Dismissed

Mr.Mahender Puri v. Hind Terminals Pvt.Ltd., Cin NO.U63030MH2003PTC141927

Bombay HC25 Apr 2014CP/225/2013

Case brief

AI extract

What is this about?

The court dismissed a winding-up petition filed by a former CEO against Hind Terminals Limited for non-issuance of promised stock options. The court held that there was no ascertained debt as no stock option policy or board resolution existed to quantify or formalize the commitment.

What did the court decide?

Petition dismissed with no order as to costs due to lack of ascertained debt.

Mr.Mahender Puri Vs Hind Terminals Pvt.Ltd., Cin… — Specific Performance | Bombay HC (2014)

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908-CP225-13.DOC

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Agk

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION COMPANY PETITION NO. 225 OF 2013

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Mr. Mahender Puri…Petitioner
Versus
Hind Terminals Private Limited…Respondents

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Mr. Mayur Khandeparkar , with Mr. Nishit Dhruva, Mr. Prakash Shinde, Mr. Aditya Parab, i/by MDP & Partners, for the Petitioners.

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Mr. Sandip Parekh , i/by M/s. Deven Dwarkadas & Partners, for the Respondents.

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CORAM: G.S. PATEL, J DATED: 25th April 2014

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PC:-

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The petitioner seeks the winding up of Hind Terminals Limited (“ the Company ”). The petitioner claims that an amount of Rs. 16,30,30,000/- and interest at the rate of 18% is due to him from the Company.

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In paragraph 4 of the petition, the petitioner who is a professional, has set out the circumstances in which he came to be employed as a Chief Executive Officer of the Company. He was first the Chief Financial Officer of one Samsara Shipping Private Limited. He was then persuaded to take on responsibilities for another

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908-CP225-13.DOC

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Company named MSC Agency (India) Private Limited. During the
course of this work, he was assigned further tasks and received other
job offers too. While considering one of these alternative job offers,
one that promised more immediate remuneration, the petitioner says
that he was persuaded by principal officers of the Company to accept
employment as its CEO. The offer letter dated 24th December 2005
is Exhibit “D” to the petition. Clause 8 of this offer letter says that
the petitioner would be given stock options for 5% of the equity at a
nominal value ranging between 1 to 10% of the face value. The
petitioner’s remuneration as finally decided was about Rs. 1 crore
annually. According to the petitioner, this was significantly less than
Rs. 1.2 crores per annum (plus allowances) that he was being offered
by other organizations.

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A letter of appointment was issued on 2nd March 2006. A copy of this is Exhibit “G” to the petition. It sets out the petitioner’s salary. Clause 7 of the appointment letter states that the petitioner would be “given stock options at a nominal value ranging between 1 to 10% of the face value as per our discussion at a later date”.

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The case of the petitioner as set out in paragraph 4(k) of the petition is that the promised equity or stock options were never given to him. The petitioner repeatedly demanded these stock options, expressing his desire to encash upto 50% of the options that were due to him. It seems not to be disputed that no stock options were, in fact, ever issued.

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On 19th April 2010, the petitioner resigned. He demanded payment of gratuity, other payments and payments towards 50% of his equity.

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908-CP225-13.DOC

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There is no dispute that the petitioner has received his payments towards gratuity and all other dues. The petitioner has signed a document saying that he has received an amount of Rs. 19,57,977/- in full and final settlement of his dues. The petitioner maintains that the amount of stock options is still due to him.

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On 28th May 2010, the petitioner’s advocate sent a notice the Company demanding payment of these stock options. The Company replied on 14th July 2010 denying all liability. The Company maintained that no firm commitment towards stock option was ever made. This was only a possibility subject to further discussions. It, therefore, disclaimed all liability. Further correspondence ensued, in much the same vein. The statutory notice dated 28th May 2010 met with no positive response. The petitioner, therefore, claimed that the Company is indebted to him in the amount of Rs. 16,30,30,000/-.

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Two defences are raised. The first, of course, is that there was no firm or binding commitment to issue any stock options. No amount can, therefore, said to have been ascertained. There is, in the Company’s submission, no quantified or ascertained debts due to the petitioner. A further defence raised is that the stock options, even assuming that they were agreed to be issued were subject to performance and that the petitioner’s performance did not met the Company’s requirements.

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A more crucial issue is, I think, the one raised in paragraph 10 of the affidavit in reply where the Company says that it did not have and still does not have any stock option policy in place. These policies, as is commonly known, are not merely a matter of issuing equity shares. They require to be spelled out and clearly stated. They require resolutions of the Board, shareholders’ consent, provisions to be made for infusion of funds, guidelines for quantification of the

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908-CP225-13.DOC

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amount of stock options that may be issued to any employee, a
definition of the class of employees entitled to such stock options and
the restrictions and guidelines on the manner in which these options
may be exercised. None of this has been done.

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It is not, in my view, possible to accept the case set out by the petitioner that an amount is due to him from the Company. There is no ascertained debt. The defence raised by the Company cannot be said to be lacking in substance or bona fides . The petition is without substance. It is dismissed with no order as to costs.

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(G. S. PATEL, J.)

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Mr.Mahender Puri v. Hind Terminals Pvt.Ltd., Cin NO.U63030MH2003PTC141927

Case brief

What is this about?

What did the court decide?

Mr.Mahender Puri v. Hind Terminals Pvt.Ltd., Cin NO.U63030MH2003PTC141927

Case brief

What is this about?

What did the court decide?

What the court decided

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Issues for consideration

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