NSR GASTRONOMY (MAURITIUS) LLC Vs. K.N. VASUDEVA ADIGA AND ORS.

JUDGEMENT

(1.) The second respondent in the petition before the Company Law Board has preferred this appeal against the impugned order dated 22-5-2014, appointing Administrator and Committee of Management replacing the Board of Directors and issuing further directions for running of the company. For the purpose of convenience, the parties are referred to as they are referred to before the Company Law Board.

(2.) M/s. Vasudeva Adigas Fast Food Private Limited is a private company involving in the food and beverages business and has its registered office at No. 36, 12th Main, 27th Cross, IV Block, Jayanagar, Bangalore. It is the first respondent before the Company Law Board.

(3.) The second respondent-NSR Gastronomy (Mauritius), LLC became a significant shareholder of the first respondent-Company by purchasing about 18,017 ordinary equity shares from the petitioners before the Company Law Board. The petitioners and Smt. Vinoda Adiga, wife of the first petitioner subscribed to 51 Class A Series equity shares representing 51% of the Class A Series equity shares of the company, 1,50,000 Series A compulsory Convertible Preference Shares (CCPS) representing 100% of the Series A CCPS and 39,619 Series B CCPS representing 100% of the Series B CCPS by and under the shares subscription-cum-share purchase agreement dated 24-3-2012. The second respondent holds majority i.e., 51% of the voting rights in the first respondent-company. The shareholding agreement provided for composition of the Board. The Board shall consist of upto 12 Directors. On second closing, the Board shall comprise of 5 Directors which shall consist of 2 Directors nominated by the Promoters in accordance with Clause 5.2(a) and 3 Directors nominated by the Investors under Clause 5.2(b). Notwithstanding the appointment of the independent Directors as per Clause 5.3, as long as the Investor share holding percentage is at least 51% or is holding 51 Class A equity shares, the investor Directors shall constitute majority of the Directors. The persons nominated, as per the terms contained in Clause 5.1 shall be appointed as Director/s of the Board. However, if the shareholding percentage of the promoters in the company falls below 20%, then the promoters shall be entitled to nominate only one person to the Board and appoint one non-voting observer. The Promoters shall not be entitled to any representation of the Board either as nominee Director or as observer, if the shareholding percentage of the promoters in the company falls below 10%.