Faculty of Law (GLS Law College)

Intra Moot Court Competition 2023-24

 Indiva has twenty-eight states in a republic form of government in the southeast and is
currently one of the most populous countries in the world. Indiva is filled with multilingual
diversified cultures and religions. The Constitution of Indiva declares it to be a sovereign,
socialist, secular, democratic republic that envisages the principles of justice, liberty,
equality, and fraternity to the citizens of Indiva. Mombay is the capital city of the Parashtra,
which is situated on the West Coast of the Indiva.
 Kota Sons Ltd. is a holding company with controlling interests in various companies
operating globally comprising of “Kota Trusts” which is a private Trust situated at
Mombay, Parashtra. It has had a long-standing joint venture with the Lalji-Premji Group
(LPG) led by Mr. Nikolas. The two groups have developed trust and confidence through
their business collaborations over the years.
 Mr. Mohan Kota, the founder of Kota Sons Ltd., and his family members are actively
involved in the company's operations. The Kota family collectively holds over 80% of the
shareholding of Kota Sons Ltd., while the LPG holds over 20% of the same.
 Kota Sons Ltd. is a national and international service provider and contributor in several
sectors viz. Communication, Information Technology, Consumer and Retail market,
financial services, Manufacturing, and Promoter of companies etc. The business
association between the two groups, namely the Shareholders of Kota Sons Limited',
represents the culmination of a longstanding connection between the ‘LPG' and the ‘Kota
Family spanning 60 years.
 It is important to note that there was no explicit establishment of a formal business
partnership between the two groups in accordance with legal requirements. Instead, the
regulation of the relationship between the ‘LPG' and the ‘Kota Sons’ relied less on legal
obligations and formalities.
 In the spirit of interdependence and mutual trust, Mr. Nikolas was chosen as the 'Executive
Chairman' of ‘Kota Sons Limited' through a rigorous selection process based on his
qualifications and merits. His appointment explicitly recognized his significant shareholder
status, both as an insider and outsider, highlighting the connection between his appointment
and his role as a significant shareholder.
 In this same spirit of trust, Mr. Nikolas sought advice periodically regarding matters of
transition and historical legacy issues, where crucial decisions had to be made to minimize
 losses or undertake restructuring, in the best interests of ‘Kota Sons Limited' and the Kota
Group Companies.
 Mr. Nikolas showed great respect and deference towards the past leadership of ‘Kota Sons
Limited', going above and beyond to safeguard their legacy. He addressed these legacy
issues internally, without making public statements about them during his tenure as the
'Executive Chairman', along with his team. During his tenure, Mr. Nikolas made significant
decisions to cut losses and restructure the company, leading to a substantial increase in its
market value.
 Subsequently, on April 1, 2019, Mr. Nikolas was abruptly removed as the Executive
Chairman of Kota Sons Ltd., after a meeting of the board of directors and called for
approval through the general resolution, without providing substantial reasons by inter alia
linking it to performance misconduct.
 He decided to appeal before the Board of Directors and challenge his removal stating the
reasons for the sacking were not specified by Kota and Sons and negating the fiddling with
the culture of such a reputed company and the credential of the office and his reputation.
 He blamed the board for tarnishing his image before the shareholder of the company. The
Board of the company decided against the appeal and gave Mr. Nikolas substantial time to
make things in order and leave the company peacefully.
 At the same time of the removal of Mr. Nikolas another issue rose up wherein Kota Sons
Ltd. decided to restructure its share capital by converting existing surplus reserves into
rights shares for existing shareholders at a discounted price. Some shareholders exclusively
belonging to LPG but not associated with the Kota and Sons filed an application to Mr.
Mohan Kota, alleging that the rights shares were only allotted to shareholders representing
the Kota and Sons.
 Mr. Nikolas filed a case against the company in the National Company Law Tribunal
(NCLT) bench in Mombay for wrongful removal from the post of chairman and accused
the company of ‘Oppression and mismanagement in the company, claiming that Kota and
Sons were trying to furtherreduce the stake of LPG in the company and reduce the voting
rights of shareholders.
 In response Company filed its statements by alleging that Mr. Nikolaus had started his
Dream project, something that he had been working on for years even before his
employment with the company. The said project started without the expressed permission
of the board 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 board and
the matter came to light through the media and digital media and newspapers. Then the
company started to think about the mismanagement and embezzlement or illegal business
being carried out under his supervision. Therefore, with immediate effect, he was dismissed
and removed from the post.
 He claimed before the Company Law Board Tribunal against the decision of the Board of
 Directors on the basis of his credentials of business and claimed that he was not indulged
in the illegal activities in the Kota and Sons. The performance of the company during
Nikolas’s regime acclaimed the sincerity of his decision for the welfare of the shareholders
and stakeholders. A chairman cannot be sacked on fictitious grounds.
 The flagship business of Kota Sons Ltd., the Hydrophone Project, suffered losses,
impacting other ventures of Kota Trust miserably. The internal operations systems were
modified, requiring permission and approval from Mr. Mohan Kota and his family
members for every decision. Mr. Nikolas was not willing to operate under such a model.
 The Governing bodies of the company had to take the decision in a meeting of the board
of director’s approval of the sacking of Mr. Nikolas. Relentless allegations appeared from
Mr. Nikolas’s side for interfering in his decisions in the company’s decision-making.
 NCLT upheld the decision of the board to remove Mr. Nikolas from the post of Executive
Chairman.
 Mr. Nikolas appealed to the National Company Law Appellate Tribunal (NCLAT),
challenging the decision. The NCLAT reversed the NCLT's decision. Aggrieved by the
NCLAT's decision, Kota Sons Ltd. has now approached the Supreme Court of India.
 The Supreme Court is currently hearing the case, which involves issues of corporate
governance, oppression and mismanagement, shareholder rights, and the removal of Mr.
Nikolas as the Executive Chairman of Kota Sons Ltd.
 The Supreme Court has scheduled this matter for the final hearing.

Disclaimer:

This problem is a hypothetical moot problem. It is only for an academic