certificate of valuation issued by Sharp & Tannan and complete the transfer. A legal opinion was obtained and the meeting of Board of Directors of SAF Yeast was held on 23 May 2009. It was resolved that SAF Yeast would create a separate bank account title "M/s. SAF Yeast Co. Pvt. Ltd. Shares Account" and the consideration in respect of transfer of shares would be deposited. K. Narsimhan, Vice President Finance of SAF Yeast was authorized to execute share transfer forms in terms of Article 18 upon receipt of consideration of `27,48,38,822/- for 80,772 shares held by Nafan. Muthu informed SAF Yeast that Laloum had informed him that original share certificates of Nafan were lost and called upon SAF Yeast to issue duplicate share certificate. SAF Yeast informed Narsimhan on 21 May 2009 of the decision taken in the meeting held on 23 May 2009 authorizing him to transfer the documents in the name of Nafan and in favour of A.M.Muthiah, Director. On 25 May 2009, Bank of India Shareholding Ltd. stamped nine unsigned share transfer forms. A letter of the same date of A.M. Muthiah to SAF Yeast was taken on record stating that he had paid the amount of `27,49,38,822/- as the purchase money for 80,772 shares. A letter from the Axis Bank of the same date confirmed that the amount was transferred from A.M.Muthiah's saving account to current account of SAF Yeast with Axis Bank. The four Indian directors of SAF Yeast attended the Board meeting. At the relevant time the record of share transfer were placed before it ascertaining that the amount was transferred. The Board of Directors considered the ::: Uploaded on - 31/10/2015 ::: Downloaded on - 01/11/2015 00:00:21 ::: bsb 37 COAPPL21.15+5.doc request of SAF Yeast as an agent of the Nafan for issuance of duplicate share certificate for 80,772 shares. The issue was discussed and not having found any adverse evidence, resolved to cancel the lost original share certificates and issue duplicate share certificates to enable issuance of duplicate share certificate to enable issuance of duplicate share certificate. The meeting was adjourned by 45 minutes.

(xxiii) After the duplicate share certificates were prepared, the duly executed share transfer forms were taken on record along with the duplicate share certificates. The share transfer forms were accepted and resolution was passed to transfer the shares in the name of A.M. Muthiah and accept him as a shareholder for the 80,772 shares. It was thus resolved to delete the name of Nafan as a shareholder from SAF Yeast. SAF Yeast, through Muthu informed Corinne on 28 May 2009 stating the steps taken pursuant to the MOU referring to previous correspondence and that the MOU has been implemented. Muthu informed of the Board resolution taken in the meeting dated 25 May 2009 after receiving purchase consideration for transfer of shares of Nafan. The letter also stated that the entry of Nafan has been removed from the register and the name of A.M. Muthiah has been entered. It was also stated that permission of Reserve Bank of India has been obtained and called upon Nafan to nominate a bank account for transfer of purchase consideration.

::: Uploaded on - 31/10/2015 ::: Downloaded on - 01/11/2015 00:00:21 ::: bsb 38 COAPPL21.15+5.doc (xxiv) The petition filed by Nafan suffers from suppression of

various materials and vital facts especially regarding execution of MOU and on this ground alone the petition requires to be dismissed. The petition is not maintainable, as the Nafan is not qualified to file the petition in terms of provisions of Section 399 of the Act. The petition is not filed bonafide. It lacks particulars of so-called inducement, fraud, and fabrication. The suppression of material facts in the petition cannot be covered in a rejoinder, the MOU dated 23 January 2009 is valid and binding, and Muthu Group pursuant to the MOU in accordance with the Articles of Association takes steps. The Board meeting held on 29 January 2009, 23 May 2009 and 25 May 2009 are valid and the resolutions passed are binding. No notice was required to be given to the nominee directors.

Reply by SAF Yeast

13. On behalf of SAF Yeast, reply was filed by Muthu being the Managing Director and authorized signatory, briefly as under:

(i) Petition ought to be dismissed, as Nafan is not a shareholder or member of SAF Yeast. Nafan/Lesaffre entered into binding MOU to transfer shares to Muthu Group on 23 January 2009, pursuant to a meeting. This MOU was entered into to end all pending litigations in the Apex Court and High Court of Allahabad, Lucknow Bench. The signing of the MOU by Laloum itself was ::: Uploaded on - 31/10/2015 ::: Downloaded on - 01/11/2015 00:00:21 ::: bsb 39 COAPPL21.15+5.doc notice to SAF Yeast of the same. After the execution of the MOU in a meeting of Board of Directors, the MOU was tabled as notice in writing under Article 15 of the Articles of Association. It was referred for issuance of fair value to statutory auditor. Nafan/Lesaffre did not take steps to execute the transfer of shares to Muthu Group. This constituted a default on the part of Nafan/Lesaffre and therefore SAF Yeast as a duly appointed agent was empowered under Articles of Association to act on behalf of Nafan/Lesaffre. After receiving the purchase money on/or on behalf of the Nafan, the shares were transferred. The participation agreement dated 22 March 1991 is not enforceable The issue involving the litigation between the SAF Yeast and Calyon Bank has been set out in the reply filed by Muthu, which is adopted.

Affidavit of Alain Laloum

14. On 10 June 2010, Alain Laloum filed his affidavit taking briefly the following contentions:

(i) In 2006, Muthu initiated proceedings in Allahabad High Court, Lucknow Bench, against Laloum and other nominee directors. Several discussions took place between Muthu and Lucian Lesaffre to resolve the dispute. Lucian Lesaffre and Muthu signed Heads of Agreement at London. After the Heads of Agreement were signed, they exchanged draft of redemption ::: Uploaded on - 31/10/2015 ::: Downloaded on - 01/11/2015 00:00:21 ::: bsb 40 COAPPL21.15+5.doc shareholder agreement. Muthu and Lucian Lesaffre agreed that their lawyers would discuss and finalize the agreement. Muthu was aware that neither Lesaffre nor Nafan will execute any agreement without first it drawn by their lawyers and placing it for approval before the Board, having been finally executed by Lesaffre family. Muthu was also aware that no policy decision, more particularly, a decision to exit from India would ever be taken without Lucian Lesaffre and Denis Lesaffre being involved and with approval of the Board of Lesaffre.

(ii) In January 2009, Muthu called upon Laloum and requested for a meeting. Muthu drew attention of Laloum to the petition pending before the Supreme Court. Though Laloum was confident that they had not committed any contempt, Muthu kept boasting about his connections with judiciary and considering the fact that some of the employees of Calyon Bank were prosecuted with, could not be taken lightly.

(iii) Laloum was to undergo hip surgery on 30 January 2009 and was unable to travel. Thereafter a meeting was fixed at the instance of Muthu at Montreux. Laloum met Muthu at Montreux Palace Hotel, which was close to residence of Laloum. It was agreed at the start of the meeting that it would be a final attempt to explore the settlement. As Muthu had travelled, long way to meet Laloum, Lesaffre felt obliged to Muthu. Muthu insisted on calling upon Articles of Association and got them faxed. He insisted on ::: Uploaded on - 31/10/2015 ::: Downloaded on - 01/11/2015 00:00:21 ::: bsb 41 COAPPL21.15+5.doc explaining all the terms on which he would purchase the shares of Nafan. Muthu suggested that, while relevant pages of Articles were arriving by fax, they should sign a memorandum so that whatever is to be put before Denis Lesaffre would be clear. Laloum suggested that Muthu should take lead in writing the document. Muthu wrote out the document. Laloum did not pay much attention to it, as it was his understanding that it was only his proposal to Denis Lesaffre. In that, light Laloum signed the proposal. After the meeting, Laloum informed Meurent that they had signed an understanding regarding proposal, which will be forwarded. It was never discussed in the meeting what are the consequences of the sale of shares. What was signed was not an agreement for sale of shares held by Nafan in any Company. Lesaffre family could only do this. Laloum enquired about the valuation because he wanted to know if it was worthwhile to follow up with Muthu's proposal.

When the valuation was received from Sharp & Tannan, Laloum was shocked at extremely low value. Laloum never informed about the loss of original certificates to Muthu.

Accounting Assignment (Part A) 2. a) The first focus of CSR for corporations such as JB Hi-Fi should be the environmental responsibility. Since, JB Hi-Fi is a business that sell products from consumer electronics to kitchen appliances; according to Caramela it would be expected of the corporation to provide a report outlining environmental efforts it takes to reduce and/or recycle electronic waste (2016, under “Environmental Effectiveness”). The second CSR would be the corporate philanthropy such as donations to charities and/or other organisations. The benefits could include the promotion of good public relation and possibility of attracting more employees and customers (Henderson et al., 2014). The third expected CSR would be the economic responsibilities. If a company does not generate profit, employees will lose jobs and it won’t be able to fulfil its other social responsibilities (Brusseau, 2011). The fourth CSR of JB H-Fi is the ethical responsibility of doing what is right even when not required by the letter or spirit of the law (Brusseau, 2011). By treating its customers fairly and ethically in cases such as product/service returns, JB Hi-Fi will be able to bring a strong brand image. b) The environmental and philanthropic responsibilities identified above were disclosed in JB Hi-Fi’s annual report. Page 14, “Environmental Statement” section of the report states that JB Hi-Fi has implemented a voluntary initiative to facilitate the return of used mobile phones by customers so that they can be recycled and reused. Under “Social Statement”, on page 15 of the report, JB Hi-Fi has a program called “Helping Hands”. It is a program which encourages its directors, executives and employees to donate to registered charitable organisations through payroll system. The three CSR initiatives disclosed in the report are Economic, Environmental and Social responsibilities. c) The three major theories for implementing CSR initiatives are “stakeholder management”, “corporate Legitimacy” and “enlightened self-interest”. Enlightened self-interest theory describes costs motivated by a desire to promote society’s best interest, but are also incurred in the hope of generating greater benefits for the business than the costs (Henderson et al., 2014). Companies implement this theory to promote a socially responsible image by donating charities or other organisations. Stakeholder theory suggests that an organisation is part of a broader environment with complex and dynamic relationships with its stakeholders (Henderson et al., 2014). Businesses undertake this theory to achieve its strategic achievements by meeting important stakeholder demands (Henderson et al., 2014). Corporate legitimacy theory is a generalized perception that entity’s actions are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs, and definitions (Suchman, 1995). Implementation of this theory assures the company’s continued survival and legitimacy, as long as its activities are consistent with society’s values (Henderson et al., 2014). “Helping hands” and “Change for Change” are initiatives that encourage employees and customers to make donations to charity organisations are indication that JB Hi-Fi has applied enlightened self-interest theory. An example of corporate legitimacy theory implementation is their “Australian Packaging Covenant” program that ensures the environmental impact from packaging is reduced, measured and understood. JB Hi-Fi’s annual response to Carbon Disclosure Project(CDP) suggests that they have applied stakeholder theory. Doing this could be one of the ways of increasing the number of shares bought, as CDP reports entity’s environmental action to investors. Reference list: 1. Henderson, S., Peirson, G., Herbohn, K., Artiach, T. and Howieson, B. (2014). Issues in financial accounting. 15th ed. Frenchs Forrest: Pearson Australia, pp.912-948. 2. Caramela, S. (2016). What is Corporate Social Responsibility. Retrieved from http://www.businessnewsdaily.com/4679-corporate-social-responsibility.html 3. Brusseau, J. (2011). The Business Ethics Workshop [EBL version]. Retrieved from http://catalog.flatworldknowledge.com/bookhub/1695?e=brusseauch13_s02#brusseau-ch01 4. Suchman, M. (1995). Managing Legitimacy: Strategic and Institutional Approaches. The Academy of Management Review, 20(3), pp.571-610.

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