Vitsol Memorial For APPELLANT

4th VITSOL NATIONAL MOOT COURT COMPETITION ON CORPORATE LAW 2022
Team Code: VNMC418-A
4th VITSOL NATIIONAL MOOT COURT COMPETITION
ON
CORPORATE LAW 2022
IN THE HON’BLE SUPREME COURT OF ARCADIA
APPEAL NO. _______/2022
VAANI LTD.
KARTA TRUST,
KARTA GROUP PRIVATE LTD.
(APPELLANT)
V.
SEOL INVESTMENT PRIVATE LTD.
ANIL SEOL
(RESPONDENT)
IN THE MATTER OF THE COMPANIES ACT, 2013
UPON SUBMISSION TO THE HON’BLE CHIEF JUSTICE OF SUPREME COURT
MEMORANDUM ON BEHALF OF THE APPELLANT

MEMORIAL ON BEHALF OF THE PETITONER
1
Table of Contents
List of Abbreviations 3
Table of Contents 3-6
 Index of Authorities 3
 Books 5
 Websites 5
 Statutes 6
Statement of Jurisdiction 7
Statement of Facts 8
Statement of Issues 12
Summary of Arguments 13
Arguments Advanced
1. Issue-I: Whether removal of Anil Seol from the position of Chairman-cum-

14
Chief Executive Officer leads to Oppression and Mismanagement?
2. Issue-II: Whether provisions of Articles of Association of Vaani Ltd are
unreasonable and in violation of the Companies Act, 2013 by giving 19
unscrupulous power to Karta Trust?

3. Issue-III: Whether raising of finance through Compulsorily Convertible
Debenture are oppressive and in violation of the Companies Act, 2013 and 23
SEBI‘s rules and regulations?

Prayer 27
2
LIST OF ABBREVIATIONS
& And
AIR All India Report
Anr. Another
Art. Article
CCD Compulsory Convertible Debentures
CCI Competition Commission Of India
CEO Chief Executive Officer
CIS Collective Investment Scheme
CLB Company Law Board
Co. Company
Corpn. Corporation
Ed. Edition
Govt. Government
Hon‘ble Honorable
i.e That is
IPO Initial Public Offering
Ltd. Limited
M.D. Managing Director
NCLAT National Company Law Appellate Tribunal
NCLT National Company Law Tribunal
No. Number
No. Number
Ors. Others
PPP Public-Private Partnership
3
Pvt. Private
r/w Read with
Retd. Retired
ROC Registrar of Companies
S./Sec. Section
SC Supreme Court
SCC Supreme Court Cases
SCR Supreme Court Reports
SEBI Security Exchange Board Of India
St. State
u/s Under Section
v. Versus
INDEX OF AUTHORITIES
TABLE OF CASES
1. 50'Neill v. Phillips
2. Aruna Oswal v Pankaj Oswal
3. Ashbury Railway Carriage Co. v Riche 1875
4. Central Government v. Kopran Ltd
5. Duraiswami v UIL Assurance Co
6. Hungerford Investment Trust Ltd. v. Turner Morrison Co. Ltd.
7. Madras Stock Exchange Ltd v SSR Rajakumar
8. Mahon v East Holyford Mining Co
9. N R Murty v. Industrial Development Corporation of Orissa Ltd
4
10. Narendra Kumar Maheshwari vs. Union of India

11. Needle Industries (India) Ltd. v. Needle Industries Newey (India) Holding Ltd
12. Rajeev Mishra v Jwala Engineering Pvt. Ltd. (2019)
13. Ramashankar Prashad v. Sindri Iron Foundry Pvt. Ltd
14. Ramakrishna Industries (Pvt) Ltd v. P.R. Ramakrishnan
15. Shanti Prashad Jain v. Kalinga Tubes Ltd
16. Tata Consultancy Services Limited v. Cyrus Investments Pvt. Ltd. & Ors.
17. Twycross v. Grant
BOOKS:
 Bhandari M.C., Guide to Company Law Procedures, (21st ed., 2009), Lexis
NexisButterworthsWadhwa, Nagpur.
 Majumdar A.K. &Kapoor G.K., Company Law & Practice, (17th ed., 2012), Taxmann.
 Ramaiya A., Guide to the Companies Act, (17th ed., 2010), Lexis
NexisButterworthsWadhwa, Nagpur.
 Aiyer P.R.,Advanced Law Lexicon, (3rd ed., 2005).
 A. Ramaiya Guide to Companies Act, Lexis NexisButterworths, Wadhwa, Nagpur
 Taxmann Master Guide to Companies Act 2013 & Company
WEBSITES:
 www.scconline.com
 www.findlaw.com
 www.judis.nic.in
 www.indiankanoon.com
 www.livelaw.in
 www.judis.nic.in
5
 www.manupatra.com
 www.sebi.gov.in
 www.nclt.gov.in
 www.nclat.nic.in
STATUTES:
 The Constitution of India

 The Companies Act, 2013
6
STATEMENT OF JURISDICTION
The Appellants have approached the Hon‘ble Supreme Court of Arcadia filing Appeal
under Section 423 of the Companies Act, 2013 which reads as under:
―Any person aggrieved by any order of the appellate tribunal any file an appeal to the
supreme court within sixty days from the date of receipt of the order of the Appellate Tribunal to
him on any question of law arising out of such order:
Provided that the Supreme Court may, if it is satisfied that the appellant was prevented by
sufficient cause from filling the appeal within the said period, allow it to be filed within a further
period not exceeding sixty days‖.
7
STATEMENT OF FACTS
 Arcadia is a democratic republic in the Asian Continent in which Vaani Ltd is an unlisted
public company engaged in infrastructural projects in PPP model in the state of Arcadia.
It The company is maintaining net worth of 13000 crores, net tangible assets of 5200
crores excluding the monetary assets for last three years with an average operating profit
of 330 crores. Karta Group Private Ltd which is promoted by Karta Trust is the holding
company of Vaani Ltd with 66% of shares and voting rights in Vaani Ltd & Karta Trust
is holding 99% of equity shares and voting rights in Karta Group Private Ltd and
remaining 1% shareholders were the selected employees of Vaani Ltd in which Mr.
Avesh Karta was the Chairman-cum-CEO of the Vaani Ltd. was incorporated by the
Karta Group Private Ltd in the year 2010 as decided by the Karta Trust.
 Mr. Avesh Karta and his brother Mr.Arjun Karta from the famous Karta business family
are the trustees of Karta Trust and they are the board of directors of Karta Group Private
Ltd. Later, marriage took place on 26-06-2015 between Ms. Meena Karta of the Karta
family and youngest son Mr. Anil Seol of the Seol family who is holding 99% of shares
in Seol Investment Pvt Ltd remaining 1% is held by his father Vikram Seol. The Later, in
order to increase the trust and bondage of these two business families, Karta family
transferred 17% of its shares and voting rights of Vaani Ltd to Seol Investment Pvt Ltd
for a price equivalent to the face value of shares on 05-12-2015 and during the course of
time, Vaani Ltd also issued shares in favour of its employees. Seol investment Pvt Ltd
increased its shareholding and voting rights from 17% to 21% till today by purchasing
shares from the employees of Vaani Ltd. Today the shareholding and voting rights of
Karta Group Pvt Ltd in Vaani Ltd comes down to 66%.
 On 10.05.2017 A Resolution was passed by the Board of Directors of Vaani Ltd and
appointed Anil Seol as its Chairman-cum-Chief Executive Officer with effect from
26.05.2017. Mr.Anil Seol decided to shift main focus of the business from its flagship
highway and other PPP projects to Multi-storeyed building projects for Multi-national
companies which was not badly affecting the business in the near future of the company.
8
But the decision has created disappointments in Karta Trust because of the less emphasis
given by Anil Seol to the business areas of the company. They feared that this would step
affect the reputation and recognition of the company. The Company was successful in
achieving 8% more growth during the tenure of Anil Seol, than its earlier 7 years.
Mr.Anil Seol noticed that 64% of the net tangible assets of the company are in monetary
assets. So, Mr.Anil Seol wanted to utilise all these monetary assets and capital reserve to
the ongoing three projects of the company, which was opposed by the Karta Trust
nominated directors in the Board without giving their affirmative voting in favour in the
board meeting stating that this will affect the financial stability of the company. Anil Seol
dissatisfied by these incidents, and openly criticised in the media on 05-12-2018 about
the existence of hefty control of Karta Trust over the management of Vaani Ltd and
requested the remaining shareholders of the company to stand against the provisions of
Articles of Association of Vaani Ltd which is providing significant power to Karta Trust
over the management of Vaani Ltd. And that such provisions of Articles of Association is
contrary to the existing law and practice. Meanwhile, Meena Karta on 15-12-2018 filed a
police complaint against her husband alleging domestic violence followed by a petition
for Divorce.
 In January 12, 2019 Karta Trust decided to remove Anil Seol from the position of Board
chairman of the Vaani Ltd. Accordingly, the nominated directors passed a resolution to
remove Mr.Anil Seol from the position on January 25, 2019. The selection committee
appointed Mr.Arjun karta as the new Chairman of the board of directors of Vaani Ltd on
February 5, 2019. As a result of the initiatives and efforts of Arjun Karta, Vaani Ltd on
November 18, 2019 successfully secured the State of Sourashtra’s tender for developing
Kolapur – Sikola State High Way to be completed by the year 2026. It is expected that
the company could achieve 20% more revenue than now. Now, the board of directors
decided to raise 49% of this project cost estimated around 6500 crores rupees through
initial public offering of compulsorily convertible debentures in the year 2020 with a
reservation of 15% of the issue in favour of the Chief Executive Officer and employees
on a competitive basis upon the same issue price. The Board also decided to issue sweat
equity shares equivalent to fifteen percent of the then existing paid up equity share
9
capital of Vaani Ltd at the price equivalent to face value to Mr. Arjun Karta in the year
2021 after the completion of the IPO.
 This was vehemently opposed by the Anil Seol and tweeted against this PPP project. Anil
Seol also started influencing the remaining directors to vote against the project and issue
of securities. In contrary, for the successful completion of the new project the Karta Trust
directed the board of Vaani Ltd to proceed with the issue of compulsorily convertible
debentures. Board of directors consists of nominated directors removed Mr.Anil Seol
from the position of Chief Executive Officer of Vaani Ltd on December 11, 2019 and
appointed Mr.Anand karta, Son of Avesh karta as the new Chief Executive Officer of
Vaani Ltd. The Board passed a resolution in this regard. The reason stated for the
removal is that, Mr. Anil Seol is acting against the interest of the Vaani Ltd and Anil Seol
is a promoter of Seol Engineering Ltd which was prohibited by SEBI from accessing the
capital market for 2 years from January 02, 2019. Later, Vaani Ltd issued compulsorily
convertible debentures worth of rupees 6500 crores through initial public offer in
December 28, 2020, convertible after 5 years from the date of issue.
 Now, Seol Investment Private Ltd and Anil Seol together filed a petition before National
Company Law Tribunal alleging that the removal of Anil Seol from the position of
Chairman and Chief Executive Officer of Vaani Ltd was illegal and the material changes
caused to the company through the removal of Mr. Anil Seol from the position of
Chairman-cum-Chief Executive Officer of the Vaani Ltd is oppressive and
mismanagement. They also alleged that Articles 45, 86, 98 and 106 of the Articles of
Association of Vaani Ltd are oppressive and in violation of Companies Act, 2013, it’s
Rules and allied laws. Petitioners further alleged that the Karta Trust is not a promoter of
Vaani Ltd, hence, the provisions of Articles of Association of Vaani Ltd giving
unscrupulous power to the Karta Trust shall be declared as illegal. Petitioners also alleged
that the raising of finance through issue of compulsorily convertible debentures and the
proposed issue of sweat equity shares are oppressive and in violation of the Companies
Act, Rules and SEBI Regulations and allied laws.
 After hearing both sides of arguments, the NCLT decided in favour of Vaani Ltd, Karta
Trust and Karta Group Private Ltd. Being aggrieved by the decision of NCLT, Seol
10
Investment Private Ltd and Anil Seol filed an appeal before the NCLAT. NCLAT
reversed the decision of NCLT. Now Vaani Ltd, Karta Trust and Karta Group Private
Ltd filed an appeal before the Supreme Court of India. The laws and legal system of
Arcadia is pari materia with the law and legal system of Republic of India
11
STATEMENT OF ISSUES
1. Whether removal of Anil Seol from the position of Chairman-cum-Chief Executive

Officer leads to Oppression and Mismanagement?
2. Whether provisions of Articles of Association of Vaani Ltd are unreasonable and in

violation of the Companies Act, 2013 by giving unscrupulous power to Karta Trust?
3. Whether raising of finance through Compulsorily Convertible Debenture are oppressive

and in violation of the Companies Act, 2013 and SEBI‘s rules and regulations?
12
SUMMARY OF ARGUMENTS
ISSUE I
Whether removal of Anil Seol from the position of Chairman-cum-Chief Executive Officer leads
to Oppression and Mismanagement?
Thus it is most humbly submitted before this Hon‘ble Court that removal of the respondent
Anil Seol from the position of Chairman-cum-Chief Executive Officer is not in any way leads to
Oppression and Mismanagement
ISSUE II
Whether provisions of Articles of Association of Vaani Ltd are unreasonable and in violation of
the Companies Act, 2013 by giving unscrupulous power to Karta Trust?
Thus it can be unanimously agreed upon that Articles of Association, being a public
document is supreme, and once it's signed, a member cannot turn around and challenge the same.
Although NCLAT's order needed to be overturned before it became a negative precedent that
could have been misused. So It is most humbly submitted that provisions of Articles of
Association of Vaani Ltd are reasonable and not in violation of the Companies Act, 2013. Also
Karta Trust is the promoter of Vaani Ltd on whose control it was incorporated
ISSUE III
Whether raising of finance through Compulsorily Convertible Debenture are oppressive and in
violation of the Companies Act, 2013 and SEBI‘s rules and regulations?
It is humbly submitted that Vanni Ltd has followed all conditions and procedures while
raising funds through issue of CCDs‘ and it is in no way violating the rules and regulations of
SEBI. Also that raising funds through issue of compulsorily convertible debentures does not
leads to oppression and mismanagement.
13
ARGUMENTS ADVANCED
ISSUE I
Whether removal of the respondent Anil Seol from the position of Chairman-cum-Chief
Executive Officer leads to Oppression and Mismanagement?
CORPORATE GOVERNANCE
Good corporate governance involves a commitment of a company to run its businesses in a
legal, ethical and transparent manner - a dedication that must come from the very top and
permeate throughout the organization. An active, well-informed and independent Board is
necessary to ensure highest standards of corporate governance. Getting the right people is
crucial; as is the process of seeking, vetting and appointing such people.1
It is most humbly submitted before this Hon‘ble Court that Vaani Ltd being a subsidiary
company owned by Karta Group Private Ltd is an unlisted public company which has followed
all mandatory requirements by appointing qualified directors for its governance and
administration. According to Rule 4 of The Companies (Appointment and Qualification of
Directors) Rules, 20142
(1) The following class or classes of companies shall have at least two directors as independent
directors -
(i) the Public Companies having paid up share capital of ten crore rupees or more; or
(ii) the Public Companies having turnover of one hundred crore rupees or more; or
(iii) the Public Companies which have, in aggregate, outstanding loans, debentures and
deposits, exceeding fifty crore rupees:
(2) The following classes of unlisted public company shall not be covered under sub-rule (1),
namely:-
1
REPORT OF THE CII TASK FORCE ON CORPORATE GOVERNANCE - RECOMMENDATIONS FOR
VOLUNTARY ADOPTION - CHAIRED BY MR NARESH CHANDRA - November 2009
2
Published vide Notification No. G.S.R. 259(E), dated 31st March, 2014
14
(a) a joint venture;
(b) a wholly owned subsidiary; and
(c) a dormant company as defined under section 455 of the Act.
Vaani Ltd being a wholly owned subsidiary of Karta Group Private Ltd is not required to appoint
Independent Directors as per the Rules stated above.
'Corporate Democracy' is a concept, particularly by way of which all the decisions that are
taken in a company within any aspect, are made on the basis of the 'majority rule', which
essentially highlights that all matters that are deliberated upon in the meeting are carried forward
laying reliance on the majority vote received.3 It was crucial to provide every member protection
against the decisions taken by the majority of those decisions that were not in favor of the
minorities.
It is most humbly submitted that the Respondent wanted to utilize all the monetary assets
and capital reserve to the ongoing three projects of the company, which was opposed by the
Karta Trust nominated directors in the Board without giving affirmative voting in favour in the
board meeting stating that this will affect the financial stability of the company.
The application under Section 241 which reads as follows :
(1) Any member of a company who complains that—
(a) the affairs of the company have been or are being conducted in a manner prejudicial to public
interest or in a manner prejudicial or oppressive to him or any other member or members or in a
manner prejudicial to the interests of the company; or
(b) the material change, not being a change brought about by, or in the interests of, any creditors,
including debenture holders or any class of shareholders of the company, has taken place in the
management or control of the company, whether by an alteration in the Board of Directors, or
manager, or in the ownership of the company‘s shares, or if it has no share capital, in its
membership, or in any other manner whatsoever, and that by reason of such change, it is likely
3
P.S. Sangal, 'Abuse of Authority by a Majority of Shareholders in a Company' (1964) 6 (4) Journal of the Indian
Law Institute, 380-381
15
that the affairs of the company will be conducted in a manner prejudicial to its interests or
its members or any class of members,
may apply to the Tribunal, provided such member has a right to apply under section 244, for an
order under this Chapter.
It must be related to oppression and mismanagement. While the Tribunal is unable to

consider the merits of the application under Section 241, it must ensure that the proposed claim
is prima facie related to oppression and mismanagement of the firm or its member(s) while
deciding on the petition. A simple reading of the proposed application under Section 241 should
show that the accusations are about oppression and mismanagement. 4
In the case of Rajeev Mishra v Jwala Engineering Pvt. Ltd., 5 the Tribunal has stated that
every petitioner who has filed an application under Section 2416 of the Act, must make note of
the fact that only one of the requirements under 244(1)(a) is required to be fulfilled. The
respondent, in this case, was not qualified to lodge a case of oppression and mismanagement
under Section 241 if any one of the criteria was met.
The Board of Directors of a company is central to its decision making and governance
process. Its liability to ensure compliance with the law underpins the corporate governance
structure in a company, the aspirations of the promoters and the rights of stakeholders, all of
which get articulated through the actions of the Board.7
It is most humbly submitted that, Karta Trust being the promoter of Vaani Ltd, is
engaged in infrastructural projects in PPP model in the state of Arcadia successfully secured the
State of Sourashtra’s tender for developing Kolapur – Sikola State High Way to be completed by
the year 2026 and it is expected that the company could achieve 20% more revenue than now.
The respondent‘s noticed that 64% of the net tangible assets of the company are in monetary
4
Debunking the Threshold for waivers: Mismanagement under Indian Companies Act, 2013 - Mansi Bajaja -
Symbiosis Law School, Hyderabad, India - Received 17 March 2022; Accepted 26 March 2022; Published 01 April
2022
5
Rajeev Mishra v Jwala Engineering Pvt. Ltd. (2019)
6
Companies Act, 2013, s 241
7
https://www.mca.gov.in/content/mca/global/en/data-and-reports/reports/other-reports/report-company-law.html
16
assets and wanted to utilize them which would badly affect the company‘s near future and so was
removed from the position of Chairman.
The recent case of Tata Consultancy Services Limited v. Cyrus Investments Pvt. Ltd. &
Ors.8 is a landmark decision on oppression and mismanagement it was held that removal from
position of directorship is not sufficient to make out a case of oppression and mismanagement,
and the NCLT can dismiss such complaints. However, relief under Section 242 can be granted if
the removal is carried out in accordance with law but "forms part of a larger design to oppress or
prejudice the interest of some members." Thus removal of the respondent from the post of
Chairman-cum-Chief Executive Officer is not in any way leads to Oppression and
Mismanagement.
"In Shanti Prashad Jain v. Kalinga Tubes Ltd.,9 the Supreme Court of India opined as
follows: It must be shown that the conduct of the majority shareholders was oppressive to the
minority as members. There must be continuous acts on the part of the majority shareholders
showing that affairs of the company were being conducted in a manner oppressive to some parts
of the members. The conduct must be burdensome, harsh, and wrongful, and mere lack of
confidence between the majority shareholders and the minority shareholders would not be
enough."10
The Court stated that the oppression must have at least some elements of lack of probity
or fair dealing with a member in order to be considered oppressive in terms of the rights of
members. The Supreme Court has also ruled that the directors' foolish or inefficient conduct
would not provide a basis for relief from oppression under the anti-oppression statute. - "Needle
Industries (India) Ltd. v. Needle Industries Newey (India) Holding Ltd. 11 according to subsection
(1) of Section 241 of the Companies Act." Oppression & mismanagement incorporate the
company's conduct and the activities that are detrimental to the general public's interest. The
term "public interest" refers to a company's operation in the public interest or for the general
8
2021 SCC OnLine SC 272
9
(1965) 1 Comp LJ 193
10
Oppression & Mismanagement: Taking Snippets from the Tata Mistry Saga - UJJWAL SHETH - International
Journal of Law) Management & Humanities
11
(1981) 2 SCC 333
17
welfare of the community, rather than in a manner that is damaging to the public interest - "N R
Murty v. Industrial Development Corporation of Orissa Ltd."12
Oppression and mismanagement do not include apprehension of the future of the

company- Central Government v. Kopran Ltd. 13 That's not enough to say that the company's
operations have been or are unfair to minority employees. A course of Oppressive conduct and
the applicant should also give specific instances and facts of oppressive actions, not merely
statements or opinions of third parties. These provisions are never intended for settling the
disputes between warring groups of shareholders or directors - "Hungerford Investment Trust
Ltd. v. Turner Morrison Co. Ltd."14
The Board of directors of a company or, for that matter, majority shareholders exercising
its power to remove directors, including Chairman of the Board of directors, cannot be construed
as a case of unfairly prejudicial conduct when the Board or majority is acting within its powers
as laid down under the articles of association of the company. However, ousting of the majority
by force or other wrongful Acts to prevent the lawful exercise of their rights as shareholders by
the minority is a case of oppression - "Ramashankar Prashad v. Sindri Iron Foundry Pvt. Ltd."15
―Thus it is most humbly submitted before this Hon‘ble Court that removal of the respondent Anil
Seol from the position of Chairman-cum-Chief Executive Officer is not in any way leads to
Oppression and Mismanagement.‖
12
(1977) 47 Comp cas 389 (Ori)
13
[2005] 125 Comp Cas 495 (CLB)
14
(1976) 102 ITR 314
15
(1966) 1 Comp LJ 310
18
ISSUE II
Whether provisions of Articles of Association of Vaani Ltd are unreasonable and in violation of
the Companies Act, 2013 by giving unscrupulous power to Karta Trust?
It is most humbly submitted that provisions of Articles of Association of Vaani Ltd are
reasonable and not in violation of the Companies Act, 2013. Also Karta Trust is the promoter of
Vaani Ltd on whose control it was incorporated.
Memorandum of Associations and Articles of Associations together form the Constitution
of a company. Articles of Association lay down the bye-laws along with rules and regulations for
smooth functioning of the internal management of a company. They define the duties, rights, and
powers of the governing body as between themselves and the company at large, and the mode
and form in which business of the company is to be carried out.16 It's a public document which
binds not only the company but even its members together and has paramount significance.
However, Article of Association must always be in consonance with Memorandum of
Association.
Articles as defined in section 2(5) of the Companies Act states "the articles of association
of a company as originally framed or as altered from time to time or applied in pursuance of any
previous company law or of this act".17 It entails that Articles of Association contains all the
rules and regulations that govern the company policy. Further, section 10 of the act states that
Memorandum of Association and Articles of Associations, after registration, shall bind the
company and its members as to the same extent as if it had been signed by them. This section
aims to impart contractual force to both the public documents. Articles laid out in the Articles of
Association have contractual force between the company and its members as also between
members inter se in relation to their rights as such members.18 It binds the members inter se so
far as the duties and rights which arise out of the Articles are concerned. As stated in
16
Ashbury Railway Carriage Co. v Riche 1875
17
The Company Act 2013
18
Ramakrishna Industries (Pvt) Ltd v. P.R. Ramakrishnan 1988
19
Duraiswami v UIL Assurance Co19, "The purpose of the Memorandum and Articles is to define
the position of the shareholder as shareholder, not to bind the shareholder in his capacity as an
individual".
In order to better understand, just as how Arcadia is a democratic country with a well-
defined and structured set of laws and regulations, wherein every citizen of Arcadia has been
guaranteed protection against any and all oppressive majoritarian actions by the virtue of the
Arcadian Constitution, in a similar manner, when we discuss corporate democracy, the minority
members are provided protection from oppressive actions against the majority shareholders by
virtue of the provisions of Oppression and Mismanagement contained under Chapter XVI of the
Companies Act, 2013.20 However, whenever Articles of Association and Company Act are in
conflict, the provisions of Company Act 2013 will prevail. Hence this document, as crucial role
as it plays, doesn't override Company Act 2013. The articles of a company have a binding force
but do not have the force of a statute.
It is alleged that provisions of Articles of Association are oppressive in nature.
Relevant provisions of the Articles of Association of Vaani Ltd read as follows:
―45. Quorum at General Meetings: No quorum at a general meeting of the holders of the
Ordinary Shares of the Company shall be constituted unless the members who are personally
present are not less than seven in number including at least one authorized representative
nominated by Karta Trust so long as the Karta Trust remaining as the promoter with substantial
control of Vaani Ltd.‖ This clearly states that unless members are constituted meetings cannot be
held. The document must not conflict with the provisions of the Act.21
With regard to the allegation made by the Respondents that Karta Trust is not the
promoter of Vaani Ltd the provisions of Articles of Association reads as follows:
―86. Nomination of Directors: So long as the Karta Trust remain as the promoter with
substantial control of the company, Karta Trust, shall have the right to nominate 2/3rd of the
prevailing number of Directors including the Managing Director on the Board and in like manner
19
AIR 1956
20
Companies Act, 2013, s 152
21
Madras Stock Exchange Ltd v SSR Rajakumar, (2003) 116 Comp Cas 214
20
to remove any such person so appointed and in place of the person so removed, appoint another
person as Director. The Directors so nominated by the Karta Trust shall be appointed as
Directors of the Company. Similarly the Key Managerial Personnel of the Vaani Ltd shall be
appointed by the board of directors from among the persons nominated by the Karta Trust‖.
Articles are internal regulations and bye-laws. It is to contain regulations for management of the
company which has been stated without any ambiguity. Thus the provisions prima facie prove
that Karta Trust is the promoter. In the case of Twycross v. Grant, 22 "a promoter, I apprehend, is
one who undertakes to form a company with reference to a certain project, and takes certain
steps to accomplish that purpose."
Let us examine who are 'persons in control of the issuer' and 'persons named as promoters
in the prospectuses'. The SEBI (ICDR) Regulations, 2009 have used the definition of 'control' as
given by SEBI (Substantial Acquisitions of Shares and Takeovers) Regulations, 2011.23 It has
provided an inclusive definition of the term 'control' and says that it includes the right to appoint
majority of the directors or to control the management or policy decisions.24 The scope of the
term 'promoter' is enlarged multifold by this definition because it includes not only the right to
appoint majority of the directors on the board of a company but also the power to take
management or policy decisions, directly or indirectly. It is a well-known fact that the persons
who promote companies generally wish to have such control in their hands. Such control can
also be exercised through shareholder's rights, management rights, shareholder's agreements,
voting agreements or in any other manner.25
―98. Matters How Decided. Matters before any meeting of the Board which are required to be
decided by a majority of the directors shall require the affirmative vote of a majority of the
Directors appointed pursuant to Article 86 present at the meeting and in the case of an equality of
vote‘s the Chairman shall have a casting vote.‖
22
2 CPD 469 (1877) 541.
23
SEBI (Substantial Acquisitions of Shares and Takeovers) Regulations 2011, reg 2(e). "control" includes the right
to appoint majority of the directors or to control the management or policy decisions exercisable by a person or
persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or
management rights or shareholders agreements or voting agreements or in any other manner: Provided that a
director or officer of a target company shall not be considered to be in control over such target company, merely by
virtue of holding such position;
24
ibid
25
ibid
21
―106. Appointment of Chairman and Chief Executive Officer Notwithstanding anything contrary
contained in Article 86, for the purpose of selecting a new Chairman of the Board of Directors
and the Chief executive officer, so long as the Karta Trust remains as the promoter with
substantial control of the Company for the time being, a Selection Committee nominated by the
Karta Trust shall be constituted in accordance with the provisions of this Article to recommend
the appointment of a person as the Chairman of the Board of Directors and the Chief executive
officer, the Board may appoint the person so recommended as the Chairman of the Board of
Directors and the Chief Executive Officer, subject to Article 98 which requires the affirmative
vote of all Directors appointed pursuant to Article 86.
It is most humbly submitted that both Memorandum of Association and Articles of

Association are registered with the Registrar of Companies. They are open and accessible to
all. 26 It is, therefore, the duty of every person dealing with a company to inspect its public
documents and make sure that his contract is in conformity with their provisions. But whether a
person actually reads them or not, ―he is to be in the same position as if he had read them‖. He
will be presumed to know the contents of those documents.27 The Respondent Anil Seol is a
known budding successful businessman in Arcadia holding 99% of shares in Seol Investment Pvt
Ltd remaining 1% is held by his father Vikram Seol was appointed as Chairman-cum-Chief
Executive Officer. Being a Key Managerial Personnel is it presumed that he has read the
provisions of AoA.
―Thus it can be unanimously agreed upon that Articles of Association, being a public document
is supreme, and once it's signed, a member cannot turn around and challenge the same. Although
NCLAT's order needed to be overturned before it became a negative precedent that could have
been misused. So It is most humbly submitted that provisions of Articles of Association of
Vaani Ltd are reasonable and not in violation of the Companies Act, 2013. Also Karta Trust is
the promoter of Vaani Ltd on whose control it was incorporated‖.
26
The right of inspection, etc is expressly granted by S. 399 of the Act.
27
Mahon v East Holyford Mining Co, (1875) LR 7 HL 869
22
ISSUE III
Whether raising of finance through Compulsorily Convertible Debenture are oppressive and in
violation of the Companies Act, 2013 and SEBI‘s rules and regulations?
It is most humbly submitted that raising of finance through Compulsorily Convertible

Debenture are not oppressive and in violation of the Companies Act, 2013 and SEBI‘s rules and
regulations.
At a basic level, debentures are of two categories viz. Convertible Debentures and Non-
Convertible Debentures. Convertible Debentures are a type of debt security where either a part
or whole value of the debenture is convertible into equity shares as predetermined, when the
debenture is issued. Thus convertible debentures are issued with provisions that allow the holder
to exchange the debenture for company stock or equity, and upon such exchange when the debt
obligations inherent in such debentures are discharged by the entity by issuing stock or equity.
Conversely, Non-Convertible Debentures are those where no such conversion is permitted on the
discharge of the debt obligation inherent in the debenture. In other words, in the case of Non-
Convertible Debentures, the purchaser of such debentures, by virtue of having purchased such
debentures, does not get to become a holder of equity or stock in the entity issuing such
debentures, at the termination of the debentures on discharge of the debt liability inherent in the
same.
Convertible Debentures are further subdivided into two categories viz. Fully Convertible
Debentures and Partially Convertible Debentures. Fully Convertible Debentures, as the name
indicates, are those where the whole value of the debenture is convertible into equity of the
issuer, as predetermined, at the time of issue. Conversely, Partially Convertible Debentures
would be where only a portion of the debt would be eligible for conversion into equity of the
issuer, as pre-determined at the time of issue.
In general, in the case of all convertible debentures, the conversion of the debt obligation
into equity of the issuer can be either at the option of the debenture holder or such conversion has
to necessarily happen at the time of discharge of the debt obligations. In the former class of
convertible debentures, the purchaser or holder of such debentures will exercise her right or
23
option, to choose whether or not to convert the debt that is owed to her, at the appointed time.
Hence such convertible debentures are referred to as Optionally Convertible Debentures. In the
latter class of convertible debentures, the debt obligations inherent in the debentures necessarily
or compulsorily are repaid in the form of equity of the entity. Hence such convertible debentures
are referred to as Compulsorily Convertible Debentures. 28
Section 2(30) of the Companies Act, 2013 (‗Comp. Act‘) defines a ‗debenture‘
to include debenture stock, bonds or any other instrument of a company evidencing a debt,
whether constituting a charge on the assets of the company or not. That is, a debenture is a debt
instrument for the company.
Section 71 of the Comp. Act lays down the conditions attached to debentures. The relevant part
reads as under:
“(1) A company may issue debentures with an option to convert such debentures into shares,
either wholly or partly at the time of redemption:
Provided that the issue of debentures with an option to convert such debentures into shares,
wholly or partly, shall be approved by a special resolution passed at a general meeting.
(2) No company shall issue any debentures carrying any voting rights….”
While the Comp. Act specifically provides for the issuance of convertible debentures, it also
mandates that such issue shall be required to be approved by a special resolution. The fact that
the Comp. Act deals with convertible debentures in the provisions relating to debentures,
indicates that the statute seeks to regulate CCDs as debentures. Furthermore, debentures shall
not carry any voting rights in the company.
As per Section 129 (Financial Statement) read with Schedule III (General Instructions for
Preparation of Balance Sheet and Statement of Profit and Loss of a Company) of the Comp. Act,
a company is required to inter alia provide appropriate disclosures with respect to debentures
and the rate of interest and particulars of conversion thereof.
28
SECURITIES AND EXCHANGE BOARD OF INDIA - WTM/KMA/CFD/392/06/2011
24
In Narendra Kumar Maheshwari vs. Union of India 29 , the Honourable Supreme Court,
observed that in the various guidelines applicable to such instruments, compulsorily convertible
debentures are regarded as ‗equity‘ and not as a loan or debt.‖ One of the critical considerations
adopted by the Honourable Supreme Court of India in concluding so, is that ―A compulsorily
convertible debenture does not postulate any repayment of the principal. Also it is evident that
companies were issuing hybrids in the form of Compulsory Convertible Debentures to raise
capital.‖
CCDs are considered to be convenient as it allows the investor to tap into the Company's
potential without diluting the founder‘s shareholding percentage until the CCDs are converted
into shares.30
As per sec 73 of the Companies Act, 2013 read with Companies Acceptance Deposit Rules,
2014, no private company is allowed to accept depostis from public and even in the case of
public companies there are certain conditions and procedures which company has to comply with
in order to be eligible for acceptance of deposit.31 It is humbly submitted that Vanni Ltd has
followed all conditions and procedures while raising funds through issue of CCDs‘ and it is in no
way violating the rules and regulations of SEBI.
Hoffmann, LJ in O'Neill v. Phillips,32with reference to unfairly prejudiced observed:
"concept of fairness must be applied judicially and the context which it is given by the courts
must be based upon rational principles and that the court has a very wide discretion, but it does
not sit under a palm tree."
The question which arises is whether the remedy of prejudice have a separate footing from
oppression or whether these two remedies are conjunctive. By interpretation of Section
241(1)(a) one can conclude that the remedy of "unfair prejudice" standalone because the
provision uses the expression "prejudicial or oppressive" disjunctively and in open-ended
29
(1990) Supp SCC 440
30
https://www.mondaq.com/india/securities/693030/nuances-associated-with-issuance-of-compulsorily-convertible-
debentures
31
https://taxguru.in/company-law/raising-funds-compulsorily-convertible-debentures.html
32
50'Neill v. Phillips, (1999) 1 WLR 1092, at p. 1098 (HL)
25
manner."33 Therefore it can be inferred that 2013 Act empowers a shareholder to not only bring
action for oppressive act but also if it is unfairly prejudice or both.
The averments made as to oppression and mismanagement were bald and vague.34
It is humbly submitted that Vanni Ltd has followed all conditions and procedures while raising
funds through issue of CCDs‘ and it is in no way violating the rules and regulations of SEBI.
Also that raising funds through issue of compulsorily convertible debentures does not leads to
oppression and mismanagement.
33
LIC v. D.J. Bahadur, (1981) 1 SCC 315 at para 144
34
Aruna Oswal v Pankaj Oswal on 6 July, 2020
26
PRAYER
Wherefore, in light of the facts stated, issues raised, arguments advanced and authorities cited, it
is most humbly prayed and implored before the Hon‘ble Supreme Court that it may be
benevolently pleased to adjudge and declare that:
1. Removal of the respondent Anil Seol from the position of Chairman-cum-Chief

Executive Officer is not in any way leads to Oppression and Mismanagement.
2. Provisions of Articles of Association of Vaani Ltd are reasonable and not in violation of
the Companies Act, 2013. Also Karta Trust is the promoter of Vaani Ltd on whose
control it was incorporated.
3. It is humbly submitted that Vanni Ltd has followed all conditions and procedures while
raising funds through issue of CCDs‘ and it is in no way violating the rules and
regulations of SEBI. Also that raising funds through issue of compulsorily convertible
debentures does not leads to oppression and mismanagement.
And / or
Also pass any other order that this Hon‘ble Court deems fit and proper in the interest of justice,
equityand good conscience.
For this act of kindness the Counsels on behalf of the Appellant, shall duty bound forever to pray.
All of which is humbly prayed,
Counsel appearing on behalf of the APPELLANT.
27

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4th VITSOL NATIONAL MOOT COURT COMPETITION ON CORPORATE LAW 2022

Team Code: VNMC418-A

4th VITSOL NATIIONAL MOOT COURT COMPETITION

CORPORATE LAW 2022

IN THE HON’BLE SUPREME COURT OF ARCADIA

APPEAL NO. _______/2022

KARTA GROUP PRIVATE LTD.

SEOL INVESTMENT PRIVATE LTD.

IN THE MATTER OF THE COMPANIES ACT, 2013

UPON SUBMISSION TO THE HON’BLE CHIEF JUSTICE OF SUPREME COURT

MEMORANDUM ON BEHALF OF THE APPELLANT

Table of Contents 3-6

1. Issue-I: Whether removal of Anil Seol from the position of Chairman-cum-

unscrupulous power to Karta Trust?

SEBI‘s rules and regulations?

MEMORANDUM ON BEHALF OF THE APPELLANT

MEMORANDUM ON BEHALF OF THE APPELLANT

MEMORANDUM ON BEHALF OF THE APPELLANT

10. Narendra Kumar Maheshwari vs. Union of India

17. Twycross v. Grant

 A. Ramaiya Guide to Companies Act, Lexis NexisButterworths, Wadhwa, Nagpur

 Taxmann Master Guide to Companies Act 2013 & Company

MEMORANDUM ON BEHALF OF THE APPELLANT

 The Constitution of India

MEMORANDUM ON BEHALF OF THE APPELLANT

MEMORANDUM ON BEHALF OF THE APPELLANT

MEMORANDUM ON BEHALF OF THE APPELLANT

MEMORANDUM ON BEHALF OF THE APPELLANT

MEMORANDUM ON BEHALF OF THE APPELLANT

MEMORANDUM ON BEHALF OF THE APPELLANT

1. Whether removal of Anil Seol from the position of Chairman-cum-Chief Executive

2. Whether provisions of Articles of Association of Vaani Ltd are unreasonable and in

3. Whether raising of finance through Compulsorily Convertible Debenture are oppressive

MEMORANDUM ON BEHALF OF THE APPELLANT

MEMORANDUM ON BEHALF OF THE APPELLANT

(a) a joint venture;

(b) a wholly owned subsidiary; and

(c) a dormant company as defined under section 455 of the Act.

The application under Section 241 which reads as follows :

(1) Any member of a company who complains that—

It must be related to oppression and mismanagement. While the Tribunal is unable to

Oppression and mismanagement do not include apprehension of the future of the

It is alleged that provisions of Articles of Association are oppressive in nature.

Relevant provisions of the Articles of Association of Vaani Ltd read as follows:

It is most humbly submitted that both Memorandum of Association and Articles of

It is most humbly submitted that raising of finance through Compulsorily Convertible

MEMORANDUM ON BEHALF OF THE APPELLANT

1. Removal of the respondent Anil Seol from the position of Chairman-cum-Chief

All of which is humbly prayed,

Counsel appearing on behalf of the APPELLANT.

MEMORANDUM ON BEHALF OF THE APPELLANT

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