Case: Chatterjee Petrochem(I) Pvt.Ltd Vs. Haldia Petrochemicals Ltd

Haldia Petrochemicals Ltd., hereinafter referred to aswas incorporated in 1985 for establishing a green field petrochemical complex in Haldia in the State of West Bengal to be established by the West Bengal Industrial Development Corporation, hereinafter referred to asand the R.P. Goenka Group. However, the Goenka Group left the Company in 1990 and Tata Chemicals and Tata Tea were inducted into the project between 1990 and 1993. Not much headway was made towards implementing the project till June, 1994 when Dr. Purnendu Chatterjee, hereinafter referred to asa Non-Resident Indian industrialist and financier, expressed an interest in the project. Accordingly, a Memorandum of Understanding was entered into between WBIDC and the Chatterjee Petrochem (Mauritius) Company, hereinafter referred to asand the Tatas on 3rd May, 1994. According to the said Memorandum, the initial cost of the project was estimated at Rs.3600 crores which was to be funded with a debt of Rs.2400 crores and equity of Rs.1200 crores. Initially, equity capital of Rs.700 crores was to be contributed by WBIDC, CP(M)C and the Tatas in the ratio of 3:3:1 respectively. It was also provided that the Board of the Company would consist of four nominees each of WBIDC, CP(M)C and two from the Tata group. This was followed by a Joint Venture Agreement, hereinafter referred to asbetween the three parties on 20th August, 1994, incorporating the terms which had been agreed upon by the parties. It was decided that both WBIDC and CP(M)C would invest Rs.300 crores each and the Tatas would invest Rs.100 crores, while Rs.500 crores was to be obtained from the public, including Non-Resident Indians and Financial Institutions, towards equity, keeping the debt equity ratio at 2:1. Certain other terms and conditions agreed between the parties were also included in the Agreement, of which one of the specific terms was that in case of disinvestment by WBIDC, the disinvested shares would be offered to CP(M)C. One of the other terms agreed to by the parties is that they would be entitled to seek specific performance of the terms and conditions of the agreement in accordance with the provisions of the Specific Relief Act, 1963, and the agreement would remain in force as long as the parties held the prescribed percentage of shares.2. After the said agreement was executed, four other letters dated 30th September, 1994, 6th October, 1994 and 5th January, 1995, were exchanged between the parties, whereby it was agreed that between 24 months of commencement of commercial production or within 60 months of the date of the JVA, whichever was later, at least 60% of the shareholding of the WBIDC would be offered to CP(M)C at Rs.14/- per share. It was provided that the role of the Government in the Company would be limited to its promotion and guidance through the initial phases of the project and that the nominee of CP(M)C would be the Managing Director. In March, 1995, the Articles of Association of the Company were altered to bring it in line with the terms of the JVA. An addendum to the JVA was executed on 30th September, 1996/4th October, 1996, by which the project cost was revised to Rs.5170 crores and the equity participation was revised to Rs.432.857 crores to be provided by WBIDC and by CP(M)C, while Tatas were to provide Rs.144.286 crores. The remaining equity participation of Rs.969 crores was to be from the public.3. The project started in 1997 and commercial production commenced in August, 2001. Thereafter, further agreements were entered into between the parties and the first of such agreements was entered into on 12th January, 2002, whereby CP(M)C, the Government of West Bengal, WBIDC and HPL, inter alia, agreed on a certain course of action in regard to HPLs need of financial and managerial restructuring. The object and exercise of such restructuring was that CP(M)C would acquire a controlling interest of 51% shares in the equity of the Company and would have complete control over the day-to-day affairs of the Company, including the right to appoint key executives. WBIDC also agreed to vote along with CP(M)C on all issues in the shareholders meeting and its nominee would also vote along with the nominee Directors of the CP(M)C. It was specifically agreed that all other rights and obligations of CP(M)C in terms of the earlier agreement would continue till CP(M)C acquired majority shares in the Company.4. The aforesaid agreement was followed by another agreement dated 8th March, 2002, wherein it was recorded that in terms of the agreement dated 12th January, 2002, 155,099,998 equity shares of WBIDC had been transferred and delivered to CP(I)PL, on 8th March, 2002. It was also mentioned that the said shares were pledged with WBIDC and, accordingly, the shares had been duly lodged along with the share certificates with WBIDC and the pledge had been acknowledged. Certain other agreements in regard to the shareholding pattern and the management of the Company were entered into, wherein after allotment of shares to Winstar, which had been brought in to infuse Rs.127.4 crores towards equity, the collective shareholding of the Appellants was shown to be 58.62% with a rider that 155 million shares transferred by WBIDC to CP(M)C was subject to registration and lenders approval. We may have recourse to refer to some of the said agreements at a later stage.5. One other agreement which is relevant to the facts of this case was entered into between PC and the Government of West Bengal, represented by the Respondent No.8, Shri Sabyasachi Sen, on 14th January, 2005, wherein it was indicated that the Government of West Bengal would sell its entire shareholding in HPL to CP(M)C, and that the price of the shares would be determined by an independent valuer selected by the Government of West Bengal from amongst a panel of firms to be prepared by CP(M)C. It was further declared that the recommendation of the valuer would be binding both on the Government of West Bengal and CP(M)C.6. In the months of January and February, 2005, HPL had approved the issuance and allotment of equity shares worth Rs.150 crores at par to Indian Oil Corporation (IOC). Objecting to the proposed allotment of shares to IOC and also on the ground that WBIDC and the Government of West Bengal had failed to fulfil their commitment to transfer their balance 36% shares to the Appellants, the Appellants filed Company Petition No.58 of 2009 before the Company Law Board under Sections 397, 398, 399, 402, 403 and 406 of the Companies Act, 1956, inter alia, for the following reliefsAn order be passed directing the company to take immediate steps for modifying and/or altering and/or amending the Articles of Association of the Company to incorporate therein the complete agreement by and between the joint venture partners and special rights of the petitioner in relation to the Company, as provided in the Agreements dated 20th August, 1994, 12th January, 2002, 8th March 2002 and 30th July, 2004.b) Appropriate orders be passed directing the entire shareholding of the respondent No.2 in the Company to be transferred in favour of the petitioner at the agreed price of Rs.14/- per share in respect of such number of shares of HPL registered in the name of Respondent No.2 constituting 60% of the holding of the respondent No.2 in the Company and on such valuation in respect of the balance shares held by Respondent No.2 as this Honble Board may think fit and proper;c) Declaration that the resolution passed at the EGM of the Company held on January 14, 2005, is illegal, inoperative, null and void and not binding on the Company or any person connected therewith;d) Permanent injunction restraining the respondents whether by themselves or by their servants or agents or assigns or otherwise howsoever from giving any effect or further effect to the resolution passed on the EGM held by the Company on January 14, 2005 in any manner whatsoever;e) Permanent injunction restraining the Company from receiving any money or encashing any cheque that may have been issued by the Respondent No.6 to the Company in pursuance of the Memorandum of Association and the resolution passed by the EGM of the Company held on January 14, 2005;f) Permanent injunction restraining the Company and its Board of Directors from taking any major decision or policy decision relating to the management and affairs of the Company before the majority shareholding and management control in the Company is effectively established as per the Agreements dated 12th January, 2002, and 30th July, 2004, including the due recognition of the nominee of petitioner No.2 as Director of the Company pursuant to the letter of Petitioner No.2 dated 1st August, 2005;g) Permanent injunction restraining the Company and its present board from dealing with or disposing of or alienating or encumbering any asset or property of the Company except strictly in the course of the business of the Company;h) Permanent injunction restraining the Company and its Board of Directors from taking any decision in relation to the management and administration of the Company except with the previous approval of the petitioner;i) Permanent injunction restraining the respondents and each of them from in any manner acting in derogation ofrights as majority shareholders in the company and theright to control the management of the Company, including without limitation by way of sale of shares of the Company held by any of them to any third party except the petitioners;j) ..................................................................................................................k) ..................................................................................................................l) Direct the reconstitution of the Board of the Company to reflect the majority control and the special rights accorded under the Agreements between the shareholders to the petitioners;m)Subsequently, on coming to learn that the shares in question had already been allotted to IOC, the Appellants filed an application for amendment of the petition to challenge the allotment in favour of IOC and seeking cancellation thereof.7. Before the Company Law Board, hereinafter referred to as, not only was it reiterated by the Chatterjee Group that PC had to rejuvenate the Company and to implement the project, for which he was recognized as ain the Memorandum of Understanding entered into on 3rd May, 1994, but that there was a clear understanding that the Chatterjee Group would have management interest in the Company. Before the CLB it was further contended that the Company was really a quasi-partnership with each of the three groups having financial stakes and management participation. The Chatterjee Group further claimed that the Memorandum of Understanding not only provided for the Appellants to hold 3/7th of the shares of the Company, but also 2/5th of the Directorship therein. WBIDC was also to have a 3/7th share in the Company so that the Company remain as a private company.8. The Chatterjee Group also reiterated that in the JVA dated 20th August, 1994, the Chatterjee Group had been given a right of pre-emption to acquire the shares of WBIDC if it chose to disinvest its shares. Before the CLB it was also emphasized that at the time of entering into a Memorandum of Understanding on 3rd May, 1994, it had been clearly understood between the parties that the Company would remain in the private sector. Repeating what has been indicated hereinbefore, learned counsel for the Chatterjee Group submitted before the CLB that in addition to the JVA, 4 letters had been exchanged between the Chatterjee Group and the WBIDC/GoWB providing for the Chatterjee Group to acquire at least 60% of the shares held by WBIDC at Rs.14/- per share upon the happening of certain events within a particular timeframe. Before the CLB the Chatterjee Group also contended that it was understood by the parties that the role of the Government would gradually be confined to promotion and guidance during the initial stages of the project, after which the control of the management would be in the private sector and the nominee of the Chatterjee Group would be the Managing Director of the Company.9. In support of its contention of mismanagement and oppression by the Company towards the Chatterjee Group, it was alleged that the decision to allot 150 million shares to IOC by WBIDC/GoWB had been taken behind its back with the sole intention of preventing the Chatterjee Group from acquiring the control of the Companys affairs, as was promised and understood at the initial stage when PC agreed to participate in the equity holdings of the Company. One of the major acts of oppression complained of by the Chatterjee Group before the CLB was that despite having received payment in respect of 155 million shares and having transferred the same to the Chatterjee Group, it did not complete the transfer by registering the transfer with the Company and altering its Register of Members accordingly, which effectively deprived the Chatterjee Group of having the promised majority shareholding in the Company. Before the CLB it was further contended that had the said shares been registered in the name of the Chatterjee Group, the total shareholding of the Chatterjee Group would have been 51% which would have given them control of the affairs of the Company. Hence, a prayer had been made before the CLB for a direction upon WBIDC/GoWB to complete the transfer of the 155 million shares in favour of the Chatterjee Group.10. On behalf of the Chatterjee Group it had also been contended before the CLB that it had agreed to induct IOC as a portfolio investor in the Company at the instance of GoWB. However, subsequently, by its letter dated 20th September, 2004, the Chatterjee Group had indicated that in view of the proposed public offer, there was no further necessity of inducting any portfolio investor, but the investment of Rs.150 crores by IOC could be considered. A resolution was adopted by the Company on 2nd November, 2004, to allot shares to IOC, although the Chatterjee Group was against such allotment. In order to maintain the private character of the Company, the Chatterjee Group called upon WBIDC to sell 60% of its shareholding to the CP(M)C at the agreed price of Rs.14/- per share as recorded in the letter dated 30th September, 1994. It was further submitted before the CLB that upon such demand being made, discussions were held and it was mentioned that the GoWB and WBIDC would give in writing that the entire shareholding of WBIDC in the Company would be sold to the Chatterjee Group. It was, therefore, submitted that pursuant to such discussions and representations that an Agreement was reached on 14th January, 2005, between one Dr. Sabyasachi Sen and PC in the presence of Mr. Tarun Das, wherein they agreed to vote in support of the Resolution to allot 150 million HPL equity shares to IOC at par. The grievance of the Chatterjee Group before the CLB was that inspite of several letters written on behalf of the Chatterjee Group, no steps were taken by the Company to give effect to the Resolution dated 14th January, 2005.11. Another major grievance of the Chatterjee Group before the CLB was that sometime before 15th July, 2005, doubts regarding IOCs investment in HPL were substantiated when the letter dated 10th November, 2004, written by the WBIDC to IOC was discovered. It was contended before the CLB that by deliberately suppressing the discussions between WBIDC and IOC which would give IOC control over the management of HPL, WBIDC/GoWB wrongly obtained the consent of the Chatterjee Group to the Resolution of the Extra-Ordinary General Meeting held on 14th January, 2005, to allot shares at par to the Respondent No.6 IOC. The Chatterjee Group also complained that neither GoWB nor WBIDC had ever intended to honour the agreement dated 14th January, 2005, and from the letter dated 10th November, 2004, it was clear that GoWB and WBIDC did not intend to sell the HPL shares held by the WBIDC to the Chatterjee Group.12. It was also contended before the CLB by the Chatterjee Group that since HPL was not in immediate need of funds, the allotment of shares to IOC was not warranted despite the fact that the Chatterjee Group was ready and willing to complete the share purchase deal at the agreed price of Rs.14/- per share. By virtue of the superior bargaining power of the WBIDC and GoWB, the Chatterjee Group could not enforce their special rights on account of their continuing minority status in the Company, nor could it acquire control of the management thereof.13. It was also contended that even the Articles of Association had not been modified or altered to reflect the rights which the Chatterjee Group enjoyed and the clandestine arrangement arrived at between the GoWB, WBIDC and IOC undermined the very basis on which the request made by GoWB and WBIDC had been accepted by the Chatterjee Group. Accordingly, the said arrangement was required to be brought to an end for resolving the oppressive acts of the GoWB and the WBIDC.14. On the basis of the aforesaid allegations, the Chatterjee Group contended before the CLB that the affairs of the Company were being conducted in a manner which was prejudicial to the public interest and oppressive to them. It was further contended that winding-up of the Company would unfairly prejudice the parties but that otherwise the facts would justify the making of a winding-up order on just and equitable grounds.15. The aforesaid stand taken by the Chatterjee Group was opposed on behalf of the Company on the ground that inspite of having made several promises to infuse equity into the Company, it had failed to do so and in view of severe fund crunch faced by the Company on account of such failure, the Company had no other alternative, but to transfer the shares in question to a party which was willing to do so. In fact, it was the joint contention of GoWB and WBIDC that since the Chatterjee Group had failed to abide by its commitments to infuse equity into the Company and as the affairs of the Company were at a point of collapse, with creditors, particularly the Indian Oil Corporation supplying Naphtha, which was the essential ingredient in the manufacturing process of the Company, demanding their outstanding dues even under the threat of taking appropriate action under the provisions of the Companies Act, 1956, the Company had no option but to transfer the 150 million shares to IOC as per the decision taken earlier.16. In addition to the above, it was also submitted that the Chatterjee Group had agreed to the decision to induct the IOC in the Company as a portfolio investor.17. The Company Petition was disposed of by the CLB by upholding the decision of the Company to allot 150 million shares to IOC, which would be at liberty to deal with the same in any manner it thought fit. Similarly, the transfer of 155 million shares by WBIDC to the Chatterjee Group at Rs.10/- per share was confirmed. A further direction was given to GoWB and WBIDC to transfer the 520 million shares held by them in HPL to the Chatterjee Group. The Chatterjee Group was also directed to purchase the 271 million preference shares held by GoWB and WBIDC at par. The CP(I)PL was directed to pay a sum of Rs.125 crores to WBIDC towards balance consideration for the 155 million shares on or before 28th February, 2007. It was further directed that on payment of the said amount, the shares in question would be deemed to have been dematerialized and transferred in the name of CP(I)PL, without any further deed or act or refusal from anyone or production of any instruction to transfer. Significantly, the Chatterjee Group was also given liberty as soon as they paid the consideration for the 155 million shares, to take control of the day-to-day management of the Company as they would then be holding 51% of the equity shares, with the stipulation that no major decisions would be taken without the approval of the Court. The CLB also came to a definite finding that the 150 million shares allotted to IOC had not been so transferred suddenly or surreptitiously or with any ulterior motive and the allegation of a secret agreement between GoWB and IOC, though of very little significance, has been magnified by the Chatterjee Group in the Company Petition.18. The Government of West Bengal, through its Joint Secretary in the Department of Commerce and Industry, filed an appeal before the Calcutta High Court against the said order of the CLB dated 31st January, 2007 under Section 10F of the Companies Act, 1956, and the same was numbered as A.P.O.No.45 of 2007. Among the various grounds taken in the Appeal, a question was raised as to whether the CLB could have assumed jurisdiction on the Company Petition filed by Chatterjee Petrochem (Mauritius) Ltd. Co., Winstar India Investment Company Ltd., India Trade (Mauritius) Ltd. and Chatterjee Petrochem (India) Pvt. Ltd., to enforce rights under private contracts. Another ground taken was that the CLB had erred in applying the doctrine of legitimate expectation in a Petition under Section 397 read with Sections 398 and 402 of the Companies Act, 1956, and in treating the Company to be a quasi-partnership. As a corollary to the said question, the Government of West Bengal also questioned the jurisdiction of the CLB to convert the Company Petition into a Suit for Specific Performance of Contract. It was also contended that the issues raised in the Company Petition were with regard to the disputes of a contractual nature between shareholders and the non-performance of such contracts between the shareholders could not be treated to be theThe locus standi of the Chatterjee Petrochem (India) Pvt. Ltd. to maintain a petition under Section 398 of the Companies Act was also questioned since on the date of filing of the Petition before the CLB, the said Company was not even a member of the Joint Venture Company. It was also reiterated that no case for mismanagement or oppression had been made out and the application under Section 398 of the above Act was liable to be dismissed.19. Upon hearing the parties, the learned Single Judge held that CP(I)PL had no locus standi to maintain a petition under Section 397 of the Companies Act and that CLB could not have assumed jurisdiction on the Company Petition, in which CP(I)PL was a petitioner, since CP(I)PL was not a member of HPL. The learned Single Judge held that such a petition for the purpose of enforcing rights under private contracts would not be maintainable and that the agreement entered into between CP(I)PL and WBIDC for transfer of shares, being a private contract between two shareholders, the same could not be the subject matter of a petition under Section 397 of the Companies Act, 1956. The learned Single Judge also observed that such agreements could not be treated to beand that, in any event, such a ground had not also been pleaded in the Company Petition. The learned Judge held that the order of the CLB, which was based entirely on the question of transfer of the 155 million shares by WBIDC to CP(I)PL, stood vitiated by such jurisdictional error.20. The learned Single Judge also held that the CLB was not justified in applying the concept of quasi- partnership, which had been urged on behalf of the Chatterjee Group, to HPL. According to the learned Single Judge, the question as to why a Limited Company should be considered to be a quasi- partnership, would have to be decided on the facts of each case. While, on the one hand, it would be easy to apply the said concept to a closely-held Family Company or a Private Limited Company, as in cases where a partnership is converted into a Company, such an assumption could not be arrived at merely on the ground that the promoters of the Company described themselves as partners.21. The learned Single Judge further held that from the entire pleadings in the Company Petition no case whatsoever had been made out that in conducting the affairs of HPL, the GoWB and WBIDC had oppressed the Petitioners in any way so as to attract the provisions of Section 397 of the Companies Act. The learned Single Judge also held that the CLB was not right in applying the doctrine of legitimate expectation to the agreement entered into between WBIDC and CP(I)PL on 8th March, 2002, thereby converting the Company Petition into a suit for specific performance of contract. The learned Judge observed that by granting relief in the name of the doctrine of legitimate expectation, the CLB has actually enforced specific performance of the contract and agreements, which was beyond its jurisdiction.22. Lastly, on the question of the induction of IOC and the allotment of 155 million shares to the said Company, the learned Single Judge held that the induction of IOC was on the basis of the Debt Restructuring Package and the Refinancing Scheme, which were to the advantage of HPL, and had been decided from time to time at the Board meetings of the Directors, which had been presided over by PC. On the basis of his aforesaid findings, the learned Single Judge, relying on the decision of this Court in Shanti Prasad Jain Vs. Kalinga Tubes Ltd. [(1965) 2 SCR 720] , held that an order granting relief under Section 397 could be made only after affirming and recording an opinion on each of the three conditions mentioned in Section 397(2)(a) and (b) of the Companies Act, 1956. The learned Single Judge held that in the instant case, no such opinion had either been formed or recorded by the CLB relating to the said three conditions. The learned Single Judge also rejected the submissions made on behalf of the Petitioners that an opinion with regard to the said two conditions would automatically follow from the opinion formed by the CLB on oppression, or such opinion could be gathered from the order of the Board itself. The learned Single Judge, accordingly, held that the order passed by the CLB was contrary to the provisions of Section 402(e) of the above Act, since no relief under the said Section could be granted without a finding having been arrived at that a case of oppression had been made out within the meaning of Section 397 of the aforesaid Act.

Reasoning:
What emerges from the materials on record and the submissions made on behalf of respective parties is that HPL was incorporated in 1985 by the West Bengal Industrial Development Corporation and the R.P. Goenka Group, and their nominees were the subscribers to the Memorandum of Association. Soon thereafter, in 1990, the Goenka Group left the Company and Tata Chemicals and Tata Tea were inducted into the project between 1990 and 1993. However, since the TATAs were not very keen to continue with the Project, in June 1994, Dr. Purnendu Chatterjee, a Non-Resident Indian industrialist and financier, evinced his interest in implementing the project. Accordingly, a Memorandum of Understanding was entered into between WBIDC and the Chatterjee Petrochem (Mauritius) Company and the Tatas on 3rd May, 1994. Certain assurances were given to Dr. Chatterjee that the Company would remain a private enterprise with the Chatterjee Group in control of the management thereof. A further assurance was given to the effect that WBIDC/GoWB would transfer their entire shares in the Company to the Chatterjee Group, which would then acquire a complete majority for the purposes of management and control of the Company.90. In addition to the above, certain duties and obligations to be performed by the Chatterjee Group were also indicated, mainly confined to the question of bringing in equity in an otherwise cash-strapped situation then prevailing in relation to the Companys finances. It also appears that the assurances given by WBIDC/GoWB were on account of the aforesaid assurances given by the Chatterjee Group to bring in equity. Inasmuch as, the Chatterjee Group failed to abide by its commitments, the Company had no other alternative, but to bring in IOC by selling and transferring 150 million shares to the saidmain grievance of the Appellants appears to be that having been induced into investing large sums of money in establishing the petrochemical complex on various promises, particularly that the Company would continue to retain its private character and the Chatterjee group would have control over its management, such promises, although, reduced into writing in the form of agreements, not only remained unfulfilled, but even the character of the Company was altered with the transfer and sale of 150 million shares by the Company in favour of IOC. Coupled with the above, is the other grievance that despite having transferred 155 million shares in favour of CP(I)PL, and having received the full price therefor, the Company had not registered the same in the Companys Register of Share-holders, thereby depriving the Chatterjee Group from exercising its right to vote in respect of the said shares. The third grievance of the Chatterjee Group is that by not registering the transfer of the 155 million shares in their favour, but, on the other hand, transferring 150 million shares in favour of IOC, the character of the Company was altered from a Private Company into a Government Company and also reduced the Chatterjee Group to a minority, despite the promises held out earlier and as incorporated in the Agreements dated 20th August, 1994, 12th January, 2002 and 8th March,case of the Chatterjee Group is woven around two particular issues, namely, that it had been induced to invest in HPL so as to make it a successful commercial enterprise on the promise that the Company would always retain a private character and the Chatterjee Group would have control over its management, but such a promise had not been adhered to and, on the other hand, negotiations were undertaken by WBIDC to induct IOC, a Central Government Company, with the intention of ultimately handing over the management of the Company to IOC. The aforesaid case of the Chatterjee Group is also based on the grievance that while keeping the Chatterjee Group under the impression that it intended to ensure that the Chatterjee Group had the requisite number of shares to allow it to have a majority shareholding and thereby control of the Companys management, the Company carried on clandestine negotiations with WIBDC to transfer all the shares held by it in the Company to IOC to give it management and control over the Companyssecond ground, as made out by the Chatterjee Group, was that despite having transferred 155 million shares in favour of CP(I)PL on 8th March, 2002, it did not register the same in the name of CP(I)PL, which remained the beneficial owner, the right to vote on the basis thereof remained with WBIDC. This was done despite the fact that the price for the said shares had been received by way of a private arrangement and the Lenders and financial institutions had given their consent to the same. According to the Chatterjee Group, this one act of omission on the part of the Company was sufficient to attract the provisions of Section 397 of the Companies Act and for the CLB to pass appropriate orders on account thereof. It is on account of the second ground on which the Company Petition was filed that a prayer had been made therein for a direction upon WBIDC and IOC to immediately register the transferred 155 million shares in the name ofis clear that when Dr. Purnendu Chatterjee expressed his interest in setting up of the Haldia Petrochemicals Ltd., various incentives had been offered to him by the GoWB and WBIDC to invest in the Company and to make it a successful commercial enterprise. Such investments were, however, contingent upon Dr. Chatterjees bringing in sufficient equity to set up and run the Company. As would be seen, at the very initial stage all the understanding between Dr. Chatterjee and GoWB & WBIDC, both WBIDC and the Chatterjee Group were to hold 433 million shares each, while Tata was to hold 144 million shares. The promise extended by WBIDC and GoWB to the Chatterjee Group to provide at least 60% of the shares held by WBIDC at Rs.14/- per share to the Chatterjee Group so as to give the Chatterjee Group the majority shareholding in the Company, as was indicated in the Agreements dated 12th January, 2002, 8th March, 2002 and 14th January, 2005, did not ultimately materialise and, on the other hand, the Chatterjee Group was reduced to a minority on account of its decision not to participate in the Rights Issue, and, thereafter, by transfer of 150 million shares by WBIDC in favour offailure of WBIDC and GoWB to register the 155 million shares transferred to CP(I)PL could not, strictly speaking, be taken to be failure on the part of the Company, but it was the failure of one of the parties to a private arrangement to abide by its commitments. The remedy in such a case was not under Section 397 of the Companies Act. It has been submitted by both Mr. Nariman and Mr. Sarkar that even if no acts of oppression had been made out against the Company, it would still be open to the learned Company Judge to grant suitable relief under Section 402 of the Act to iron out the differences that might appear from time to time in the running of the affairs of the Company. No doubt, in the Needle Industries case, this Court had observed that the behaviour and conduct complained of must be held to be harsh and wrongful and in arriving at such a finding, the Court ought not to confine itself to a narrow legalistic view and allow technical pleas to defeat the beneficial provisions of the Section, and that in certain situations the Court is not powerless to do substantial justice between the parties, the facts of this case do not merit such a course of action to be taken. Such an argument is not available to the Chatterjee Group, since the alleged breach of the agreements referred to hereinabove, was really in the nature of a breach between two members of the Company and not the Company itself. It is not on account of any act on the part of the Company that the shares transferred to CP(I)PL were not registered in the name of the Chatterjee Group. There was, therefore, no occasion for the CLB to make any order either under Section 397 or 402 of the aforesaid Act. If, as was observed in M.S.D.C. Radharamanans case (supra), the CLB had given a finding that the acts of oppression had not been established, it would still be in a position to pass appropriate orders under Section 402 of the Act. That, however, is not the case in the instantour view, the appellants have failed to substantiate either of the two grounds canvassed by them for the CLB to assume jurisdiction either under Section 397 or 402 of the Companies Act, 1956, and it could not, therefore, have given directions to WBIDC and GoWB to transfer 520 million shares held by them in HPL to the Chatterjee Group and the High Court quite rightly set aside the same and dismissed the Company Petition.