MOOT COURT PROBLEM

Kata and Co. Ltd. is a national and international service provider and
contributors in several sectors viz. Communication, Information Technology,
Consumer and Retail market, Financial services, Manufacturing, Promoter of
companies etc. Mr. Ram was appointed CEO of Kata and Sons Co. Ltd. after for
four consecutive years. The Kapoor family is the second largest stakeholder of
the Kata and Sons Co. Ltd. The appointment of Mr. Ram as the CEO was seen
more as a generational shift in the Kata Group. Mr. Shayam Lal Kata, the
Chairman, Emeritus of Kata and Sons Ltd. was a successor of Sh. M.D.K Kata
Co. Ltd. Who has built the empire through his business and accounted from
salt to steel conglomerate.

Mr. Ram, on 24th October, 2017 was sacked out by the Kata and Sons Co. Ltd.
after meeting of board of director and called for the approval through the
general resolution. That was strange to Ram and given a chance for their
submission before the Board of Director. The shareholders were known for
handling their HR issues so humanly that they could not find a better exit to
their CEO under the Company Act, 2013. Discussed the procedure for the
appointment of new CEO and removal from the post of the Company under
section under sections 149 along with 163 and 242-245 and other relevant
sections and judicial observations.

The Kata and Co. Ltd. approved the removal of Mr. Ram from the post of CEO
but he decided to appeal before Board of Director and challenge his removal
stating the reasons for sacking were not specified by Kata and negates the s
fiddling with the culture of 130 yr old company and credential of the office and
his reputation. He blame for tarnishing his image before the s shareholder by
the chairman. Mr. Ram has started his own business without approval of the
Trust. He launched its own dream project without the approval of the board of
director of the company. There was unequal distribution of profits between the
directors and other shareholders. These charges and manipulation of funds
under gratification were raised by the Chairman and the matter came to light
through the media and digital media and newspapers. Then the company
started to think about the mis-management and embezzlement or illegal
business being carried under his supervision. Therefore, with immediate effect
he was dismissed and removed from the post.

He claim before the Company Law Board Tribunal against the decision of the
Board of Director on the basis of his credentials of business and claiming that
he was not indulged in the illegal activities in the Kata group. The performance
of the Kata company during Ram’s regime acclaimed his sincerity of his
decision in the welfare of the shareholder’s and stakeholders and challenged
the removal from the post of CEO on the basis of the privileges and immunities
of the post. He argued that it is a clear violation of the directions of the
Company Law Board in its various decision and guideline. It did not paint a
galvanizing picture. If you let alone luxurious cars, all other entities had their
accounts RED. A Director cannot be sacked on fictitious grounds. The deal of
the Kata with the Japanese-telecom giant, MOKOMO; ended up Kata’s by
paying $ 1.2 billion in arbitration award and it became a reason of lose to
exchequer of the Company. The Governing bodies of the Kata & son’s have to
take the decision in a meeting of the board of director’s for final approval of
sacking of Mr. Ram.

Relentless allegations appeared from Ram side for interfering in his decision’s
in company decision making. He also accused Kata of ‘Operation of Minority’
claiming that Kata was trying to reduce the stake of kapoor’s family in the Kata
and Co. Ltd. and reduce the voting rights of shareholders. During all this, Mrs.
T. Vadia emerged as a supporter an independent director at four of the Kata’s
entities. The board tried to sack him for saying that things were not in general
interest of the company. But apparently they could not do so, because the
Board meeting did not favour her sacking and removal.

Later Ms. Wadia ended up filling a suit of manipulation of the power of the
stakeholders in Kata and Sons Ltd. The Company Law Board has to take action
against the Chief Director of the Kata and Co. Ltd. For the violation of the Law
and Procedure. The interest of the minority share holder and stakeholder a
cause of concern in the general meeting of the Board of Directors. The
expansion of the business carried out by the CEO is the violation of credential
of business of the company.

To conclude, the controversy was about goals or vision for money, but vision
that symbolizes trust and Kata had invested and earned. A committee was
forced four months to decide the successor “Mr. M Gopal Swamy” became the
new CEO of the Kata Co. Ltd. and remember for his well place in history and
will be remember warmly as his ancestor’s.

Discuss the Law and Procedure for the selection of the new successor’s of the
company and highlighting the violation of “Principles of Natural Justice” in the
removal of the CEO on the following contentions:-

a) Whether the removal of Mr. Ram without notice is a violation of the Natural
Justice Principle and appointment of the Interim Chairman by the Trustee is
the basic violation of this principle?

b) Whether the Lack of transparency and impartiality to right of vote to the

c) Discuss the violation of the Minority shareholders on the part of the majority
shareholders.

d) Discuss the liability highlighting the Corporate Social liability of the reputed
company .

Note: Prepare and draft the memorial before the National Company Law Board
on the basis of the laws and procedure in this matter and discuss the judicial
precedents. These issues are not exhaustive. The participant can go through
the other similar issues relevant to the problem.