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The Madras High Court on Monday dismissed appeals preferred by former AIADMK MP K.C. Palanisamy against an order of the Company Law Board (CLB) declaring two investors in his Cheran Enterprises Private Limited as the beneficial owners of 25 acres of property reportedly worth about ₹500 crore.
The court also confirmed the Board’s order directing the jurisdictional Registrar to register a sale deed vesting the property in favour of the investors if the former MP fails to execute the sale deed on his own.
Justice G. Jayachandran held that the former MP never made any genuine attempt to repay ₹75 crore invested by ORE Holding Limited of Mauritius and ₹4 crore by non-resident Indian Nandakumar Athappan of Singapore in 2004.
Therefore, now, the appellant could not resist the CLB’s 2015 order, passed in two execution petitions, declaring ORE Trust and Mr. Athappan as the beneficial owners of 17.15 and 7.80 acres of land belonging to Vasantha Mills, a subsidiary of CEPL, the judge also said.
Though it was argued on behalf of the former MP that the present value of the property was nearly ₹500 crore, whereas the principal and interest payable to ORE and Mr. Athappan was far less, the judge pointed out that the immovable property to be conveyed was not only for the money invested in 2004 but also for the investors to relinquish their rights in CEPL and its subsidiary companies and exit the company as desired by the former MP.
Exit scheme
The judge pointed out that it was the former MP who had approached the CLB in 2005 for framing an exit scheme, with respect to one of the investors, due to the differences that had arisen between him and the investors.
On the other hand, the investors had approached the Company Law Board seeking an investigative audit to determine the amount of money allegedly misappropriated by the former Member of Parliament.
While disposing of their petitions by a common order in 2008, the CLB directed the former MP to repay the money invested by the two investors with simple interest of 8% within 12 months from November 1, 2008. In the event of failure to repay the money within the stipulated time, he and his group companies were directed to convey the 25 acre property to the two investors.
Though the need to convey the property had arisen long ago, the former MP and his companions “had at no point of time shown any sign of complying with the first limb of the CLB’s order.” Instead, the matter was taken on several rounds of litigation before the High Court and the Supreme Court before the investors could finally approach the CLB once again in 2011 to execute its 2008 orders. The Board allowed the execution petitions in December 2015 and hence the present company appeals were filed in 2016.
Finding no reason to allow the appeals, Justice Jayachandran said: “In a matter involving an exit scheme framed under the Companies Act, one party is eased out from the management of the Company for a consideration. In such circumstances, the money invested is not the sole criteria for fixing the quid pro quo.
“There are several other factors that come into play to ascertain the quid pro quo to ease out the deadlock for smooth exit. Weighing the money invested in the year 2003-2004 at one hand and the present value of the property at another hand is not fair or equitable test for proportionality.”
The judge also wrote: “This court is of the view that these appeals are yet another act of oppression exercised by the appellants (the former MP and others) against the respondents, by re-agitating the same cause in a different form through Vasantha Mills Limited to delay the inevitable.”
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