Bhavin Rashmi Mehta v Chetan Mehta and others
Jurisdiction | Singapore |
Judge | Woo Bih Li JAD |
Judgment Date | 15 May 2023 |
Neutral Citation | [2023] SGHC(A) 19 |
Court | High Court Appellate Division (Singapore) |
Docket Number | Civil Appeal No 49 of 2022 |
Hearing Date | 27 April 2023,14 March 2023 |
Citation | [2023] SGHC(A) 19 |
Year | 2023 |
Plaintiff Counsel | Jerald Foo and Luis Inaki Duhart Gonzalez (Selvam LLC) |
Defendant Counsel | Koh Swee Yen SC, Ang Shunli Alanna Suegene Uy and Teo Wei Kiat Samuel (WongPartnership LLP),The fourth respondent absent and unrepresented. |
Subject Matter | Companies,Directors,Resignation |
Published date | 18 May 2023 |
This appeal centred around the question of whether one of the respondents had withdrawn his resignation from his directorship of a company, which would in turn affect whether he could have validly voted on resolutions passed by the company’s board. We dismissed the appeal on 27 April 2023 and issue our grounds of decision as follows.
The appellant, Mr Bhavin Rashmi Mehta (“Mr Bhavin”), and the first respondent, Mr Chetan Mehta (“Mr Chetan”) were cousins. Mr Bhavin’s father, Mr Rashmi Mehta (“Mr Rashmi”), and Mr Chetan’s father, Mr Prabodh Mehta (“Mr Prabodh”) had incorporated the fourth respondent company, Arpee Gem Pte Ltd (“Arpee Gem”). Though patriarchs, the two fathers were not directors or direct shareholders at the material times. The board of Arpee Gem comprised Mr Bhavin, Mr Chetan, Mr Sanjiwan Sahni (“Mr Sahni”) who was the second respondent, Mr Quek Hung Guan (“Mr Quek”) who was the third respondent and one Mr Pradipkumar Modi (“Mr Modi”).
Mr Bhavin and Mr Chetan were also shareholders of Arpee Gem holding one share each. Arpee Gem was controlled by companies owned by Mr Bhavin and Mr Chetan’s families, namely Burma Ruby Inc and BC Manufacturing Inc respectively, each with 18,000 shares. The only other shareholder, Lotus Global Investments Pte Ltd, held preference shares and did not exercise control over Arpee Gem:
Arpee Gem was a majority shareholder and in direct control of two subsidiaries: Kay Diamonds NV (“Kay Diamonds”) and Gembel European Sales NV (“GES”). Kay Diamonds and GES owned another subsidiary, Menamani Investment Corporation NV (“MIC”):
There were three events of note in this dispute. First, Mr Sahni submitted a notice of resignation via email on 14 December 2015 (the “2015 Resignation”). Second, he gave a second notice of resignation by way of a letter dated 4 December 2018 to Arpee Gem, which he had attached to an email sent on the same date (the “2018 Resignation”). The 2015 Resignation and the 2018 Resignation will be collectively referred to as the “Resignations”. Third, in 2020, Mr Bhavin disagreed with Mr Chetan’s proposal to sell a property (the “Property”) belonging to MIC as the buyer was an acquaintance of Mr Chetan.
On 16 July 2021, Mr Chetan issued notices calling for board meetings of Kay Diamonds and MIC, for the purpose of convening annual general meetings (“AGMs”) of the two companies. For the Kay Diamonds AGM, Mr Chetan sought to add to the agenda the determination of who was authorised to vote on behalf of Kay Diamonds in MIC’s affairs. For the MIC AGM, Mr Chetan sought to add to the agenda the decision to sell the Property. The AGMs were fixed for 6 October 2021 (the “October 2021 AGMs”).
On 22 September 2021, Mr Bhavin received notice of the October 2021 AGMs via email. The email also contained draft directors’ resolutions dated 21 September 2021 (the “Draft Resolutions”), which sought to appoint Mr Chetan as Arpee Gem’s proxy for MIC’s and Kay Diamond’s AGMs. Mr Bhavin’s evidence was that he had not been consulted in the preparation of these Draft Resolutions.
On 3 October 2021, Mr Bhavin received signed copies of the Draft Resolutions (the “Purported Resolutions”). The signatures of Mr Chetan, Mr Sahni and Mr Quek were on the Purported Resolutions, constituting the requisite majority of the board for the resolutions to pass. On 5 October 2021, Mr Bhavin objected by email to the validity of the Purported Resolutions on various bases, including that Mr Sahni was no longer a director of Arpee Gem.
Pleadings belowIn HC/OS 1267/2021 (“OS 1267”), Mr Bhavin alleged that Mr Sahni had ceased to be a director of Arpee Gem when the Purported Resolutions were signed by him because of the Resignations. Hence, Mr Sahni’s approval of the Purported Resolutions was invalid with the result that the resolutions were not passed with the required majority.
OS 1267 was filed in reliance on ss 399(2) and 409A Companies Act (the “CA”). As the action was filed on 13 December 2021, the applicable edition of the CA was Cap 50, 2006 Rev Ed. This was because the 2020 Rev Ed came into operation on 31 December 2021. As ss 399(2) and 409A of the CA required an act that contravened the CA or related to a requirement necessitated by the CA, Mr Bhavin sought to rely on a contravention of s 173A CA (as Arpee Gem did not regularise matters following Mr Sahni’s alleged resignation as director) and s 39 CA (as Arpee Gem sought to retain Mr Sahni as director after he had vacated his office).
The respondents in turn submitted that a notice of resignation by a director may be withdrawn by either the company or the director as long as both consented, and that the conduct of Arpee Gem, Mr Bhavin and Mr Sahni sufficed to amount to consent to the withdrawal of the Resignations. They relied on the following conduct:
Further and/or alternatively, the respondents submitted that Mr Bhavin was estopped by convention from denying that Mr Sahni continued to be a director of Arpee Gem.
Decision below The Judge below (the “Judge”) found that the dispute was essentially a shareholder dispute between two factions of Arpee Gem, and the question of whether Mr Sahni was a director should be asserted by Arpee Gem and not Mr Bhavin (
In particular, the Judge found that Mr Bhavin’s prayers for declaratory relief lacked basis as they did not pertain to Mr Bhavin’s personal rights, and in any case would be superfluous given the other remedies sought by Mr Bhavin (
As for Mr Bhavin’s prayers for injunctive relief pursuant to ss 399(2) and 409A CA, the court found that there could not have been a breach of s 39 CA, which enshrined the common law rule that a company’s constitution was a contract between the shareholders and the company as well as the shareholders
During the hearing below, counsel for Mr Bhavin applied to amend OS 1267 to rely on s 18 read with the First Schedule of the Supreme Court of Judicature Act 1969 (2020 Rev Ed) (the “SCJA”) so as to enforce ss 145(4A) and 145(4B) CA as an alternative basis for his claims (the “Amendment Application”):
On appeal, Mr Bhavin submitted that Mr Sahni did not withdraw the Resignations, and in any event could not have done so as the Resignations were immediately valid and effective upon their receipt. To continue acting as a director, he would have had to be re-appointed. Mr Bhavin also contended that the Judge had erred in finding him estopped from claiming that Mr Sahni had resigned. Alternatively, the Judge should have granted the Amendment Application.
The respondents maintained that the Resignations were withdrawn by consent and that the elements of estoppel by convention had been made out. The respondents also submitted that Mr Bhavin had no
The Judge based her decision on a narrow ground,
We needed only to rest our conclusion on the facts even though counsel for the respondents did not explicitly say that the Judge’s conclusion should also be supported on the facts. Rather, counsel for the respondents assumed that the Judge had made factual findings, as did counsel for Mr Bhavin.
We agreed that the evidence about the phone calls or meetings in 2015 and 2018, which were purportedly made to persuade Mr Sahni to stay on as director after each notice of resignation was sent, would have to be resolved, if necessary, by trial. Separately, we noted that some persons who purportedly agreed to the withdrawal of the Resignations were neither directors nor shareholders and their consent would not have been binding upon Arpee...
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