SMAY Investments Ltd and Another v Sachdev and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Patten,MR JUSTICE PATTEN |
| Judgment Date | 14 March 2003 |
| Neutral Citation | [2003] EWHC 474 (Ch) |
| Docket Number | Case No: HC 02C03515 |
| Court | Chancery Division |
| Date | 14 March 2003 |
[2003] EWHC 474 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, London WC2A 2LL
The Honourable Mr Justice Patten
Case No: HC 02C03515
Mr Anthony Trace QC and Mr Jonathan Russen (instructed by Merriman White) for the Claimants
Mr Murray Rosen QC and Mr Robert Deacon (instructed by Charles Russell) for the First and Third Defendants
Mr James Drake (instructed by Stevens & Bolton) for the Fourth Defendant
Hearing dates : 25th —27th February 2003
APPROVED JUDGMENT
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version is handed down may be treated as authentic.
INTRODUCTION
Reliance Silicones (India) Private Limited ("RSIL") was incorporated in India and has its registered office in Bombay. It carries on the business of manufacturing silanes and silicone-based products. The first Claimant, SMAY Investments Limited ("SMAY") is registered as the holder of 41% of the issued share capital of RSIL. The remaining shares are held by Manasvi Investments Private Limited ("Manasvi"), the Fourth Defendant (9.43%), Hargreaves Investment Limited ("Hargreaves"), a company incorporated in Mauritius (49%), and Mr Sachdev, the First Defendant, his wife and a Mr Shamba Prasad Misra (0.27%).
SMAY is a Jersey company which until July 2001 was controlled by the Second Claimant, Mr Bachchan, through Chelford Holdings Limited, a BVI company. In July 2001, in circumstances I will come to shortly, some 49% of the issued shares were transferred by Chelford to Bachmann Alpha Limited, which is described in the evidence as an investment company for beneficiaries under a Guernsey Trust, who are independent of Mr Bachchan.
Manasvi is also an Indian company. In the Particulars of Claim in this action it is alleged that its ultimate beneficial owner is Mr Sachdev, but this is denied. In the annual returns to the Registrar of Companies in India the registered shareholders are shown as Mr A P Parikh, Mr Kaushik Parikh and Ms Amita Parikh in equal one-third shares. Its directors are Mr Kamlesh Sanghavi and Mr Prakash Randive.
It is common ground between the parties that on 5th June 2001 Mr Bachchan and Mr Sachdev met at the offices of the Second Defendant, RMSP (UK) Limited ("RMSP") in Guildford and agreed terms for the provision of financial assistance to RSIL. At that time SMAY owned 90% of the issued share capital of RSIL. Mr Gregg Egen (then a director of SMAY and RMSP) was also present. The terms of what is generally referred to as the Guildford Agreement were recorded in a signed manuscript note as follows:
"1. Resolution for Transfer of 76% holding i.e. both A & B – Actual transfer of SMAY.
2. Transfer of Administration to Danny McCann's Trust Company.
3. Settlement of Fees —First negotiate the fees and then Pay some & Pend some.
4. Understanding that is Between AB & YS:
4.1 Operations as usual with better reporting and decision making and communication.
4.2 Both cannot & should not sell without consulting each other and obtaining each other's approval.
4.3 Both YS & AB to retain minimum 51% together and jointly —vote as a block.
4.4 AB to raise funds by any & all means reqd by the company currently estimated at Rs. 8 Cr. (1.25) for Vashi & to 8 Crore for Khopoli (1.25m).
4.5 YS to continue as Chairman and AB & YS in total control as long as he desires.
4.6 YS to strive to build the next big Plant as soon as situation in Company permits.
4.7 YS to continue with Base in the UK as a Permanent home.
4.8 YS to have a salary in the UK of in hand £14.500/ —per month with Tax —Payee separate to be Tax Planned & National Insurance + Medical Insurance to be paid. This to come from RMSP/SMAY or any vehicle mutually agreed.
4.9 No raking up of the past or pin pointing of liabilities or decisions of the past or drawings or debts of the past effective date of the Transfer of shares.
4.10 AB to provide total support both moral, financial management to YS to enable him to deliver the targets required by the organization.
4.11 AB's involvement to be full and with complete availability and access to information.
4.12 AB + YS to operate as a team and discuss & make changes by mutual agreement.
The above to be implemented by both Parties and only to be changed by mutual agreement and both parties' consent."
The reference in clause 4.3 to Vashi and Khopoli is to the existing plant owned by RSIL at Vashi in India and to a proposal to construct a new manufacturing plant at Khopoli. One crore is equivalent to ten million rupees and was worth about £150,000 at the time.
Mr Bachchan claims that under the terms of the Guildford Agreement he was to acquire ultimate voting control of RSIL and on 11th June 2001 76% of the issued shares in SMAY were transferred to Chelford. At the same time Mr Egen resigned as a director of SMAY and was replaced by Mr McCann, who acted as Mr Bachchan's representative on the board. Mr Sachdev remained as a director. As a result of the transfer of the 76% interest in SMAY to Chelford Mr Bachchan effectively controlled RSIL.
The background to the Guildford Agreement is highly contentious. The relationship between Mr Bachchan and Mr Sachdev goes back to early 1994. At that time Mr Sachdev was a director of, and the majority shareholder in, RSIL. He was anxious to expand the company and in particular its manufacturing capacity. An agreement was made in about June 1994 under which Mr Bachchan would provide initial funding of £5m and subsequently arrange for facilities of up to US $50m. In return, Mr Sachdev agreed to transfer to Mr Bachchan 24% of the issued share capital of RSIL and a declaration of trust to this effect was executed on 23rd August 1994. Mr Sachdev says in his evidence that the funding pursuant to the 1994 agreement was to be provided by December of that year, but was not forthcoming. Only about Rs. 11 crores (£2m) was provided through Lotus Investments Limited (one of Mr Bachchan's companies). Eventually it was agreed that funding would be provided through SMAY to the tune of US $60m and RSIL would issue and allot to SMAY 97% of its shares. It is at this point that the accounts of Mr Sachdev and Mr Bachchan significantly diverge. Mr Bachchan in his first affidavit describes events between 1995 and 1998 in these terms:
"18. Between 1995 and 1998 I invested approximately £4,500,000.00 (four and a half million pounds) of my own monies and my family's monies in RSIL, though this investment came through a number of limited companies under my control. In addition, I procured further investment by myself and others totalling approximately £2,000,000.00 (two million pounds).
19. The intention was that these investments should give rise to a 24% shareholding in RSIL. In the event, SMAY became the majority shareholder in RSIL, with the result that I acquired a minority shareholding in SMAY and an Indian company known as Lotus Investments Limited, representing mine and my family's interests, acquired 9.5% of the shares in RSIL. This represented the capitalisation of £4,500,000.00 of the investment, with the balance of £2,000,000.00 being treated as unsecured investment.
20. Regrettably, the substantial investments in RSIL did not lead the company to prosper. It did not manage to build a factory on the scale intended. By March 1996 RSIL was forced to register as a "Sick Industrial Unit" with the Board of Financial Reconstruction in India. This put RSIL in a position akin to administration in this country.
21. By March 1998 Lotus Investments Limited had sold its shareholding interest in RSIL to Manasvi for approximately US $100,000.00 (one hundred thousand US dollars). From that time until the summer of 2001 I ceased to have any shareholding interest in the business of RSIL, though the balance of the investment in RSIL remained in the company (albeit apparently lost to its creditors). In contrast, Mr Sachdev (through SMAY and Manasvi) continued to be the ultimate beneficial owner of RSIL and to sit on its Board."
Mr Sachdev accepts that SMAY acquired a majority interest in RSIL, but he alleges that by early 1996 the promised funding of US $60m had not materialised and that instead Mr Bachchan offered to provide funding of Rs.36 crores (£6m) through Manasvi, which Mr Bachchan then controlled. This led to an agreement between SMAY, RSIL and Manasvi, executed on 22nd March 1996 in India, which I shall refer to as the Tripartite Agreement. It provided for SMAY to provide technical know-how to RSIL in return for shares. In addition SMAY was to contribute US $60m to RSIL, and Manasvi was to provide or arrange for an injection of Rs.36 crores. Both payments would be by way of subscription for shares. In the event of a default by SMAY, then the voting rights attaching to the shares would be forfeited and Manasvi would have the right to acquire SMAY's shares. Mr Sachdev says that the Tripartite Agreement was approved by the board of RSIL at a meeting held on 21st March 1996. It was then executed by Mr Sachdev on behalf of SMAY, by Mr Khati on behalf of RSIL and by Mr Kaushik Parikh on behalf of Manasvi. Lotus Investments (rather than Manasvi) then proceeded to make the payment of Rs.36 crores by a cash advance of Rs. 11 crores and by the discharge of third party liabilities of RSIL in a sum equivalent to the balance, in return for a 9.5% holding in RSIL.
In paragraph 14 of his third affidavit Mr Sachdev says that the reason why Mr Bachchan arranged for the Rs.36 crores to be provided through Lotus Investments and not by Manasvi was that he wished to carry out a scheme...
To continue reading
Request your trial
-
(1) Bilta (UK) Ltd ((in Liquidation)) (2) Kevin John Hellard (liquidator of Bilta (UK)Ltd) and Another v (1) Muhammad Nazir and Another (3) Pan 1 Ltd and Others
...it maintained was a binding arbitration agreement (compare the similar point made by Patten J in the context of CPR Part 11 in SMAY Investments Ltd v Sachdev [2003] EWHC 474 (Ch); [2003] 1 WLR 1973, at para. [43]). It was clear as between the parties that the application was made to enable......
-
Zumax Nigeria Ltd v First City Monument Bank Plc
...evidence that the application was being made without prejudice to the FCMB's pending challenge to the jurisdiction. 45 In SMAY Investments Ltd v Sachdev [2003] 1 WLR 1973 Patten J (as he then was) summarised the approach to be adopted in considering whether a party has submitted to the jur......
-
Ronald Dennis (Petitioner) v Tag Group Ltd and Others
...the test of conduct unequivocally referable to submission to the jurisdiction". 17 Mr Brisby QC and Mr Chivers QC both rely on SMAY Investments Limited v Sachdev [2003] 1 WLR 1973, a decision of Patten J (as he was). Having set out the facts of the case and nature of the disputes between th......
-
Asad Ali Meerza and Others v Tareq Al Baho and Others
...NL v Atlantic Capital Corporation [1995] reported only in "The Times" for 11 th December, but quoted in full by Patten J. in SMAY Investments Ltd. v Sachdev [2003] 1WLR 1973 at p.1976. I reproduce the whole of the quote as set out in that paragraph 41 from the Judgment of Patten J: ""In ap......
-
BVI Case Notes - July 2014
...dismissed. Footnotes 1 High Court of England, Northern Ireland, Court of Session of Scotland 2 BVIHC (COM) 2012/0008, 2 April 2012 3 [2003] EWHC 474(Ch) 4 [2011] UKPC 37 5 (1986) 83 LSG 1725 The content of this article is intended to provide a general guide to the subject matter. Specialist......