The Supreme Court on Monday rejected an appeal by World Crest Advisors, a Dish TV promoter group firm, that sought to restrain Yes Bank from exercising its rights including voting rights over 440 million shares held by the bank.
A bench led by Justice DY Chandrachud refused to interfere with the Bombay High Court order that allowed Yes Bank to vote at the company’s extraordinary general meeting (EGM) on June 24. DishTV had in May announced the EGM to ratify and pass a resolution for re-appointment of the managing director, the whole-time director and a non-executive independent director.
However, the apex court said the observations made in the impugned order will be confined to the ad interim relief only.
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World Crest Advisors had moved the apex court against the HC’s division bench order that upheld its single judge’s order of June 17 that refused to “exercise its discretion” and rejected the promoter’s plea wanting to restrain Yes Bank from attending or voting at the company’s EGM.
The promoter family, led by Dish TV chairman and managing director Jawahar Goel, and Yes Bank, which is the largest shareholder in the firm with a 25.63% stake, are at loggerheads over corporate governance and fund raising issues.
World Crest, which is a part of the Jawahar Goel Group, had sought protection of its rights in the shares of DishTV India which were pledged by it in favour of Catalyst Trustee as security for `5,270 crore advanced by Yes Bank to the Essel Group (Subhash Chandra) entities — Evenness Business Excellence Services, Essel Corporate Resources, Last Mile Online, Living Entertainment Engterprises, Mumbai WTR and Pan India Network Infravest — the appeal said.
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The Essel Group companies had defaulted on their repayment obligations, as a result of which Catalyst invoked the pledge of 440 million shares of Yes Bank, which constituted almost 25% of the paid-up capital of the bank, World Crest said while alleging that Catalyst was in violation of the Security Trustee Agreement.
Stating that the HC’s order was “erroneous,” World Crest told the SC that the impugned order was contrary to settled law and judicial precedents that “parties cannot contract out of law and evade statutory prohibitions and therefore the pledgee or its nominees, who are not general property right holders in the pledged shares, and who’s rights are at best, only ‘slightly greater than a mere possessory lien’, cannot be allowed to vote on the strength of pledged shares, to usurp management control of the company/firm in question and create general property rights on third parties”.
Yes Bank has since then not just interfered with the functioning of DishTV but has objected to its management, conduct, operations and routine resolutions such as appointment of auditors, finalising their remuneration, allowing appointment of directors, etc, it said.
“By exercising 25% voting rights under the pledged shares, the bank has sought to hijack the management and control of DishTV and has virtually brought a deadlock in the operations, stating to act as a shareholder of DishTV. The actions of Yes Bank have greatly tarnished the image of DishTV, thereby having prejudicial impact on not only Jawahar Goel Group and World Crest but also the value of their investment,” the appeal said. While World Crest had sought itself to be declared as owners of over 440 million shares of DishTV, Yes Bank said that the shares were pledged in favour of Catalyst by five other companies to secure the term loans, thus the lender claimed to be the beneficial owner of the shares and sought to exercise its voting rights in respect of the same.