Course Name: Company Law

Course Code: L-CT-0009

Manish Kapadia and others v Century Pharmaceuticals Public Ltd

Instructions:

1. The length of the Case Brief should not exceed 3000 words, excluding footnotes. Every
student is expected to choose one of the parties to represent in order to write the Case Brief. The
Case Brief, therefore, should reflect the arguments advanced from the perspective of either party.
2. Please ensure that the responses have a clear structure and are concise and to the point. Your
responses must be substantiated by legal authorities and precedent and you will be assessed on the
quality of your analysis of the facts and your application of legal principles.
3. No speaking footnotes are allowed. All footnotes must be uniformly formatted using any method
of citation of preference.
4. All submissions must be in Times New Roman, font 12, 1.5 space.
5. All submissions will be checked for plagiarism through the similarity check on Turnitin, and
penalties will be levied for plagiarism as per University Policy.
6. Submissions are to be made by 11.59 pm on 22nd November 2020. Late submissions will be
subject to penalties.
7. If there are any clarifications sought regarding either these instructions or any of the facts present
in the assignment, all the clarifications must be consolidated into a single document and emailed
to us by 11.59 pm on 4th November 2020 and we will send out an email containing responses to
each clarification sought.
8. The total marks for the written submission i.e. Case Brief and the oral submission i.e. Viva on the
written submission are 50 marks.

I. In March 2016, Century Pharmaceuticals Public Limited Company (“CPPL”) got

registered under Companies Act, 2013 at Surat, Gujrat with the primary business of
manufacturing eye care clinical solutions. CPPL was listed on the Bombay Stock
Exchange (“BSE”) having authorised capital of 500 Crore Rupees divided into
10,00,000 shares of Rs. 5000 each where the subscribed and paid up capital of the
company was Rs. 45 Crore divided into 90000 shares between Mittal family, Desai
family and Kapadia group of Industry and rest were listed on BSE.1

II. Business started between three groups where it was decided that Mittal family and
Desai family will be the directors of the company and will administer the
management of the company at Mumbai. Whereas, Mr. Kapadia, member of the
company will be responsible for supervision of the production and distribution
activities of the company and company produces. The Articles of Association
(“AOA”)2 declared the number of directors to be nine in total i.e. three from Mittal

1
Share Percentage has been provided in Annexure I
2
Article 18 has been specified in Annexure III
 Course Name: Company Law
Course Code: L-CT-0009

Family, two from Desai family and three independent directors with Mr. Paresh Mittal
as managing director (“MD”).3

III. The company ran smoothly for two years and in the month of March 2018 in a
business related event Mr. P. Mittal declared his intention to elect his son, Dhruv
Mittal and Kartik Desai, son of Mr. Ashok Desai as directors, by amending Article 18
of the AOA. In next month on 6th April, notice was served to directors for board
meeting and Board meeting was conveyed on 18th April, where special resolution was
passed for alteration of AOA4 and details of the same were filed with the Registrar on
20th April. Accordingly, for the appointment of directors, the notice was served on 7 th
May 2018 for Annual general meeting (“AGM”) to be held on 23rd May and a
resolution was passed to that effect. thereafter, appointment letters were issued to Mr.
Dhruv Mittal and Mr. Kartik Desai who joined as the Directors in July 2018. 5 Details
of the same were filed to registrar in MGT 14 format.

IV. In an unprecedented event in December 2018, one of the manufacturing factories at

Surat caught fire and suffered huge terms of monetary and infrastructural losses. To
recover from the losses, company served notice on 11th January for board meeting to
be held on 21st January and board meeting was called. All directors unanimously
agreed to borrow loan of Rs. 20 Crore with an interest of 12% with the duration of
loan repayment to be 6 years from State Bank of India (“SBI”).

V. After 3 months, Mr. Kapadia found out about the degradation in the quality of
solution and after careful analysis he found out that a different material was being
used in manufacturing than to what was originally agreed upon. When traced out to
the origin, Mr. Kapadia found out that the board resolution was passed to that effect
based on proposals made by Mr. D. Mittal and Mr. K. Desai and when Mr. Kapadia
demanded to check the register and books of account, he was denied the permission to
inspect the same.

VI. In April 2019, Board of Directors (“BOD”) served notice and called in for AGM on
2nd May where BOD declared that it was not within rights of Mr. Kapadia to check the

3
The details of the Board of Directors is provided in Annexure II.
4
The amended Article in the AOA is provided in Annexure IV.
5
The details of the new Board of Directors are provided in Annexure V.
 Course Name: Company Law
Course Code: L-CT-0009

books of account. Mr. Kapadia suggested that the inferior quality of supplementary
product is being used in manufacture and which is harmful for the company’s
business as well as public’s health. Mr. Kapadia urged BOD to undergo a quality
check from several different independent labs, however, his request was denied.

VII. On 3rd June, Mr. Kapadia e-mailed all the directors and shareholders about the inferior
quality of product and a possible threat to potential customers. However, the
information in the e-mail got leaked and went viral which became news. Company’s
image and product demand suffered a massive fall. As a result, company suffered
huge losses. Subsequently, there were persistent defaults in the payment of principal
and interest of loan amount issued by SBI. To revive the company’s and the product’s
image, Managing Director issued a public notice stating the wholesomeness of the
product and urged people not to believe in rumours.

VIII. On 27th June MD called up for AGM on 5 th August and BOD held that the all claims
made by Mr. Kapadia were false and Company had shifted to different material by
approval of the BOD and the decision was taken in good faith and for the benefit of
the company. In the same meeting, the venue of the meeting was changed to 28 th floor
of building rather than normal venue of 1 st floor and incidentally the elevator was
under maintenance. Following such circumstances and the physical condition of Mr.
Kapadia did not allow him to attend the meeting and vote. BOD proposed to appoint
Mr. Verma as the new medical expert at manufacturing plant at Surat knowing that
Mr. Kapadia was against this decision as Mr. Verma had no knowledge of the field
and was not a qualified medical professional with relevant experience to deal with the
production of pharmaceutical products.

IX. Mr. Kapadia filed petition under Section 241 to National Company Law Tribunal
(“NCLT”) complaining of various malpractices of Mr. D. Mittal and Mr. K. Desai I
and their conduct of the company's affairs in a manner oppressive to the petitioners
and using the inferior quality material in manufacturing was detrimental to the public
interest which could make the company criminally liable. The petition contested that
the Mr. D. Mittal and Mr. K. Desai had breached the standard professional conduct
and ethical standards of integrity and probity whereby BOD by allowing degradation
in the quality of product have violated the responsibility to act in bona fide manner in
 Course Name: Company Law
Course Code: L-CT-0009

the interest of the company. The subsisting default in repayment of loan and interest
cannot be justified on the mere ground of monetary damage and there is possibility of
siphoning of funds and misuse of the authority. He contested that by changing the
venue of the meeting, without prior notice was violative of his right to vote as a
member. Further, appointment of Mr. Verma was not in accordance with the AOA
and original agreement therefore Mr. Kapadia prayed for a direction to supersede the
BOD by appointing an special officer to take over its management and affairs and a
special expert team to test the sample product with an immediate effect.

X. The defence of the company was that it was not within powers of Mr. Kapadia to
inspect the books of account and that the matters are internal administration of
a company and all decisions were taken by majority of shareholders in good faith and
for the benefit of the company. All claims of Mr. Kapadia were false and he was
responsible for leaking the information about the product quality, therefore NCLT
should not entertain his petition and petition should be dismissed.

On the basis of the facts and circumstances presented above, please choose one of the
parties to represent and write a Case Brief from the perspective of the lawyer of that
side offering advice to their client about the issues based on relevant statutory
provisions, legal principles and case laws.
 Course Name: Company Law
Course Code: L-CT-0009

ANNEXURE I

SHAREHOLDING OF CENTURY PHARMACEUTICALS PUBLIC LIMITED

SHAREHOLDER’S NAME SHAREHOLDER’S PERCENTAGE

MITTAL FAMILY 52% In Total
MR. PARESH MITTAL 23%
MS. SONIYA MITTAL 20%
MR. ADARSH MITTAL 9%
DESAI FALILY 34% in Total
MR. ASHOK DESAI 30%
MS. SUNANDA DESAI 4%
MR. MANISH KAPADIA 11%
LISTED ON BSE 3%

TOTAL 100%
 Course Name: Company Law
Course Code: L-CT-0009

ANNEXURE II

COMPOSITION OF BOARD OF DIRECTORS BEFORE APRIL 2018

1. PARESH MITTAL MANAGING DIRECTOR

2. SONIYA MITTAL WHOLE TIME DIRECTOR
3. ADARSH MITTAL WHOLE TIME DIRECTOR
4. ASHOK DESAI WHOLE TIME DIRECTOR
5. SUNANDA DESAI WHOLE TIME DIRECTOR
6. ASHVIN DAS KUMAR WHOLE TIME DIRECTOR
7. VIMALA KAMALAKAR INDEPENDENT DIRECTOR
8. VINOD SINGH INDEPENDENT DIRECTOR
9. PRANAV DESHMUKH INDEPENDENT DIRECTOR
 Course Name: Company Law
Course Code: L-CT-0009

ANNEXURE III

ARTICLES OF ASSOCIATION

(Before April 2018)

Article 18: Directors Article

3.1: Number of directors

a. The total number of directors in the Company shall be no more than 9 although at
any given time, the Board may comprise less than 15 directors, where there shall
always be three independent directors.

b. All provisions of the Companies Act, 2013 (“Act”) and Rules thereunder as
amended from time to time shall be applicable.

Article 19: Management of affairs of Company

a. The management of daily affairs of company shall rest with the Mittal family and
Desai family and they shall work as directors of the company and administer the
management of the company at Mumbai.
b. It has been decided by shareholders agreement that Mr. Paresh Mittal shall work as
managing director of the Century Pharmaceuticals Public Limited Company.
c. Whereas Mr. Kapadia shall supervise the production and distribution activities of the
company and shall be the authoritative person for all decision making relating to
production and distribution of said product.
 Course Name: Company Law
Course Code: L-CT-0009

ANNEXURE IV

ARTICLES OF ASSOCIATION

(After April 2018)

Article 18: Directors Article

3.1: Number of directors

a. The total number of directors in the Company shall be no more than 11 although at
any given time, the Board may comprise less than 15 directors, where there shall
always be three independent directors.

b. All provisions of the Companies Act, 2013 (“Act”) and Rules thereunder as
amended from time to time shall be applicable.

Article 19: Management of affairs of Company

a. The management of daily affairs of company shall rest with the Mittal family and
Desai family and they shall work as directors of the company and administer the
management of the company at Mumbai.
b. It has been decided by shareholders agreement that Mr. Paresh Mittal shall work as
managing director of the Century Pharmaceuticals Public Limited Company.
c. Whereas Mr. Kapadia shall supervise the production and distribution activities of the
company and shall be the authoritative person for all decision making relating to
production and distribution of said product.
 Course Name: Company Law
Course Code: L-CT-0009

ANNEXURE V

COMPOSITION OF BOARD OF DIRECTORS AFTER APRIL 2018

1. PARESH MITTAL MANAGING DIRECTOR

2. SONIYA MITTAL WHOLE TIME DIRECTOR
3. ADARSH MITTAL WHOLE TIME DIRECTOR
4. ASHOK DESAI WHOLE TIME DIRECTOR
5. SUNANDA DESAI WHOLE TIME DIRECTOR
6. ASHVIN DAS KUMAR WHOLE TIME DIRECTOR
7. DHRUV MITTAL WHOLE TIME DIRECTOR
8. KARTIK DESAI WHOLE TIME DIRECTOR
9. VIMALA KAMALAKAR INDEPENDENT DIRECTOR
10. VINOD SINGH INDEPENDENT DIRECTOR
11. PRANAV DESHMUKH INDEPENDENT DIRECTOR