TAMIL NADU WATER INVESTMENT CO. LTD. Vs. AIDQUA HOLDINGS

JUDGEMENT

(1.) THE dispute in the CP revolves around the affairs of New Tirupur Area Development Corporation Ltd. ('NTADCL') -the 3rd respondent in the CP. NTADCL was incorporated in the year 1995 and promoted by the Government of Tamil Nadu ('GoTN'), Tirupur Exporters Association ('TEA') and Infrastructure Leasing and Financial Services Ltd. ('IL&FS') as a special purpose vehicle to implement the Tirupur Area Development Programme ('TADP'), which was formulated in the year 1993 -94 by Tamil Nadu Corporation for Industrial Infrastructure Development Ltd. ('TACID'), and IL&FS was approached to assist in the TADP. To implement the scheme, a memorandum of understanding ('MoU') dated 25th August, 1994 was entered into between TACID, TEA and IL&FS and accordingly NTADCL was established. The concession agreement dated 11th February, 2000 entered into by GoTN, Tirupur Municipality and NTADCL envisaged development of infrastructural facilities in and around Tirupur including services of treatment and supply of potable water, treatment and disposal of sewage, etc. The Concession Agreement of 2000 undertook to implement the project strictly on commercial principles, to supply water for residential and industrial purposes in Tirpur Local Planning Area, and also offer sewage treatment facility, etc. For that purpose, it had to develop, construct, operate and maintain a 185 million litre per day capacity water supply plant at a total cost of about Rs. 123 crore. The agreement permitted NTADCL to extract up to 250 million litre per day ('MLD') of water from the Cauvery river to achieve the above object. It is claimed that NTADCL is the first water supply and sanitation project in the country and one of the largest private investments in urban infrastructure in the country. GoTN and IL&FS decided to finance the project and invest in the equity share capital through Tamil Nadu Water Investment Corporation Ltd. ('TWICL') which was specifically corporated for this purpose. Asia Infrastructure Development Co. Ltd. ('AIDEC'), through AIDQUA Holdings, Mauritius (R1). Members of the Contractor Consortium and Tirupur Exporters Association, LIC, GIC agreed to invest in - NTADCL and entered into a shareholders agreement on 12th April, 2001. The shareholding and the percentage of shareholding is as shown below:

(2.) THE pleadings have been completed in the petition. It is submitted that during the pendency of the petition, the petitioners came to know from a post -script in a communication dated 13th December, 2007, received from Mr. Kogi Kashiwaya (Chairman, AIMAC) that the shares held by AIDQUA in the third respondent -company have been sold to an investor whose name is not disclosed. The applicants were not informed of the transfer nor the particulars of the transferee furnished. Hence, the entire transaction is illegal and violative of the provisions contained in chapter 5 of articles of association of R3, petitioners say. As per article 61, subject to articles 47 to 55 and article 70, if a shareholder intends to sell all or any part of its securities to a third party, it shall first offer such securities to the other shareholders and give notice in writing to the Board of the intended sale, the price at which the sale is proposed to be made and the particulars of the proposed transferee. The application says the first respondent has failed to divulge the details of the third party transferee. The transfer might also violate provisions relating to Foreign Investment and Foreign Exchange Management Regulations of the Government of India. As there is a material change in the ultimate owner of the said shares, the transfer violates the provisions in the articles of association of the company. The original shareholders of AIDQUA have divested their shareholding without informing NTADCL. The first respondent (AIDQUA) has been conducting its affairs in total violation of the statutory requirements/norms, rules and regulations. The NTADCL addressed two letters dated 27th May, 2009 and 3rd June, 2009 to which R1 send an evasive reply on 9th June, 2009. The second respondent continues to stall all efforts taken by the Board in this regard. Since R3 is a public utility undertaking, to provide water to the public, it is imperative that the company is able to have its debt restructured. All the other shareholders of NTADCL are public financial institutions and public funds invested by these companies would be lost. It is, therefore, just and necessary to direct R1 and R3 -company to disclose the details of the direct or indirect sale/transfer of shares held by AIDQUA (R1) in R3. Hence, the application.

(3.) THE application has been filed under regulation 44 of Company Law Board Regulations, 1991 ('CLB Regulations') to direct the first (AIDQUA) and fourth (AIDEC) respondent -companies to disclose the details of the entity that owns the first respondent and the shares of the third respondent as a result of owning the first respondent, as the applicants have come to know that the fourth respondent has sold and transferred his entire shareholding in the first respondent (AIDQUA) to an unknown investor, which is in violation of the provisions contained in the articles of association of the third respondent. The applicants say that AIDQUA was incorporated by AIDEC (R4) as a special purpose vehicle with the sole object of investing in NTADCL (R3). R2 (Faizal N. Syed) is the managing director of R5 (Calatrava Advisers (P.) Ltd. -a Singapore based company), and the applicants are given to understand that Faizal N. Syed had been nominated as the director of AIDQUA, following an understanding between R5 and AIDQUA.