Moot Court Memo

-PRELIMINARIESTEAM CODE:
RAM MANOHAR LOHIA NATIONAL LAW UNIVERSITY, GRAND-INTRA 2016

Before,
THE HONOURABLE SUPREME COURT OF INDIA
U/Art. 136 OF THE CONSTITUTION OF INDIA
COMPETITION
COMMISSION
INDIA.
OF
..A PPELLANT
V.
SHOPKEPPAA.IN
PVT.
LTD.
&
OTHRS..
RESPONDENT
[SLP (C) 1234 O F 2014]
ALONG WITH
CONSTITUTIONAL WRIT JURISDICTION U/ART 32
MR. MOHAN GROVER & ORS.......................................................................P ETITIONER
V.
SPECIAL COMMITTEE, SANYASTHAN LEGISLATIVE

ASSEMBLY...................R ESPONDENT
[W.P. (C) 2/2015]
-MEMORIAL
FOR THE
APPELLANT -
-PRELIMINARIESON SUBMISSION TO THE SUPREME COURT OF MAHADESHA

MEMORIAL FOR THE PETITIONER
T ABLE OF CONTENTS
1. List of Abbreviations........................................................................................................iv
2. Index of Authorities..........................................................................................................v
3. Statement of Facts...........................................................................................................viii
4. Statement of Jurisdiction.................................................................................................xii
5. Arguments Presented..................xiii
6. Summary of Arguments...xv
7. Arguments Advanced........................................................................................................1
I. WHETHER THE TRANSFER OF SHARES AS PART OF DISINVESTMENT IS
MALA FIDE AND VIOLATIVE OF THE MOU AS WELL AS THE RELEVANT
PROVISIONS OF THE COMPANIES ACT, 1956? ................................................1
I.1. Transfer of Shares as Part of Disinvestment Is Mala Fide........................1
I.1.1. Disinvesting and At the Same Time Bringing In Funds..1
I.1.2. Governments Intention was to Obliterate RCCPs Contribution
to the Project.......................................................................................1
I.2. Violative of the Memorandum of Understanding......................................2
I.3. Transfer of Shares as Part of Disinvestment Is violative of the Provisions
of the Companies Act, 1956........................................................3
I.3.1. Violation of Section 397.............................................................4
I.3.2. Violation of Section 398.............................................................6
-MEMORIAL FOR THE APPELLANT-
-PRELIMINARIESII. WHETHER THE DECISION OF THE RCCP IN VETOING THE CDR SCHEME
IS CONTRARY TO THE BEST INTEREST OF THE COMPANY? .......................8
III. WHETHER THE CLAUSES IN THE MOU CONFERRING SPECIAL RIGHTS
ON THE APPELLANT ARE VALID? ....................................................................10
III.1. Appellant had some Definite Legitimate Expectations in joining
VSPL..............................................................................................................10
III.2. Section 36: Binding Force of the Articles of Association......................11
I. WHETHER, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, IT WAS
PROPER TO EXERCISE THE LEGISLATIVE PRIVILEGES UNDER ARTICLE
194 (3) OF THE CONSTITUTION? .......................................................................14
I.1.Violation of Principles of Natural Justice...14
I.2. Legislative Privileges Dont Include the Power to Expel a Member.........14
I.2.1. All Powers of House of Commons cant be claimed by the State
Legislature.........................................................................................15
I.3. Expulsion was not justified.....................................................................16
I.3.1. Acts of the Petitioners were not relatable to Legislative
Proceedings.......................................................................................16
I.3.2. Alleged Misconduct was Executive Act...................................17
I.4. Indiscriminate Usage of terms like unbecoming and lowering the
dignity of the House...18
II. WHETHER IT WAS PROPER FOR THE SANYASTHAN LEGISLATIVE
ASSEMBLY TO TAKE UP, AS A MATTER OF BREACH OF PRIVILEGE, AN
INCIDENT THAT OCCURRED DURING ITS PREVIOUS TERM? .18
II.1. All the Pending Motions of the Previous Term Lapsed on its
Dissolution...................................................................................................18
-PRELIMINARIESII.2. Alleged Misconduct had no effect of obstructing the business of the new
term of the Assembly...................................................................................20
8. Prayer...............................................................................................................................21
LIST OF ABBREVIATIONS
ABBREVIATION
AIR
Anr.
Art.
CDR
CLB
Co.
Ed.
Govt.
H&G
H & G (M)
HC
Honble
i.e.
J.
Ker.
Ltd.
Mad.
MOU
No.
P.
Ors.
RCC
RCCP
SC
SCC
SCR
Sec.
SIDC
UOI
v.
Viz.
Vol.
VSPL
DEFINITION
All India Reporter
Another
Article
Corporate Debt Restructuring
Company Law Board
Corporation
Edition
Government
Heppleworth and Grimes
H & G Holdings (Mauritius)
High Court
Honourable
That is
Justice
Kerala
Limited
Madras
Memorandum of Understanding
Number
Public
Others
RCC Group of Companies
RCC Ports Ltd.
Supreme Court
Supreme Court Cases
Supreme Court Reporter
Section
Sanyasthan Infrastructure Development Corporation
Union of India
Versus
Namely
Volume
Vyasanagar Sea Ports Ltd.
-PRELIMINARIES-
INDEX OF AUTHORITIES
CASES:
1.
2.
3.
4.
5.
6.
7.
Sub-Committee on Judicial Accountability v. Union of India AIR 1992 SC 220.........2

Dinkar Anna Patil v. State of Maharashtra AIR 1999 SC 152.......................................3
K. Narayanan v State of Karnataka AIR 1994 SC 55....................................................3
Manohar Lal Sharma v Union of India (2013) 6 SCC 616............................................3
Life Insurance Corporation of India v Escorts Ltd. [1986] 1 SCC 264.........................4
London School of Electronics Ltd., In re [1985] BCLC 273.........................................4
V.S. Krishnan v. Westfort Hi-Tech Hospital Ltd. [2008] 83 SCL 44/142 Comp Cas
235 (SC).........................................................................................................................5
8. Re Posgate & Denby (Agencies) Ltd. 1987 BCLC 8 (Ch D)........................................6
9. Ebrahimi v. West Bourne Galleries Ltd. [1972] 2 All ER 492......................................6
10. Gurmeet Singh v. Polymer Papers Ltd [2005] 123 CC 486...........................................6
11. Bhubaneshwar Singh v Kanthal india Ltd. (1986) 59 Com Cases 46 (Cal.)..................6
12. Bhagirath Agarwala v Tata Properties (P.) Ltd [2002] 39 SCL 493..............................6
13. Elder v Elder & Watson Ltd. [1952] SC 49...................................................................6
14. Suresh Kumar Sanghi v Supreme Motors Ltd. [1983] 54 Comp Cas 235 (Delhi) ........7
15. Pradip Kumar Sarkar v Luxmi Tea Co. Ltd. [1990] 67 Comp Cas 491 (Cal) ..............7
16. Kamal Kumar Dutta v Ruby General Hospital Ltd. [2006] 70 SCL 222.......................7
17. Bhaskar Stoneware Pipes (P.) Ltd. v Rajinder Nath Bhasker [1988] 63 Comp Cas 184
(Delhi)............................................................................................................................8
18. Aidqua Holdings v Tamil Nadu Water Investment Company Ltd. 2014 SCC OnLine
Mad 234.........................................................................................................................9
19. Sangramsinh P.Gaekwad v Shantadevi P. Gaekwad (2005) 11 SCC 314...................10
20. M.S.D.C. Radharamanan v M.S.D. Chandrasekara Raja (2008) 6 SCC 750...............10
21. Smt. Claude-Lila Parulekar v. M/S. Sakal Papers Pvt. Ltd. & Ors (2005) .................11
22. IL and FS Trust Co. Ltd and Anr. v. Birla Perucchini Ltd. and Ors 2003 (3) Bom CR
334................................................................................................................................11
23. Bhavnagar University v. Palitana Sugar Mills Private Limited (2003) 2 SCC 111.....11
24. Messer Holdings Limited v. Shyam Madanmohan Ruia (2010) 5 Bom CR 589.........12
25. Byram Pestonji Gariwala v Union Bank of India (1992) 1 SCC 31............................13
26. Bajaj Auto Ltd v Western Maharashtra Development ................................................13
27. Kesar Enterprises Ltd. v State of Uttar Pradesh AIR 2011 SC 2709...........................14
28. Amarinder Singh v Punjab Vidhan Sabha (2010) 6 SCC 113............15,16,17,18,19,20
-PRELIMINARIES29. Raja Ram Pal v The Honble Speaker, Lok Sabha and Ors, (2007) 3 SCC 184..........15
30. Hardwari Lal v The Election Commission of India 1977 (2) Punj and Har 269.........15
31. Chhabildas Mehta v The Legislative Assembly, Gujarat State 1970 Guj LR 729.......16
32. Gujarat Assembly Election case (2002) 8 SCC 237.....................................................19
33. Purushothaman Nambudiri v State of Kerala AIR 1962 SC 694.................................19
34. A.M. Paulraj v The Speaker, Tamil Nadu AIR 1986 Mad 248....................................19
BOOKS:
1. A Ramaiya, Guide to the Companies Act (Part 2, Wadhwa and Company Nagpur
2006) .........................................................................................................................6
2. Taxmanns Company Law Digest (1913-2009) (2 [Ss. 394-483], 3rd edn, Taxmann
Publications (P.) Ltd.).........................................................................................4,7,8
3. Bryan A. Garner, Blacks Law Dicionary (8th edn, WestPublishing Company 2004) .4
4. Avatar Singh, Company Law (15th edn, Eastern Book Company 2007) ...................11
5. PM Bakshi, The Constitution of India (12th edn, Universal Law Publishing Co Pvt Ltd
2013).......................................................................................................................14
ARTICLES:
1. Dr. K.R. Chandratre, Does The Clean Hands Doctrine Go Too Far In The
Proceedings Under Section 397/398 of the Companies Act? (2006) 159 COMPANY
CASES......................................................................................................................4
2. Suresh Savaliya Restriction on Transfer of Shares in a Public Company (Journal of
Chartered Accountants, September 2011)...............................................................13
3. Brijesh Kumar, Principles of Natural Justice (Institutes Journal, July-September
1995)...........................................................................................................................14
STATUTES:
1. Companies Act, 1956
2. The Constitution of India, 1956
-PRELIMINARIES-
-PRELIMINARIESSTATEMENT OF FACTS
1. Sanyasthan is a State in the Union of Mahadesha, where politics is dominated by the
National Socialist Party (NSP) and the Revolutionary Democratic Party (RDP). In 2000, RDP
came to power and launched a program for development and operation of an international
container transhipment terminal at Vyasanagar Port.
2. On 2 August 2001, the Chief Minister Mohan Grover, spoke to his friend and industrialist
Dr. Richard Verma, head of RCC Group of Companies,[hereinafter RCC] about investing
in the proposed project. Dr. Richard suggested the inclusion of Heppleworth and Grimes
[H&G]. The parties decided to incorporate a public limited company by the name of
Vyasanagar Sea Ports Ltd. [VSPL]. The State Government became one of the promoters of
the company through the Sanyasthan Infrastructure Development Corporation [SIDC], while
the other two promoters were the RCC Ports Ltd. [hereinafter RCCP] and H & G Holdings
(Mauritius) Inc. [hereinafter H&G (M)] floated by the RCC Group and H&G Group
respectively.
3. A Memorandum of Understanding [MOU] was entered into between the parties
according to which the initial cost of the project was estimated at Rs. 8000 crores which were
to be funded with a debt of Rs.4800 crores, equity of Rs.2400 crores and the remaining Rs.
800 crores in the form of subordinate debt. The total equity of the company among the
participants was to be divided among the participating companies in the following manner:
SIDC- Rs. 600 crores(25%), RCCP- Rs. 720 crores(30%) , H&G (M) Rs. 660 crores(27.5%),
others Rs. 420 crores(17.5%).
RCCP was conferred special rights under clauses 102 and 123 of the MOU in recognition of
the interest shown by them in starting the project.
Clause 102: In case of disinvestment by SIDC, the shares may be offered to RCCP, who shall
have the right to accept or reject the offer.
Clause 123: Any decision relating to debt restructuring shall be approved by the Board only
if at least one nominee director of H & G (M) consented to the same. Notwithstanding
anything contained above, the nominee of RCCP, so long as its shareholding is not below
17.5%, shall have the power to veto the decision of H & G (M), for reasons to be recorded in
-PRELIMINARIESwriting. In such cases, the final decision shall be of the Board of Directors after considering
the views of both RCCP and H & G (M).
The Articles of Association of VSPL were later suitably amended to incorporate the relevant
clauses of the MOU.
4. In September 2002, an agreement called Loan Agreement was entered into between
VSPL and fifteen banks and the first phase of the work commenced by October 2002.
Without much trouble, the first phase of the project was completed, two months after the
expected deadline. In the second
phase, because of recession in international market, the
cost was accordingly amended for the second and the third phase of the project. The cost was
now estimated at Rs.5000 crores. This was to comprise of Rs. 1400 crores in the form of
equity; Rs.700 crores in the form of subordinate debt; and Rs. 2900 crores in the form of
senior debt. The revenue returns from the first phase fell much below the expected returns.
Around the same time, IIDB (the lead lender) expressed its concern on the irregular servicing
of debts by RCCP. By August 2010, the burden of servicing the debts mounted to such an
extent that the company and its lenders had to seek a programme of restructuring of the debts.
In October 2010, a Corporate Debt Restructuring Scheme [hereinafter CDR Scheme] was
formulated. A very contentious term in the CDR Scheme was that RCCP had to provide an
undertaking to the senior lenders in the form of a cash deficit support. In the Board Meeting,
RCCP opposed the term and said that RCCP cannot be assumed to undertake the entire
burden on its own and it is unfair to expect the company to take additional obligations.
RCCP invoked its power to veto the scheme under clause 123 of the MOU. The Board
overruled the objections of RCCP and gave its approval to the CDR Scheme, but after RCCP
threatened to initiate legal proceedings, the board agreed to formulate a new CDR scheme.
5. In February 2011, talks began for formulating a new CDR scheme. In March 2011, the
Finance Budget of the State Government expressed its concern at the increasing fiscal deficit
of the State. The Finance Ministers suggestion was to consider disinvestment of Government
shares in certain companies. The Cabinet meeting considered the proposal of disinvestment
from VSPL and it was decided that at least till October 2011, SIDC will continue to be part of
VSPL. The discussions on formulating a new CDR scheme were deferred on account of the
uncertainty about the disinvestment by the State Government. On 11th July 2011, the lead
senior lender IIDB convened a lenders' meeting to review the performance of VSPL. As an
outcome of the said meeting, IIDB wrote a letter on 15th July informing all the lenders that
-PRELIMINARIESVSPL, after the first phase of the project, was irregular in servicing the debt obligation and
that since they failed to comply with many of the covenants of the Loan Agreement, the
lenders would be constrained to downgrade the account and initiate further actions for
recovery. In view of the aforesaid letter by IIDB, the Board of Directors met on 16th August
2011 to consider a new debt restructuring scheme. In the meeting, SIDC sought time of 2
months to finally decide on whether to go ahead with its disinvestment plans or not.
Immediately after the meeting, a Group of Ministers was constituted by the State Government
which submitted their report directing the State Government to disinvest 15% from VSPL
while retaining 10% shares for public interest and some role in management in the company.
The report recommended that also said that, after the completion of the first phase of the
project RCCP has not been complying with its debt obligations and its opposition to the CDR
scheme was uncalled for so the disinvested shares should not be offered to RCCP. If
disinvested shares are offered to RCCP, it will result in them assuming a significant control of
the company with over 40% shares, which may not be in the best interest of the company.
6. The Cabinet meeting of 19th October 2011 approved the report of the GoM. The proposed
disinvestment meant that H & G (M) will now be holding 42.5% shares, RCCP holding 30%
shares, SIDC holding 10% shares and others holding 17.5% shares. According to the new
CDR scheme formulated, Government will be bringing in funds of more than Rs.215 Crores
which was vetoed by RCCP in board meeting. According to RCCP it will reduce their
shareholding from 30% to 18% and alter debt equity ratio which is not in the best interest of
the company and the Governments decision to disinvest and at the same time bringing in
enormous funds to the project is mala fide, with a view to obliterate RCCPs contribution.
Shortly after it vetoed the new CDR scheme, RCCP, filed a Company Petition against VSPL,
H & G (M), SIDC, State of Sanyasthan and the lenders, before the Company Law Board
under Sections 397, 398, 399, 402, 403 and 406 of the Companies Act, 1956, The Company
Law Board held that, oppression is clearly established and the transfer of shares in favour of
H & G (M) is violative of the MOU. The CLB further directed the respondents to consider a
new CDR scheme taking into account the interest of the appellant and also upheld the special
rights in favour of the appellant. The High Court reversed the decision of the CLB and held
that RCCP had not approached the Tribunal with clean hands and hence no relief can be
granted to them under Sections 397, 398 read with Section 402 of the Companies Act, 1956.
Aggrieved by this decision, RCCP filed SLP (C) 1234 of 2015 before the Supreme Court.
-MEMORIAL FOR THE APPELLANT -
10
-PRELIMINARIES7. In October 2012, an investigative news journal Blitz highlighted massive irregularities in
VSPL since November 2008 which led to serious protests by NSP across the Sanyasthan. The
Chief Minister, set up the Justice Inamdar Commission under the Commission of Inquiry Act,
1952 to investigate the allegations. In April 2013, fresh elections to the State Assembly were
held and NSP came to power. In December 2013, the Justice Inamdar Commission submitted
its report. The report indicted 4 members of the House: (i) the Electricity Minister for
granting certain favours to VSPL, (ii) C.M.s decision of appointing his brother-in-law as a
serious case of conflict of interest, (iii) Two legislators, one of RDP and one of NSP, took
bribes for active lobbying in the House to avoid any discussion on the issue of improperly
exempting land acquisition of the land of Blue Waters Hotels Ltd.
8. Shortly after the report was submitted, the Speaker of the House constituted a Special
Committee to consider suitable action against the members of the legislative assembly named
in the report. The Special Committee recommended the expulsion of the former Chief
Minister Sri. Mohan Grover, Electricity Minister Sri. Anil Thakore and the two legislators
named in the report of Justice Inamdar Commission. Based on the said recommendation, the
Sanyasthan Legislative Assembly, on 04th November, 2014 passed a resolution to expel the
four members named in the report. In the Resolution, it was said that their conduct was
unbecoming of a member of the House and their indictment by the Commission has seriously
lowered the dignity of the House. Aggrieved by the decision of the Speaker, the four
members have challenged their expulsion in the Supreme Court of Mahadesha vide W.P. (C)
No. 6789 of 2014.
11
-PRELIMINARIESSTATEMENT OF JURISDICTION
The Appellant humbly submits before the Honble Supreme Court of Mahadesha the
memorandum for the Appellant for the Writ Petition filed by RCC Ports Ltd. invoking the
Constitutional Writ Jurisdiction under Article 136 of the Constitution of Mahadesha.
The Petitioner humbly submits before the Honble Supreme Court of Mahadesha the
memorandum for the Petitioner for the Writ Petition filed by Mr. Mohan Grover and Others
invoking the Constitutional Writ Jurisdiction under Article 32 of the Constitution of
Mahadesha.
The present memorandum sets forth the facts, contentions and arguments in the present
case.
12
-PRELIMINARIESARGUMENTS PRESENTED
In SLP (C) 1234 of 2015, the following issues arise for consideration:
PROVISIONS OF THE COMPANIES ACT, 1956?
I.1. Transfer of Shares As Part of Disinvestment Is Mala Fide
I.1.1. Disinvesting and At the Same Time Bringing In Funds
I.1.2. Governments Intention was to Obliterate RCCPs Contribution to the Project
I.2. Violative of the Memorandum of Understanding
I.3. Transfer of Shares As Part of Disinvestment Is Violative Of the Provisions of the
Companies Act, 1956
I.3.1. Violation of Section 397
II. WHETHER THE DECISION OF THE RCCP IN VETOING THE CDR SCHEME
IS CONTRARY TO THE BEST INTEREST OF THE COMPANY?
ON THE APPELLANT ARE VALID?
III.1. Appellant had some Definite Legitimate Expectations in joining VSPL
III.2. Section 36: Binding Force of the Articles of Association
In W.P. (C) 6789 of 2014, the following issues arise for consideration:
PROPER TO EXERCISE THE LEGISLATIVE PRIVILEGES UNDER ARTICLE 194
(3) OF THE CONSTITUTION?
I.1.Violation of Principles of Natural Justice
I.2. Legislative Privileges Dont Include the Power to Expel a Member
13
-PRELIMINARIESI.2.1. All Powers of House of Commons cant be claimed by the State Legislature
I.3. Expulsion was not justified
I.3.1. Acts of the Petitioners were not relatable to Legislative Proceedings
I.3.2. Alleged Misconduct was Executive Act
I.4. Indiscriminate Usage of terms like unbecoming and lowering the dignity of the
House
INCIDENT THAT OCCURRED DURING ITS PREVIOUS TERM?
II.1. All the Pending Motions of the Previous Term Lapsed on its Dissolution
II.2. Alleged Misconduct had no effect of obstructing the business of the new term of the
Assembly
14
-PRELIMINARIESSUMMARY OF ARGUMENTS
In SLP (C) 1234 of 2015, the following issues arise for consideration:
The Appellant humbly submits that the transfer of shares as part of disinvestment is mala fide
on account of two reasons. Firstly, when shares worth Rs. 210 crores (15% of Rs. 1400
crores) were disinvested to utilize them as funds in health and education sector, then at the
infusing more than 215 crore Rupees in the company, is absurd. It has been done to evade the
debt obligations of SIDC. Secondly, by bringing in funds in such large quantities, the
Government wants to obliterate the contribution made by the Appellant to the project.
Transfer of shares is also violative of clause 102 of the MOU because, the Appellant had been
conferred pre-emptive rights or the right of first refusal over the shares disinvested by
SIDC, and thus, those shares should have been first offered to the Appellant. But SIDC
directly transferred those shares to H&G (M) thereby, violating clause 102 of the MOU.
Transfer of shares is also violative of Section 397 and 398 of the Companies Act, 1956. It
constitutes violation of Section 397 because, it is a harsh, burdensome and wrongful conduct,
which is against probity and good conduct. It also constitutes violation of Section 398
because by major disturbance in the shareholding of the shareholders, a material change in
the management affairs of the company has been brought which may cause the conduct of the
affairs of the company in a manner prejudicial to the interest of the company and public
interest. Also, the doctrine of clean hands is not applicable in the present case, and the
decision of disinvestment is not a policy decision. Assuming arguendo, the court can interfere
in the policy decisions when it is arbitrary or unreasonable, the current decision being an
arbitrary and unreasonable one, it can come under judicial scrutiny. Further, the Appellant had
some definite legitimate expectations when it joined the company, and these legitimate
expectations cannot be overlooked.
The Appellant humbly submits that its decision to veto the oppressive and inept CDR scheme
is in no manner whatsoever, contrary to the best interest of VSPL. This decision was taken to
15
-PRELIMINARIESensure that the best interest of the company remains of the paramount importance, while at
the same time, preventing its oppression at the hands of the Respondent. The implementation
of the scheme would have resulted in the original debt equity ratio of the company being
completely altered. The consequent results would be unfavourable to the company, as the
burden of servicing the debts had already mounted to a great extent and a further increase in
the debt equity ratio would have been destructive, not only for VSPL but for public interest
also. Assuming arguendo, the Appellant humbly submits that under the garb of the best
interest of the company, the interests of a shareholder should not be given a go by. The
interests of the company vis-a-vis the shareholders must be upper most in the mind of the
court.
The Appellant humbly submits that the clauses in the MOU conferring Special Rights on it
are absolutely valid. They in no manner whatsoever hinder the smooth working of the
company. First of all, the court should consider the legitimate expectations of the Appellant.
Then, because the Special Rights were incorporated under the Articles of Association, they
became binding on the shareholders by virtue of Section 36 of the Companies Act, 1956.
Clause 123 of the MOU should not be struck down because the Petitioner has not exercised
this right in a manner detriment to the best interest of the company rather, it has been
exercised to facilitate the best interest of the company. Clause 102 should not be struck down
because the pre-emption right conferred on the Appellant through this clause, has been
recognized by the courts in its recent decisions, and these rights have been declared by the
courts as not inconsistent with any provision of the Companies Act. Further, there is no
provision in the Companies Act, which debars conferring such special rights on a shareholder.
If the legislature intended to restrict such rights, then it would have made specific provisions
in this regard. In absence of such provisions, the special rights should be declared valid by the
Honble Court.
16
-PRELIMINARIESIn W.P. (C) 6789 of 2014, the following issues arise for consideration:
The Petitioners humbly submit that it was not proper to exercise the legislative privileges
under Article 194 (3) of the Constitution of Mahadesha on the grounds of: (A) Violation of
natural justice, as they were not given a proper chance to defend themselves and the detailed
investigations by Vigilance Department were yet to be concluded; (B) All powers of House of
Commons cannot be claimed by Legislature in Mahadesha, including the power of expulsion
because the basic difference in the Constitution of England and the Constitution of
Mahadesha; (C) the alleged misconduct was an executive act which didnt interfered with the
legislative proceedings, and it was committed outside the four walls of the House. (D)
Indiscriminate usage of terms lowering the dignity of the House and conduct unbecoming
of a member in the present case.
The Petitioners humbly submit that it was not proper on the part of the Sanyasthan
Legislative Assembly to take up, as a matter of breach of privilege, an incident that occurred
during its previous term because once the House is dissolved, all the business pending before
the Legislature automatically lapses and they cannot be carried over in the next term. Inamdar
Commission being a proceeding of the House, its pending business cannot be taken up in the
subsequent term. Further, the alleged misconduct of the Petitioners had no effect of
obstructing or diluting the integrity of the new legislative Assembly.
17
-ARGUMENTS ADVANCEDARGUMENTS ADVANCED

I.1. TRANSFER OF SHARES AS PART OF DISINVESTMENT IS MALA FIDE:
The Appellant humbly submits that the transfer of shares by SIDC as a part of disinvestment
is mala fide on account of two reasons:
I.1.1. Disinvesting and At the Same Time Bringing In Funds
After the completion of the first phase of the project, government expressed its difficulty in
bringing in the proposed equity. Also, when the Finance Budget of the State Government
was presented in March 2011, it expressed its concern at the increasing fiscal deficit of the
state and highlighted the need to utilize more funds for health and education sector.
Thereafter, the government decided to disinvest 15% of its shares and transfer them to H&G
(M). Taking into account the fact that government had 25% shares (equivalent to Rs. 320
crores) in the form of equity in VSPL, the value of 15% of the shares will work out to be Rs.
210 crores. Thus, it was decided by the government to disinvest shares worth Rs. 210 crores.
Up till this point no malice whatsoever appears in the disinvestment and transfer of shares.
However, the decision of government to bring in funds to the extent of more than Rs. 215
crores changes the whole scenario. When Rs. 210 are disinvested from VSPL for the purpose
of utilizing them as funds in the education and health sector, then how come more than 215
crore rupees be infused into VSPL at the same time in the form of funds. There cannot be any
reasonable explanation of this absurd move of the State Government except that it wanted to
evade its debt obligations, as facts of the case state that the burden of servicing debts had
mounted to a great extent, VSPL was not meeting with its debt obligations, and also the
government expressed its difficulty in bringing in the proposed equity.
I.1.2. Governments Intention was to Obliterate RCCPs Contribution to the Project
The Appellant humbly submits that the State Governments decision to disinvest and at the
same time bringing in enormous funds to the project is mala fide because the same was done
with the intention of obliterating Appellants contribution to the Project. Initially, the
-MEMORIAL FOR THE PETITIONER -
-ARGUMENTS ADVANCEDAppellant had the largest contribution in the project by holding 30% shares in the project. But
by transferring 15% shares to H&G (M) government increased the shareholding of H&G (M)
from 27.5% to 42.5%, thereby making H&G (M) the biggest contributor to the project. By
bringing in more funds, the government effaced the Appellants contribution to an even
greater extent. Lastly the implementation of the CDR will reduce Appellants shareholding
from 30% to 18%, thus completely obliterating the contribution of the Appellant to the
project. Thus, the Appellant humbly submits that malice on the part of government is
certainly established.
I.2. VIOLATIVE OF THE MEMORANDUM of UNDERSTANDING:
According to clause 102 of the MOU, In case of disinvestment by SIDC; the shares may
be offered to RCCP, who shall have the right to accept or reject the offer. 1 Thus, it
should be understood that the Appellant had the right of first refusal over the disinvested
shares of SIDC, and SIDC should have approached Appellant first when it was looking to
transfer its shares. However, SIDC acted in contravention of the said clause by transferring its
shares to H&G (M) and not approaching the Appellant for the same.
The word may under this clause i.e. clause 102 should not be understood to give the clause a
discretionary tenor. It should rather be seen as an incumbency upon SIDC to first offer its
shares to Appellant. The Appellant submits that the term may ought to be interpreted as
shall in clause 102 and for this argument he relies upon two precedents:
(i). In the case of Sub-Committee on Judicial Accountability v. Union of India, 2 it was held
that When a provision is intended to effectuate a right, which may otherwise seem merely
enabling, becomes mandatory. In the present case, the facts clearly mention that the
Appellant was conferred Special Rights under certain clauses of the MOU, clause 102 being
one of them. Taking the decision of the above case into account, it should be inferred that
clause 102 was indeed intended by the parties to the MOU to effectuate a special right of the
Appellant.
1 Factsheet, 3 3.
2 AIR 1992 SC 220.

-ARGUMENTS ADVANCEDIt would seem superfluous to label clause 102 as a special right if it rests completely upon the
discretion of SIDC to transfer its shares to whosoever it wants to transfer. The very virtue of
terming such clause as a special right means that the Appellant is having certain advantage;
the advantage in the present case being given in the form of right of first refusal.
(ii). When reading the provision as directory would give unbridled power resulting in
arbitrary exercise of power, it should be read as mandatory.3 In the present case, on
interpreting the word may as discretionary, SIDC would get an unbridled right of
transferring its shares to anyone it wants, thereby rendering the special right of the Appellant
ineffective.
Thus, the Appellant humbly submits that the term may should be interpreted as shall in
clause 102 of the MOU because, otherwise, there would be no denotation in terming the said
clause as a special right and also, it would result in providing an arbitrary power of SIDC to
transfer its shares to whoever it wants, thereby rendering clause 102 completely infructuous
and ineffective. When, it is established that the term may should be interpreted as shall,
then the act of SIDC of transferring its shares to H&G (M) without even bothering to ask the
Appellant whether it is interested to buy those shares or not, would in all circumstances
amount as violation of the MOU.
I.3. TRANSFER OF SHARES AS PART OF DISINVESTMENT IS VIOLATIVE OF
THE PROVISIONS OF THE COMPANIES ACT, 1956
The Appellant humbly submits that the transfer of shares by SIDC to H&G (M) is violative of
Section 397 and Section 398 of the Companies Act, 1956.
Interference of the Court is Permissible in Policy Decisions of the Government:
Unless the policy decision is unconstitutional or contrary to statutory provisions or arbitrary4
or irrational or in abuse of power, courts do not interfere in policy matters, 5 the Appellant
3 Dinkar Anna Patil v State of Maharashtra AIR 1999 SC 152.
4 K Narayanan v State of Karnataka AIR 1994 SC 55.
5 Manohar Lal Sharma v Union of India (2013) 6 SCC 616.

-ARGUMENTS ADVANCEDhumbly submits that the decision of disinvestment falls under these categories, because it is
an arbitrary and irrational decision contrary to VSPLs best interest and also the public
interest; plus, it is contrary to the provisions (Section 397 and 398) of Companies Act, 1956.
Further, once a government becomes a shareholder in a company, it assumes to itself the
ordinary role of a shareholder and the question of applying any government policy in the
affairs of the company does not arise as observed by the Supreme Court in Life Insurance
Corporation of India v Escorts Ltd.6
Thus, this Honble Court can exercise its jurisdiction over the Governments decision to
determine whether it is violative of the provisions of the Companies Act, 1956 or not.
Clean Hands Doctrine is not Applicable in the Present Case:
The Blacks Law Dictionary7 explains the doctrine as follows: The principle that a party
cannot seek equitable relief or assert an equitable defence if that party has violated an
equitable principle, such as good faith. Such a party is described as having unclean hands.
Although salutary, the doctrine is sometimes stretched (unjustifiably) too far and a relief is
refused to the minority shareholder on the ground that he was not diligent about his rights as
a shareholder. That does not seem to be the tenor of clean hands doctrine in the context of
section 397.8 The English Act has dispensed with winding up requirement. In London School
of Electronics Ltd., In re9 case, Nourse J. Said: There is no independent or overriding
requirement that it should be just and equitable to grant relief or that the petitioner should
come to the court with clean hands. After all, the primary purpose of the remedy provided by
the section 397 and 398 is to protect the minority shareholder from the oppressive conduct of
the majority shareholder; hence the clean hands principle should not overshadow it and
6 [1986] 1 SCC 264.
7 Bryan A Garner, Blacks Law Dicionary (8th edn, WestPublishing Company 2004) 268.
8 Dr KR Chandratre, Does The Clean Hands Doctrine Go Too Far In The Proceedings
Under Section 397/398 of the Companies Act? (2006) 159 COMPANY CASES 66, 68.
9 [1985] BCLC 273.

-ARGUMENTS ADVANCEDdeprive the minority shareholder from relief. 10 Thus, the Petitioner humbly submits that the
doctrine of clean hands is not applicable to the present case and oppression as a result of
transfer of shares is established.
Conditions to be satisfied for Invoking Section 39711:
In the case of V.S. Krishnan v. Westfort Hi-Tech Hospital Ltd. 12, it was held that: From
various judgements of the Supreme Court, it is clear that the oppression would be made out:
(a) Where the conduct is harsh, burdensome and wrong, (b) Where the conduct is mala
fide and for collateral purpose where although the ultimate objective may be in the interest of
the company, the immediate purpose would result in an advantage for some shareholders viss-vis others, (c) The action is against probity and good conduct.
In the present case, the transfer of shares of SIDC to H&G (M) and at the same time bringing
in enormous funds to the project satisfies all the three conditions mentioned above. First of
all, since, the shareholding of the Appellant will go down from 30% to 18%, when actually it
should have gone up from 30% to 45%, it is clearly harsh, burdensome and wrong for the
Appellant.
The Appellant humbly submits that the company is a glorified quasi partnership. The MOU
not only provided for the Appellant holding the largest shareholding i.e. 30% of the shares
but also 5/11th of directorship in the company. SIDC was to have only 25% share in the
company. In the MOU entered into on 15th July, 2002, pre-emption right was given to the
Appellant to acquire the shares of SIDC in the event of its disinvesting the shares, also certain
other special rights were also conferred on the Appellant in recognition of the interest shown
10 Dr KR Chandratre, Does The Clean Hands Doctrine Go Too Far In The Proceedings
Under Section 397/398 of the Companies Act? (2006) 159 COMPANY CASES 66, 72.
11 Taxmanns Company Law Digest (1913-2009) (2 [Ss 394-483], 3rd edn, Taxmann
Publications (P) Ltd) 2018.
12 [2008] 83 SCL 44.

-ARGUMENTS ADVANCEDby them in starting the project and because of the risk that was being taken by the Appellant
in implementing the project, since it was a very difficult project to implement considering the
lack of expertise of leading port companies in port development as well as the political
climate of the state. Even the Articles of Association of the company were amended 13 in
line with the terms of the MOU.
Therefore it is evident that right from the time when the Appellant joined the company by
entering into an MOU, it had some definite legitimate expectations in joining and
continuing with the company, as Dr. Richard Verma was a friend of Mr. Mohan Grover and
the Appellant had largest shareholding and nominees in the Board of Directors. Hence, in
reality the VSPL is a quasi-partnership between the RCCP, the Government and SIDC, and
therefore the doctrine of legitimate expectation, consistently applied to cases involving
closely held companies, family companies, and companies in the nature of quasi-partnership,
would apply to VSPL. When these legitimate expectations have been denied either by the
company or by the other shareholders, the Appellant has the right to move a petition
under Section 397 alleging oppression. In deciding whether there has been oppression, the
court has power to take into consideration not only the rights of the members under the
companys constitution but also their legitimate expectations.14 In the case of Ebrahimi v.
West Bourne Galleries Ltd.15, the court has held: "The just and equitable provision does not
entitle one party to discard the obligation he assumes by entering a company nor the court to
dispense him. It does, as equity always does, enable the court to subject the exercise of legal
rights to equitable considerations; considerations, i.e. of a personal character arising
between one individual and another". In Gurmeet Singh v. Polymer Papers Ltd,16 the CLB
has taken the view that the legitimate expectations could form the basis for grant of relief.
13 Factsheet 3 3.
14 Re Posgate & Denby (Agencies) Ltd 1987 BCLC 8 (Ch D).
15 [1972] 2 All ER 492.
16 [2005] 123 CC 486.

-ARGUMENTS ADVANCEDSecondly, as it has already been contended by the Appellant in sub-issue I.1, that these acts
are mala fide, and under the garb of the best interest of the company, the transfer of shares
will have the effect of advantage for H&G (M) vis-a-vis Appellant; the second condition is
also satisfied. Where the company registered transfers without fulfilling the requirement of
the Articles relating to transfer of shares which resulted in weakening the minority and
strengthening the local group functioning in league with the nominees of a foreign group, it
was held that there was oppression (Bhubaneshwar Singh v Kanthal india Ltd.17).18
Lastly, the third condition is also satisfied as the action cannot be in any manner said to be
one which is in concurrence with probity and good conduct, because SIDC neither bothered
to inform the Appellant about its disinvestment plans nor offered it to purchase them at a pro
rata basis. In the case of Bhagirath Agarwala v Tata Properties (P.) Ltd 19 it was held that:
The shares issued to the respondent Nos. 2 and 4 were only for the purpose of gaining
control over the company without following the provisions of the Act. The offer was not given
to the petitioners to have the shares on a pro rata basis in respect of issuance of those shares.
The issuance of those shares had been done illegally and no explanation was issued in
connection with those shares. Accordingly, the issuance of such shares was to be struck
down. In Elder v Elder & Watson Ltd. 20, it was held that: The essence of the matter seems
to be that the conduct complained of should at the lowest involve a visible departure from
standards of fair-play on which every shareholder entrusts his money to a company is entitled
to rely on.21
17 (1986) 59 Com Cases 46 (Cal).
18 A Ramaiya, Guide to the Companies Act (Part 2, Wadhwa and Company Nagpur 2006)
3398.
19 [2002] 39 SCL 493.
20 [1952] SC 49.
-ARGUMENTS ADVANCEDI.3.2. Violation of Section 398

The Petitioner humbly submits that the transfer of shares as part of disinvestment is also
covered under Section 398 of the Companies Act, 1956.
In Suresh Kumar Sanghi v Supreme Motors Ltd. 22, precedent conditions for obtaining relief
under Section 398 were enumerated: Relief under Section 398 can be granted only if (i) the
affairs of the company are being conducted in a manner prejudicial to public interest, (ii) if
the affairs are being conducted in a manner prejudicial to the interests of the company, or (iii)
if there is a material change which has taken place in the management or control of the
company, and that by reason of such change it is likely that the affairs of the company will be
conducted in a manner prejudicial to public interest or in a manner prejudicial to the interests
of the company.23
In the case of Pradip Kumar Sarkar v Luxmi Tea Co. Ltd. 24, it was held that: The method
by which the transfer of shares has been brought about can disclose a serious
mismanagement in the affairs of the company. This fact has to be taken into account in
dealing with the allegations regarding mismanagement in the affairs of the company.25 Here,
the method of transfer of shares clearly discloses a serious mismanagement in VSPLs affairs
because this act was done neither informing the petitioners nor in accordance of the Articles
of Association.
In Kamal Kumar Dutta v Ruby General Hospital Ltd. 26, it was held that When a material
change is brought about in management to detriment of interest of main promoter, it is
22 [1983] 54 Comp Cas 235 (Delhi).
24 [1990] 67 Comp Cas 491 (Cal).
-ARGUMENTS ADVANCEDsquarely covered under Section 398 (1) (b).27 The petitioner humbly submits that a material
change has been brought about in the management of the company and this change is in
detriment of the interest of the main promoter i.e. the Appellant. Since the Appellant is the
main promoter in VSPL, holding 30% of its shares, transfer of shares and bringing in funds to
the extent of more than Rs. 215 crores are acts which bring about a material change in VSPL.
And the fact that H&G (M)s shareholding will rise to 42.5% from 27.5%., while Appellants
shareholding will reduce from 30% to 18% are the consequences which are clearly in
detriment of the interest of the main promoter.
Further, the decision of transfer of shares should not be seen as the sole action entailing
mismanagement in the affairs of VSPL, there are other decisions also which consolidate the
allegations of mismanagement. In Bhaskar Stoneware Pipes (P.) Ltd. v Rajinder Nath
Bhasker,28 it was held that: Though disturbance in shareholding which is unfavourable to
one group alone may not be sufficient to establish a prejudicial conduct, yet other allegations
of mismanagement may.29 In the present case, not only the transfer of shares is an act of
mismanagement, the decision of the State Government to bring in funds to the extent of more
than Rs. 215 crores at the same time of disinvestment, is also a material change in the
conduct of the affairs of the company. Since, the facts of the case specifically mention that
the burden of servicing the debts had mounted to a great extent, bringing in further funds will
only exacerbate the situation, as it will completely alter the debt equity ratio of the company
by causing it to rise even higher. This move is not only prejudicial to the interests of the
company, but it is also prejudicial to public interest. This project has been labelled as a
very ambitious project and the purpose of starting the project was to develop the states
26 [2006] 70 SCL 222.
28 [1988] 63 Comp Cas 184 (Delhi).
-ARGUMENTS ADVANCEDindustrial and infrastructural scenario. Thus, this project is of a great significance for the
public of the State of Sanyasthan. The failure of VSPL to meet its debt obligations, raising the
debt equity ratio of the company by bringing in funds to the extent of more than Rs. 215
crores, when the Finance Budget expressed concern over the increasing Fiscal Deficit of the
State establishes mismanagement in the affairs of the company, not only on the account of
companys interest but also in the public interest.
Thus, the Appellant humbly submits before this Honble Court that the transfer of shares as
part of disinvestment is violative of Section 397 and 398 of the Companies Act, 1956.
The Appellant humbly submits that its decision of vetoing the CDR Scheme is not contrary to
the best interest of the company, because the CDR scheme itself was contrary to the best
interest of the company. Thus, it was taken to ensure that the best interest of the company
remains of the paramount importance.
According to the facts of the case, the main feature of the CDR scheme was that the
government will be bringing in funds to the extent of more than Rs. 215 crores. This
implementation would result in the Appellants shareholding to reduce from 30% to 18% and
the original debt equity ratio of the company being completely altered. The consequent
results would be unfavourable to the company, as the burden of servicing the debts had
already mounted to a great extent and a further increase in the debt equity ratio would have
been destructive, not only for VSPL but for public interest also.
In the case of Aidqua Holdings v Tamil Nadu Water Investment Company Ltd. 30, the court
said: The Government offer to pump in more than Rs. 100 crores is also a step at least in
theory, that is capable of being reversed. But the only hitch here is that NTADCL is not
even in a position to even service its debts. Therefore, NTADCL will not be able to repay
the Government the amount of more than Rs. 100 crores pumped in by the Government
under the CDR. Relying upon this observation of the court in the above case and comparing
it to the present case, even while jeopardising the interests of the appellant, the CDR scheme
was contrary to the interests of VSPL itself. The CDR scheme is primarily intended to subserve the interests of the lenders and the company VSPL does not stand to benefit at all. The
30 2014 SCC OnLine Mad 234 [80].
10
-ARGUMENTS ADVANCEDdebt equity ratio as originally propounded at the time of incorporation of the company, will
completely blow out of proportions if the CDR scheme is implemented. Therefore, it is not in
the best interest of the company to have this CDR scheme implemented.
But unfortunately, during the pendency of the appeal, much water appears to have flown (in
the figurative sense), by the allotment of shares and the State Government pumping in more
money. The Government has pumped in money, unfortunately, only to service the debt with a
pre-condition that the money will not even be used to improve the infrastructure. Investing
more money just for the purpose of servicing a debt, is neither a prudent business decision
nor in the interest of the public. The result of the approval of the CDR Scheme is (i) that the
debt due to the creditors got converted into equity to some extent and (ii) that the
Government agreed to bring in Rs. 150 crores, only for the purpose of servicing the debt,
without being able to improve either the capacity of the company or to improve the
marketability of water through legislation. Therefore, it is clear that the money brought in by
the Government is required only to go down the drain, as waste water, if no law is enacted.31
The Honble Court should consider the point that the very purpose of starting this project was
to improve the industrial and infrastructural sector of the state. The governments decision to
bring in more funds only to service the debts is neither a prudent business option nor in the
interest of the public. The public interest becomes an even more important aspect to consider
when, the Finance Budget of the government itself expressed its concern over the increasing
Fiscal Deficit of the state and it asked for utilising more funds for the education and health
sector. When the Government disinvests Rs. 210 crores (15% shares) from VSPL to invest in
the health and education sector, then at the same time it brings more than Rs. 215 crores back
to VSPL in the form of funds. This decision is not supposed to make any difference rather it
will exacerbate the economic scenario of the state. Thus, the decision of the Appellant in
vetoing the CDR scheme was not only in the best interest of VSPL, but also the public.
Assuming arguendo, if this Honble Court comes to different conclusion, the Appellant
humbly submits that under the garb of the best interest of the company, the interests of a
shareholder should not be given a go by. In Sangramsinh P.Gaekwad v Shantadevi P.
Gaekwad,32 it was held that the interests of the company vis-a-vis the shareholders must be
upper most in the mind of the court. Similarly, in M.S.D.C. Radharamanan v M.S.D.
31 2014 SCC OnLine Mad 234 [159].
11
-ARGUMENTS ADVANCEDChandrasekara Raja,33 the Supreme Court pointed put that in matters of this nature, the
function of the Company Law Board should first be to see as to how the interests of the
company vis-a-vis its shareholders can be safeguarded.
Thus, the Appellant pleads before this Honble court to not only consider the best interest of
the company and the public but also consider the interests of the Appellant.
The Appellant humbly submits that the clauses in the MOU conferring Special Rights on it
are absolutely valid. They in no manner whatsoever hinder the smooth working of the
company, rather, the Appellant by exercising his special rights was trying to ensure that the
best interest of the company remains of the paramount importance, while at the same time,
preventing its oppression at the hands of the respondents.
III.1. The Appellant had some Definite Legitimate Expectations in joining VSPL:
It has already been submitted under issue I.3.1 that the Appellant had certain legitimate
expectations in taking such risk and showing great interest in starting the project and also the
fact that Dr. Richard Verma was a friend of Mr. Mohan Grover. The Appellant humbly
submits that the Honble Court should take into consideration these facts and declare the
special rights conferred on the Appellant as valid.
III.2. Section 36: Binding Force of the Articles of Association:
Since, the Articles of Association of VSPL were amended to incorporate the relevant clauses
of the MOU, the Special Rights conferred on the Appellant under the clauses of the MOU
became automatically binding by the virtue of Section 36 of the Companies Act, 1956.
Section 36 (1) of the Companies Act, 1956 states:
Subject to the provisions of this Act, the memorandum and articles shall, when registered,
bind the company and the members thereof to the same extent as if they respectively had been
32 (2005) 11 SCC 314.
33 (2008) 6 SCC 750.

12
-ARGUMENTS ADVANCEDsigned by the company and by each member, and contained covenants on his part to observe
all the provisions of the memorandum and of the articles.34
In the case of Smt. Claude-Lila Parulekar v. M/S. Sakal Papers Pvt. Ltd. & Ors.35, it was
held that: Section 36 of the Companies Act, 1956 makes the Memorandum and Articles of
company, when reregistered, binding not only on the company but also the members inter-se
to the same extent as if they had been signed by the company and by each member and
covenanted to by the company and each shareholder to observe all the provisions of the
Memorandum and of the Articles. The Articles of Association constitute a contract not merely
between the shareholders and the company but between the individual shareholders also. Any
action referable to the Articles and contrary thereto would be ultra vires.36
The Bombay High Court in the case of IL and FS Trust Co. Ltd and Anr. v. Birla
Perucchini Ltd. and Ors37 held that: "A company and its members are bound by the
provisions contained in its articles of association. The articles regulate the internal
management of the company and define the powers of its officers. The articles also establish
a contract between the company and members and between the members inter se." Any
rights, as laid down by the Supreme Court in Bhavnagar University v. Palitana Sugar Mills
Private Limited,38 "cannot be taken away by implication from the language employed in a
statute unless the legislature clearly and distinctly authorise the doing of a thing which is
physically inconsistent with the continuance of an existing right." Nowhere, in the provisions
of the Companies Act, 1956, it has been mentioned that special rights cannot be conferred on
a shareholder, thus, the Appellant humbly submits that the special rights of the Appellant
should not be suspended.
34 Avatar Singh, Company Law (15th edn, Eastern Book Company 2007) 85.
35 (2005) 11 SCC 73 [25].
36 Smt Claude-Lila Parulekar v M/S Sakal Papers Pvt Ltd & Ors (2005) 11 SCC 73 [25].
37 2003 (3) Bom CR 334.
38 (2003) 2 SCC 111.

13
-ARGUMENTS ADVANCEDValidity of clause 123:

It has already been submitted by the Appellant under issue II that its decision of vetoing the
CDR scheme was in consonance of not only with the best interest of VSPL but also the public
interest. Thus, the special right conferred on appellant under clause 102 is no way a hindrance
to the smooth working of the company rather, the Appellant has exercised this power to
facilitate the best interest of the company by vetoing the oppressive and inept CDR scheme.
Thus, the special right under clause 102 should not be struck down.
Validity of clause 102:
The Appellant humbly submits that the special right under clause 123 that confers on the
Appellant the right of first refusal should not be struck down on account of two reasons:
(i) This right has been incorporated under the Articles of Association of the VSPL and thus, it
carries with it a binding force provided by it under Section 36 of the Companies Act, 1956.
(ii) From some recent decisions, it has been made clear by the court that, restrictions placed
on transfer of shares in a Public Limited Company, by way of conferring pre-emptive rights
on a shareholder are valid, and they are not contrary to the doctrine of free transferability
enshrined in Section 111A of the Companies Act, 1956.
(i) Messer Holdings Limited v. Shyam Madanmohan Ruia:39
In this case there was a condition in the agreement that if either party wants to sell its shares
then it would first offer them to other party except some situation as provided in the
agreement. One of the arguments challenging this restriction was that the agreement was void
as it restricts free transferability in terms of section 111A of the Companies Act.
The expression "freely transferable" therein is in the context of the mandate against the
Board of Directors to register the transfer of specified shares of the members in the name of
the transferee, unless there is sufficient cause for not doing so. The said provision cannot be
construed to mean that it also intends to take away the right of the shareholder to enter into
consensual arrangement/agreement with the purchaser of their specific shares. If the
legislature intended to take away that right of the shareholder, it would have made an express
provision in that regard. Reliance has been rightly placed on the decision of the Apex Court
39 (2010) 5 Bom CR 589.
14
-ARGUMENTS ADVANCEDin the case of Byram Pestonji Gariwala v Union Bank of India 40 which takes the view that
the freedom of contract generally, the legislature does not interfere except when warranted
by public policy, and the "legislative intent is expressly made manifest".
That means it is open to the shareholders to enter into consensual agreements which are not in
conflict with the Articles of Association, the Act and the Rules, in relation to the specific
shares held by them; and such agreement can be enforced like any other agreement. That does
not impede the free transferability of shares at all.41
(ii) Bajaj Auto Ltd v Western Maharashtra Development42:
Section 111A and more particularly sub-section (2) thereof, is not a provision to curtail the
rights of the shareholders to enter into a consensual agreement/arrangement with a
purchaser in relation to their specific shares.
It was also held that: Such a clause, even if incorporated in the Articles of Association of a
public company, would not in any way violate the principles of free transferability of shares
as contemplated under section 111A of the Companies Act as it only sets out how the
Respondent and the Appellant are to deal with their respective shareholdings. It is not a
blanket pre-emption clause which binds all the shareholders of the company to sell their
shares only to other members of the company, and thus, such a clause does not in any way
impinge upon the principle of free transferability as contemplated under Section 111A.
Thus, the Appellant humbly submits that the clauses in the MOU conferring special rights on
it are valid.
40 (1992) 1 SCC 31.
41 Suresh Savaliya Restriction on Transfer of Shares in a Public Company (Journal of

Chartered Accountants, September 2011)
<http://www.lawyersclubindia.com/articles/Restriction-on-Transfer-of-Shares-in-a-PublicCompany-4407.asp> accessed 27 August 2015.
42 http://indiankanoon.org/doc/34913168/
15
-ARGUMENTS ADVANCED-
In W.P. (C) 6789 of 2014, the following issues arise for consideration:
The Petitioners humbly submit that it was not proper to exercise the legislative privileges
under Article 194 (3) of the Constitution of Mahadesha on the grounds of: Violation of
natural justice, as they were not given a proper chance to defend themselves; All powers of
House of Commons cannot be claimed by Legislature in Mahadesha, and the acts of the
Petitioners didnt interfered with the legislative proceedings.
I.1.Violation of Principles of Natural Justice:
The principles of natural justice are firmly grounded in Article 14 & 21 of the Constitution.
The principles of Natural Justice is to check the arbitrary exercise of power by the State or its
functionaries; Kesar Enterprises Ltd. v State of Uttar Pradesh 43.44 The principle of audi
alteram partem is the basic concept of principle of natural justice. The expression audi
alteram partem implies that no man should be condemned unheard or that both the sides must
be heard before passing any order.45
In the present case, on the recommendation of the Special Committee, the Petitioners named
in the report of Justice Inamdar Commission were expelled without any due cause. They were
not given any opportunity to present their case in the Assembly, thus, violating the basic rule
of Natural Justice audi alteram partem. Further, the expulsion was not justified as Vigilance
Department was yet to submit the detailed investigations into the findings of the Inamdar
43 AIR 2011 SC 2709.
44 PM Bakshi, The Constitution of India (12th edn, Universal Law Publishing Co Pvt Ltd
2013) 22.
45 Brijesh Kumar, Principles of Natural Justice (Institutes Journal, July-September 1995)

<http://ijtr.nic.in/articles/art36.pdf> accessed 29 August 2015.
16
-ARGUMENTS ADVANCEDCommission. When a detailed investigation was yet to be concluded, then without even
giving the Petitioners a proper chance to defend themselves, clearly stipulates arbitrary action
on the part of the Respondent.
I.2. Legislative Privileges Dont Include the Power to Expel a Member
The Petitioners humbly submit that the legislative privileges that are exercised by the State
Legislature by virtue of Art 194 (3) of the Constitution dont include the power to expel a
member.
I.2.1. All Powers of House of Commons cant be claimed by the State Legislature
All the powers conferred by the House of Commons cannot be automatically followed in
Mahadesha. One reason for this is that Indian legislatures are controlled by a written
constitution and hence they do not have an absolute power of self-composition, unlike the
British House of Commons which is controlled by an unwritten constitution. 46 In the case of
Amarinder Singh v Punjab Vidhan Sabha, 47 it was held that: We are only obliged to follow
British precedents to the extent that they are compatible with our constitutional scheme. This
is because the legislatures in India do not have a wide power of self-composition in a manner
akin to the British House of Commons. This position was clarified in Raja Ram Pal's case.
Another reason is that some of the English precedents involving the exercise of privileges
were clear instances of over breadth and arbitrary in nature. 48 Even though the exercise of
legislative privileges and the concomitant power to punish for contempt have not been
codified, they cannot be construed as unlimited powers since that could lead to their
indiscriminate and disproportionate use. House of Commons has an undoubted power of
expelling a Member, and the law does not attempt to define the cases in which it may be
used. For example, if the House voted the expulsion of A.B. on the ground that he was ugly,
no court could give A.B. any relief. 49 It is hardly necessary that such an arbitrary exercise of
legislative proceedings cannot be entertained in Mahadesha.
46 Amarinder Singh v Punjab Vidhan Sabha (2010) 6 SCC 113.
47 (2010) 6 SCC 113.
48 Amarinder Singh v Special Committee, Punjab Vidhan Sabha (2010) 6 SCC 113.
17
-ARGUMENTS ADVANCEDEach specific instance of the exercise of a general privilege needs to be shown to be
necessary.50 In the present case, expulsion was not necessary since the investigation by
Vigilance Department was yet to be concluded. Further, the acts of the petitioners didnt
interfere with the legislative proceedings.
Power of Expulsion Cannot be claimed by the State Legislature
In the case of Hardwari Lal v The Election Commission of India, 51 the validity of expulsion
of a member of legislature came up for consideration. After an elaborate discussion, the
majority found that the power of British House of Commons, to expel any of its members,
flowed from its privilege to provide for and regulate its own constitution. It was held that
such power of expulsion was not available to the Indian Parliament, having regard to the fact
that the written constitution makes detailed provision for the constitution of the Parliament,
elections, vacation of seats and disqualifications for membership.
In Chhabildas Mehta v The Legislative Assembly, Gujarat State,52 a Division Bench of
Gujarat High Court speaking through Chief Justice Bhagwati held : "The problem before us
is whether the privilege can be read in Article 194(3). It is no answer to this problem to say
'read the privilege in Article 194(3) and then harmonise it with the other provisions'. If the
privilege is inconsistent with the scheme of the Constitution and its material provisions, it
cannot and should not be read in Article 194(3). The presumed intention of the Constitutionmakers in such a case would be that such a privilege should not belong to the House of the
Legislature." Since, the act of expulsion without giving hearing the side of the petitioners,
violated Fundamental Right of the Petitioners, this privilege cannot not be exercised by the
State Legislature.
49 Raja Ram Pal v The Honble Speaker, Lok Sabha and Ors, (2007) 3 SCC 184.
50 Amarinder Singh v Special Committee, Punjab Vidhan Sabha (2010) 6 SCC 113.
51 1977 (2) Punj and Har 269.
52 1970 Guj LR 729.

18
-ARGUMENTS ADVANCEDRelying upon the above case laws, the Petitioners humbly submit that all the powers of House
of Commons cannot be claimed by the State Legislature and the power of expulsion also
comes under this category.
I.3. Expulsion was not justified:
Assuming arguendo, even if the State Legislature can claim the Power of Expulsion, the
expulsion itself was not justified in the present case. It is because, the acts for which the
Petitioners were expelled, in no way affected the legislative proceedings.
I.3.1. Acts of the Petitioners were not relatable to Legislative Proceedings
The Petitioners humbly submit that their acts had no proximity with legislative proceedings
as they were executive decisions and they were committed outside the four walls of the
house. Since, no conceivable obstruction was caused to the conduct of routine legislative
business, the expulsion is not justified.
In Amarinder Singh v Punjab Vidhan Sabha 53, the Appellant was expelled for improperly
granting land exemption. It was held that: With respect to the allegations against the
appellant in the present case, it is quite difficult to see how the improper exemption of a
particular plot of land from an acquisition scheme caused an obstruction to the conduct of
legislative business. If it is indeed felt that the allegations of misconduct on part of the former
Chief Minister had brought disrepute to the entire House, then the proper course is to pursue
criminal investigation and prosecution before the appropriate judicial forum. The
Petitioners submit that even if it can be proved that they are guilty, they can be disqualified
for being a member of Parliament on the ground of corruption, only upon conviction for such
corruption as contemplated under section 8 of Representation of People Act, 1951 read with
clause (1) (e) of Article 191, not by expelling them from the Assembly.
In the above case, it was also held that: It would be safe to say that a breach of privilege by
a member of the legislature can only be established when a member's act is directly
connected with or bears a proximity to his duties, role or functions as a legislator. This test of
proximity should be the rule of thumb, while of course accounting for exceptional
circumstances where a person who is both a legislator and a holder of executive office may
commit a breach of privilege. It is our considered view that such a breach has not occurred in
53 (2010) 6 SCC 113.
19
-ARGUMENTS ADVANCEDthe present case. It was further held that: It was not necessary for the Punjab Vidhan
Sabha to have exercised its powers under Article 194(3) to recommend and then notify the
expulsion of the appellant. We fail to see how the alleged misconduct on part of the appellant
had the effect of obstructing the ordinary legislative functions of the Vidhan Sabha. In its role
as a deliberative body which is expected to monitor executive functions in line with the idea
of `collective responsibility', the Punjab Vidhan Sabha was of course free to inquire into the
alleged misconduct and examine its implications. However, the act of recommending the
appellant's expulsion through the impugned resolution cannot be justified as a proper
exercise of `powers, privileges and immunities' conferred by Article 194(3).54
I.3.2. Alleged Misconduct was Executive Act
The allegations of misconduct on part of the petitioners were relatable to their executive
actions which in no way disrupted or affected the legislative functions of the Sanyasthan
Legislative Assembly. Legislative privileges are exercised to safeguard the integrity of
legislative proceedings and the alleged misconduct did not threaten the same in any
manner. Further, the alleged misconduct was entirely non-relatable to the legislative
proceedings.
I.4. Indiscriminate Usage of terms like unbecoming and lowering the dignity of the
House
In the case of Amarinder Singh v Punjab Vidhan Sabha,55 the court held that: Expressions
such as `lowering the dignity of the house', `conduct unbecoming of a member of the House'
and `unfitness of a member' are openly-worded and abstract grounds which if recognised,
will trigger the indiscriminate and disproportionate use of legislative privileges by incumbent
majorities to target their political opponents as well as dissidents. The Petitioners humbly
submit that in the present case, these terms have been used indiscriminately against them.
Reiterating the arguments, the Petitioners humbly submit that, since, the Petitioners Right of
Natural Justice was violated; the power of expulsion cant be exercised by State Legislative
Assembly, the alleged misconduct didnt interfered with legislative proceedings and the usage
54 Amarinder Singh v Punjab Vidhan Sabha (2010) 6 SCC 113 [30]-[38].
55 (2010) 6 SCC 113.

20
-ARGUMENTS ADVANCEDof terms unbecoming and lowering the dignity of the house was indiscriminate, it was
not proper to exercise the legislative privileges under Article 194 (3) of the constitution.
The Petitioners humbly submit that it was not proper on the part of the Sanyasthan
Legislative Assembly to take up, as a matter of breach of privilege, an incident that occurred
during its previous term.
II.1. All the Pending Motions of the Previous Term Lapsed on its Dissolution:
"Dissolution, as already stated, marks the end of the life of a House and is followed by the
Constitution of a new House. The consequences of dissolution are absolute and irrevocable.
In Lok Sabha, which alone is subject to dissolution under the Constitution, dissolution
"passes a sponge over the Parliamentary slate". All business pending before it or any of
its committees lapses on dissolution. No part of the records of the dissolved House can be
carried over and transcribed into the records and registers of the new House. In short,
dissolution draws the final curtain upon the existing House.
Business before a Committee: All business pending before Parliamentary Committees of
Lok Sabha lapse on dissolution of Lok Sabha. Committees themselves stand dissolved on
dissolution of a Lok Sabha."56
Coming to judicial observations, the effects of dissolution of a House were discussed in the
Gujarat Assembly Election case57, V.N. Khare, J. made the following observations:
Dissolution ends the life of the legislature and brings an end to all business. The entire chain
of sittings and sessions gets broken and there is no next session or the first sitting of the next
session after the House itself has ceased to exist. Dissolution of Legislative Assembly ends
the representative capacity of legislators and terminates the responsibility of the Cabinet to
the Members of the Lok Sabha or the Legislative Assembly, as the case may be."
56 Amarinder Singh v Special Committee, Punjab Vidhan Sabha & Ors (2010) 6 SCC 113.
57 (2002) 8 SCC 237.

21
-ARGUMENTS ADVANCEDThe scheme of the Constitution in regard to the duration of the life of State Legislative
Assembly, it is urged, supports the argument that with the dissolution of the Assembly all
business pending before the Assembly at the date of dissolution must lapse. This position
would be consonant with the well-recognized principles of democratic rule. The Assembly
derives its sovereign power to legislate essentially because it represents the will of the
citizens of the State, and when one Assembly has been dissolved and another has been elected
in its place, the successor Assembly cannot be required to carry on with the business pending
before its predecessor, because that would assume continuity of personality which in the eyes
of the Constitution does not exist.58
Relying upon the above authorities, the Petitioners humbly submit that, since, the Inamdar
Commission didnt concluded its report before the previous legislative assembly, it cannot
have submitted it before the current legislative assembly, as all the pending motion of the
commission lapsed once the House was dissolved.
In A.M. Paulraj v The Speaker, Tamil Nadu,59 it was held that, While, therefore, there can
be no doubt that as in England, the effect of dissolution is that all business pending for
consideration before the Legislature will also lapse in India, the well-known exception that
such dissolution does not affect the proceedings for impeachment has also been recognised in
India and it is now well-understood that where a committee has completed its business and
made a report to the Speaker, then, such a report can be considered by the succeeding House.
This exception will also take in the report of a Committee of Privileges of the previous House
which has been made to the Speaker of the House before the Legislature was dissolved.
Since, the Inamdar Commission didnt complete its business and it didnt submit its report to
the speaker of the previous term, the Sanyasthan Legislative Assembly cannot take up this
incident.
II.2. Alleged Misconduct had no effect of obstructing the business of the new term of the
Assembly: In Amarinder Singh v Punjab Vidhan Sabha, 60 it was held that: Ordinarily
legislative business does not survive the dissolution of the House. Hence, in this case the
Special Committee proceeded to enquire into the executive acts of the appellants and
58 Purushothaman Nambudiri v State of Kerala AIR 1962 SC 694 [40].
59 AIR 1986 Mad 248.

22
-ARGUMENTS ADVANCEDpetitioners which had taken place during the previous term of the Punjab Vidhan Sabha. It is
quite untenable to allow the exercise of legislative privileges to punish past executive acts
especially when there was no pending motion, report or any other order of business that was
relatable to the said executive acts at the time of the re-constitution of the House.
It was also held that: It is altogether another matter if privileges are purportedly exercised
to punish those who have held executive office in the past. It is quite inconceivable as to how
the allegedly improper exemption of land had the effect of obstructing the legislative business
in the 13th term of the Punjab Vidhan Sabha. Hence, it is our considered view in respect of
the facts in the present case, that it was improper for the 13th Punjab Vidhan Sabha to claim
a breach of privileges on account of the alleged misconduct which actually took place during
the 12th term of the Vidhan Sabha.
Relying upon the above decision, the Petitioners humbly submit that, since the alleged
misconduct had no effect of obstructing the legislative business of the new term of the
Sanyasthan Legislative Assembly, it was not proper for it to take up this matter of breach of
privilege.
PRAYER
In the case of RCC Ports Ltd. v Vyasnagar Sea Ports Ltd. & Ors,
In the light of the arguments advanced and authorities cited, the Appellant humbly prays that
the Honble Court be pleased to adjudge and declare that:
1. The transfer of shares as part of disinvestment is mala fide.
2. The transfer of shares as part of disinvestment is violative of the MOU.
3. The transfer of shares as part of disinvestment is violative of Section 397 and 398 of
the Companies Act, 1956.
4. The Appellants decision to veto the CDR scheme was in consonance of the best
interest of the company.
60 (2010) 6 SCC 113.
23
-ARGUMENTS ADVANCED5. The Special Rights conferred on the Appellant are absolutely valid.
In the case of Mr. Mohan Grover & Ors v Special Committee, Sanyasthan Legislative
Assembly,
In the light of the arguments advanced and authorities cited, the Petitioners humbly pray that
the Honble Court be pleased to adjudge and declare that:
1. The Expulsion of the Petitioners is in violation of their right of Natural Justice.
2. The Alleged Misconduct of the Petitioners didnt obstruct the legislative proceedings
of the House.
3. In the facts and circumstances of the case, it was not proper to expel the Petitioners.
4. The Respondent cannot take up as a matter of breach of privilege an incident that
occurred during its previous term.
And/ Or Pass any order that this Honble Court may deem fit in the interest of equity, justice
and good conscience.
And for this act of kindness, the counsel for the Petitioner shall duty bound forever pray.
All of which is respectfully affirmed and submitted
Counsel for Petitioner
Sd/-
24

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-PRELIMINARIESTEAM CODE:

RAM MANOHAR LOHIA NATIONAL LAW UNIVERSITY, GRAND-INTRA 2016

SPECIAL COMMITTEE, SANYASTHAN LEGISLATIVE

-PRELIMINARIESON SUBMISSION TO THE SUPREME COURT OF MAHADESHA

-MEMORIAL FOR THE APPELLANT-

Sub-Committee on Judicial Accountability v. Union of India AIR 1992 SC 220.........2

-MEMORIAL FOR THE APPELLANT-

-MEMORIAL FOR THE APPELLANT-

-MEMORIAL FOR THE APPELLANT-

phase, because of recession in international market, the

-MEMORIAL FOR THE APPELLANT -

-MEMORIAL FOR THE APPELLANT-

-MEMORIAL FOR THE APPELLANT -

-MEMORIAL FOR THE APPELLANT -

-MEMORIAL FOR THE APPELLANT -

-MEMORIAL FOR THE APPELLANT -

-ARGUMENTS ADVANCEDARGUMENTS ADVANCED

2 AIR 1992 SC 220.

4 K Narayanan v State of Karnataka AIR 1994 SC 55.

5 Manohar Lal Sharma v Union of India (2013) 6 SCC 616.

9 [1985] BCLC 273.

12 [2008] 83 SCL 44.

14 Re Posgate & Denby (Agencies) Ltd 1987 BCLC 8 (Ch D).

15 [1972] 2 All ER 492.

16 [2005] 123 CC 486.

19 [2002] 39 SCL 493.

-ARGUMENTS ADVANCEDI.3.2. Violation of Section 398

24 [1990] 67 Comp Cas 491 (Cal).

28 [1988] 63 Comp Cas 184 (Delhi).

33 (2008) 6 SCC 750.

35 (2005) 11 SCC 73 [25].

37 2003 (3) Bom CR 334.

38 (2003) 2 SCC 111.

-ARGUMENTS ADVANCEDValidity of clause 123:

40 (1992) 1 SCC 31.

41 Suresh Savaliya Restriction on Transfer of Shares in a Public Company (Journal of

45 Brijesh Kumar, Principles of Natural Justice (Institutes Journal, July-September 1995)

47 (2010) 6 SCC 113.

51 1977 (2) Punj and Har 269.

52 1970 Guj LR 729.

55 (2010) 6 SCC 113.

57 (2002) 8 SCC 237.

59 AIR 1986 Mad 248.

-MEMORIAL FOR THE PETITIONER -

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