Super-Max Offshore Holdings v Malhotra & Anor

These proceedings concern the fall-out from a shareholder dispute which came to a head in December 2016. The Claimant (“SMOH”) is a company registered in the Cayman Islands which heads the Super-Max group. The group manufactures and distributes razor blades and associated products worldwide, mostly in India, the Middle East and Africa. The group’s largest market, in terms of both sales and profit, is India, where the business was started by the Defendant’s family and where it operates through a subsidiary, Super-Max Personal Care Pvt. Ltd (“SPCPL”). All its main manufacturing plants are in India. Another group subsidiary is Wesley International Ltd (“Wesley”), which is registered and based in Dubai. The group has offices in Dubai and also at Thane, near Mumbai, which is the largest of its manufacturing plants.

The Defendant (“Mr. Malhotra”) is commonly known as “Rocky”. He is a UK citizen and lives in Dubai, Mumbai and Los Angeles. The Super-Max group is an offshoot of a family business originally founded by his grandfather as Harbhans Lal Malhotra & Sons (“HLM”) in 1945. There was a family split in 1986, with Mr Malhotra and his father forming the Super-Max group (initially under a different name) and his uncle retaining the HLM business, with which the Super-Max group competes.

Actis LLP is an English registered partnership carrying on business as a private equity investor in growth markets across Africa, Asia and Latin America. In 2011 the Actis group invested US$ 225 million in the Super-Max group through the Additional Defendant which is a Mauritian company created as a special purpose vehicle (“Actis”). At this time the Super-Max business was the second largest manufacturer of razor blades in the world, behind Gillette. Subsequently Actis has invested a further sum of almost US$ 40 million, and Mr Malhotra (indirectly) about $10 million. The investments made Actis a minority shareholder with a current equity interest of 40.17% of the ordinary shares together with additional preference shares. Mr Malhotra and his family retain a majority equity stake. At the material times Mr Malhotra’s family interests have been held by a Lichtenstein foundation of which he and his family are beneficiaries, which owns the shares of a Mauritian company, Super-Max Mauritius, which in turn owns 59.83% of the ordinary shares in SMOH. Actis’ economic interest in the group is much greater than its 40.17% ordinary share ownership, by reason of the group’s debt to it and its preferential shareholding. Its economic interest was put at something in excess of 90%.

Actis, Mr Malhotra, SMOH and others entered into a shareholders agreement entitled Subscription and Shareholder Deed (“the SSD”), which was signed on 4 November 2010, amended on 4 March 2011, completed on 24 March 2011 and again amended on 24 July 2015. Mr Malhotra became the Executive Chairman of SMOH and the group, pursuant to the terms of a written agreement with SMOH with effect from 11 April 2011 (the “Service Contract”). Under the SSD there was to be a group chief executive officer who could only be removed with the consent of Actis.

The financial performance of the group was disappointing. Mr Malhotra attributed it to the incompetence of the CEO, Mr Anindo Mukherji, and the senior management team he had put in place since his appointment in August 2014. Mr Mukherji and the senior management nevertheless continued to enjoy the support of Actis. On 18 December 2016 Mr Malhotra purported to suspend Mr Mukherji as CEO and take over the role himself, and terminated the employment of some other senior managers. This was contrary to the wishes of Actis and without its consent. Actis sought an injunction, granted ex parte by Picken J on 20 December 2016, restraining Mr Malhotra from implementing the suspension of Mr Mukherji; from implementing the suspension or removal of other employees; and from holding himself out or purporting to act as CEO. In the light of Mr Malhotra’s alleged subsequent conduct, a further order was sought, and granted ex parte by Andrew Baker J, on 6 January 2017, restraining Mr Malhotra from doing various things which would or might interfere with the management of the group’s business.

Actis considered various aspects of Mr Malhotra’s conduct, both before and after the Court orders, to be a repudiatory breach of his Service Contract. On 10 February 2017 Actis, purporting to exercise rights under the SSD to take certain actions on behalf of SMOH, caused SMOH to treat Mr Malhotra’s behaviour as gross misconduct terminating the Service Contract.

The central issue in the case is whether Mr Malhotra’s Service Contract was validly terminated. Mr Malhotra challenges the suggestion that he was guilty of gross misconduct or that SMOH had any right to terminate his employment as executive chairman; and in any event disputes that Actis had the right to cause SMOH to take such action. He also advances a claim against Actis for unreasonably refusing its consent to the removal of Mr Mukherji as CEO and for wrongly purporting to act on behalf of SMOH in terminating his Service Contract.

Since the time of the purported termination, an interim arrangement has been agreed between the parties, pending the trial in these proceedings, pursuant to which, among other things, SMOH would continue to pay Mr Malhotra’s salary and Mr Malhotra would cease to act as executive chairman save for certain functions.

The SSD, which was governed by English law, put in place the following scheme for governance of SMOH and the group. An “Advisory Board” was created, which was to be the “principal governing body of the Group” (clause 17.1.5). The Advisory Board was to have seven members, being (i) Mr Malhotra (who was to act as chairman of the Advisory Board) and three persons nominated by him; (ii) two persons nominated by Actis; and (iii) one independent member, to be appointed by agreement between Mr Malhotra and Actis (clause 17.1.2). The Advisory Board was required to meet at least six times each calendar year at intervals of not more than two months (clause 17.1.4), and would only be quorate if there were three directors present including at least one Actis nominee and one Malhotra nominee (clause 18.4.1). The composition of the boards of directors of SMOH and each group company was to follow the structure of the Advisory Board: (i) Mr Malhotra was entitled to appoint four directors; (ii) Actis was entitled to appoint two non-executive directors; and (iii) there was to be one independent, non-executive director, appointed by agreement between the parties (clauses 17.2.1 to 17.2.3). Mr Malhotra was to be the executive chairman of SMOH and the group under a service contract to be agreed between Actis and Mr Malhotra on the principal terms set out in an already agreed term sheet (clause 17.2.1), provided that if his Service Contract were terminated or expired for any reason he should only be entitled to be non-executive chairman of SMOH and the group.

Save for “Reserved Matters”, all decisions of the group were to be taken after giving due consideration to the advice and recommendations of the Advisory Board (clause 18.1.2), and the parties agreed to procure each group company – subject to the fiduciary duties of the directors in question – to act consistently in accordance with any resolution of the Advisory Board (clause 18.1.3). “Reserved Matters” were not to be carried out by any group company without Actis’ prior written consent (clause 16.1). Such matters include (at para 5.2 of schedule 2):

“The appointment or removal of the CEO (subject to clause 18.6.1), India CEO, the CFO and the India CFO or any variation in the remuneration or other benefits or terms of service of any such person.”

The SSD empowers Actis’ nominated directors to prosecute rights of action on SMOH’s behalf, and to instruct SMOH to exercise decisions and/or discretions, in certain circumstances:

The scheme described above was to be replicated across the entire group and incorporated in the articles of association of each group company (clause 35.2). In circumstances of conflict/inconsistency between the provisions of the SSD and the articles of any group company, the parties agreed that the SSD was to prevail (clause 35.2). Article 29 and Schedule 1 of SMOH’s articles of association replicated clause 16.1 and Schedule 2 of the SSD in requiring the written consent of Actis for Reserved Matters in terms which are materially identical.

In fact at the times material to this dispute the composition of the boards did not entirely reflect the SSD. There were eight, not seven, Advisory Board members because there were two independent appointments. The Advisory Board comprised:

The SMOH board had only three members: Mr Malhotra and Mr Norchi as the Malhotra nominees and Mr Shomik Mukherjee as the Actis nominee.

Mr Malhotra’s Service Contract was with SMOH on terms agreed between him and Actis pursuant to the SSD. It was subject to English law and jurisdiction and contained the following express terms:

“Clause 2.1:

“[Mr Malhotra] shall serve as [SMOH’s] Executive Chairman of the Board of Directors, and shall have the general powers, duties and responsibilities of management usually vested in that office in a corporation and such other additional powers and duties as may be prescribed from time to time by the Company. The Company may ask the Employee to assume additional positions within the affiliates of the Company.”

Clause 2.2:

“The duties of the Executive Chairman of the Board shall include responsibility for determining the Super-Max Group’s (“Group”) global strategy for manufacturing, distribution, marketing, new product development and the strategic direction. Further, the Executive Chairman will be responsible for leading the development of world class [Environmental, Social and Governance ESG] systems for the Group ensuring that state of the art, best practice technology is implemented at the right cost, that product development meets with the Group’s growth plans defining organisation culture, and for the Group’s financial health and sustenance.”

Clause 2.3:

“During employment with [SMOH], [Mr Malhotra will: …. (ii) comply with all of [SMOH’s] rules, regulations and policies;”

Clause 5:

“…It is a condition of employment with [SMOH] that [Mr Malhotra] will comply with rules and policies which are established by [SMOH]”

Clause 7:

“[SMOH] shall pay to or reimburse [Mr Malhotra] for pre-approved reasonable and necessary business, travel promotional and similar expenditures incurred by [Mr Malhotra], including travel as per [SMOH’s] travel policy…”

Clause 13:

“13.1

This employment relationship shall last for an indefinite period of time and can be terminated on the grounds and in the manner as provided by applicable law and this Contract”

“13.4

For valid reasons, the Company, as well as the Employee, may at any time terminate the employment relationship without notice. A valid reason is considered to be a gross misconduct within the meaning of applicable law.”

The rules, regulations and policies of SMOH which fell within clause 2.3(ii) and 7.1 included a Code of Conduct Policy, Travel Policy, Hospitality Policy and an “Authority Matrix”. The latter was a document agreed by the Advisory Board at the time of Mr Anindo Mukherji becoming CEO and designed to provide clarity and protection of the senior management’s independence from Mr Malhotra. It set out the Reserved Matters in which Mr Malhotra was to have no involvement. It identified those other matters which were ultimately to be decided by either or both of Mr Anindo Mukherji or Mr Malhotra, sometimes in consultation with the other, and also included provisions for the involvement of others in the management hierarchy. A footnote in red provided: “There will not be any direct communication by the shareholders with any employee. All communications will flow through the CEO. A formal communication to this effect will be made to all employees.”

By December 2016 Mr Malhotra’s salary as executive chairman was US$1.45 million per annum.

Mr Anindo Mukherji was identified by Actis as a candidate for CEO of the group in June 2014 and his appointment made, with the agreement and support of Mr Malhotra, commencing on 8 August 2014. He had successive contracts of employment, first in an appointment letter, then a written contact dated 20 January 2015 with SCPCL and then a written contract dated 1 April 2015 with Wesley. The latter is the operative contractual document under which he was employed as group CEO at the material time. It was governed by UAE law and provided that he was to be supervised by, and report to, the chairman as his line manager. It contained express provisions relating to circumstances in which his employment might be terminated but no express provisions for suspension.

By the time Mr Anindo Mukherji took over as CEO and was able to shape his own management and strategy, the group had already suffered a serious decline since Actis’ investment in 2011. There had been three CEOs, the previous one having lasted only a matter of months before resigning. During two hiatuses between CEOs, Mr Malhotra had acted as temporary CEO, between 30 September 2013 and 2 January 2014; and again between 27 March 2014 and 8 August 2014. This was pursuant to the agreement of the Advisory Board. A few months after Mr Anindo Mukherji started, on 6 November 2014, Mr Birch, one of the independent Advisory Board members, sent an email describing the group as being in a “parlous” position. In his evidence he described it before Mr Anindo Mukherji’s arrival as being “shambolic”. Mr Anindo Mukherji said that it took him some 6 to 8 months to be in a position to ascertain the problems and start to implement his own strategy for change, including structural and senior management changes, in other words roughly until the financial year end 2014/2015 in March 2015, with Mr Abraham being recruited as CEO India three months later. In the four financial years from 2011/12 to 2014/15 net sales had fallen year on year from about US$231m to about US$141m. EBITDA over that period had been highly volatile: US$27m, minus US$44m, minus US$7 million, and US$16m respectively. The group’s financing costs and debt burden meant that it was loss-making throughout. In addition it had serious cashflow difficulties.

By the end of the next financial year, 31 March 2016, when Mr Anindo Mukherji had had a full year at the helm after settling in, the results continued to disappoint. Net sales were down further to about US$122m and EBITDA was about US$10m. These compared with forecasts made by Actis, based on management projections, of US$217m sales and US$39m EBITDA.

Mr Malhotra and the majority of the group’s Advisory Board began to question whether Mr Anindo Mukherji was the right person for the job. Mr Malhotra first expressed his view that Mr Mukherji was not succeeding and should be replaced as CEO at a meeting with Mr Shomik Mukherjee and Mr Rathinam on 8 April 2016. The following month, Mr Peter Birch began to express his concerns in a typically trenchant email of 25 May 2016. A meeting of the Advisory Board took place on 31 May 2016 at which it was apparent that the group had failed to meet the targets management had set. At that meeting, and in the face of critical questioning from the board members, Mr Anindo Mukherji explained that things would be different going forwards because certain legacy issues which had previously affected performance had now been resolved. Mr Mateen informed Mr Anindo Mukherji that the board would be closely monitoring whether he was able to meet his projections.

The June and July targets were again missed by a sizeable margin. At the next Advisory Board meeting on 21 July 2016, Mr Anindo Mukherji and senior management explained the figures and their perception of the reasons for the shortfall, together with their revised targets and strategy for the future. After the meeting, Mr Birch emailed the Advisory Board members as follows:

“The first quarter’s results were disappointing --- to put it mildly. We did not discuss what steps should be taken if the second quarter and the 2016/17 year’s budgeted sales and EBITDA are not achieved. We have no back up. The business is drifting towards closure. The executive management is impressive but NOT performing. We are very good at administration and better than we were @ governance but these are invalid without robust sales. It is not up to the board to come up with solutions --- it is up to management. Should they fail, then the board has no alternative but to step in --- and the way the business is going, that seems more and more likely.”

In early August 2016 Mr Malhotra sought a further Advisory Board meeting to take place that month, but the Actis nominees did not see the need for another meeting so soon and did not attend. The others went ahead with an inquorate meeting by telephone on 26 August 2016. A number of members of the board, including Mr Birch, were highly critical of Mr Anindo Mukherji. Mr Mateen, the other independent board member recognised that the performance figures were poor but regarded it as unfair to level criticism at the management in the absence of an opportunity for them to discuss and explain the figures.

The targets were missed again for August and September 2016. A meeting of the Advisory Board took place on 22 September 2016. All members concluded that no steps should be taken in relation to changing management prior to the next Advisory Board meeting in November. All except the two Actis nominees on the board (i.e. Messrs Birch, Mateen, Malhotra, Ostwal, Norchi and Ivinson) expressed the view that a change in management should be given consideration at the November meeting.

The October 2016 targets were again missed, again by a considerable margin. By November 2016 relations between the shareholders had deteriorated further. They were in discussions in relation to a proposal, a variant of which had been mooted a long time before, whereby Mr Malhotra would step down as executive chairman, to be replaced by Mr Mateen as a non-executive chairman, in return for Actis waiving payment of interest on its loans to the group. At this time both sides had in mind that the SSD would enable Actis to begin a process to sell the business in the open market from 1 January 2017, and that if Mr Malhotra did not cooperate or more than 12 months elapsed, Actis had further “drag rights” to compel Mr Malhotra to sell his shares as part of an exit from Actis’ investment. Both were aware that because of Actis’ preferred rights in relation to its debt and equity shareholding, the result would involve Mr Malhotra receiving nothing unless the fortunes of the group revived considerably.

A meeting of the Advisory Board was scheduled to take place on Thursday 24 November 2016. Ahead of that meeting, Mr Malhotra and Mr Ivinson met Mr Shomik Mukherjee and Mr Rathinam at Actis’ offices in London on Monday 21 November 2016. This was a shareholder meeting, with Mr Ivinson acting as Mr Malhotra’s legal adviser qua shareholder, not in his capacity as an Advisory Board member. Mr Malhotra asked for an offer to buy him out fully, and for Mr Anindo Mukherji to be replaced as CEO. The Actis representatives wanted Mr Malhotra to step down as executive chairman. Neither agreed to the other’s requests. They agreed to have further discussions in Dubai on Wednesday 23 November ahead of the Advisory Board meeting scheduled for the following day, and for a draft amended SSD to be drawn up for discussion. Messrs Mukherjee and Rathinam indicated that unless these shareholder issues had been resolved the Advisory Board meeting should not take place on 24 November, a view confirmed in an email from Mr Schmidt, the Actis partner with responsibility for the investment, to Mr Malhotra later that day. Mr Schmidt urged constructive discussion to resolve the issues so that the Advisory Board meeting could be constructive.

The discussions in Dubai on 23 November 2016 proved to be anything but constructive. Mr Malhotra commenced proceedings in the Cayman Islands against Actis, Actis LLP, Mr Shomik Mukherjee and three Actis employees/directors, alleging liability for destroying value in the business. When he and Mr Ivinson came to meet Mr Shomik Mukherjee and Mr Rathinam in Dubai on Wednesday 23 November, first at around noon and then over dinner in the evening, Mr Malhotra did not at first reveal this fact. However during the dinner Mr Malhotra then purported to serve the proceedings and, according to Mr Shomik Mukherjee’s evidence, which I accept, went on to threaten the Actis representatives.

Mr Shomik Mukherjee and Mr Rathinam did not attend the Advisory Board meeting the next day, requesting that it be deferred to another date. It went ahead without them although it was inquorate. Mr Anindo Mukherji and Mr Desai, the group CFO, attended to speak to the group’s performance. The four Malhotra nominees and Mr Birch signed a document condemning the refusal of the Actis nominees to attend.

The next day, 25 November 2016, Mr Malhotra sent an email to Mr Anindo Mukherji and Mr Desai urging them to put in place a drastic remedial plan in almost all areas of the business, copied to Mr Birch. Mr Birch responded supportively, without copying in the Actis nominee board members.

Matters deteriorated. Mr Malhotra took a number of aggressive steps towards Mr Anindo Mukherji with a view to undermining and removing him. They met in Dubai on 28 November 2016 and had a follow up call on 3 December 2016. On both occasions Mr Malhotra said that any outcome would result in Mr Anindo Mukherji being dispensed with, and that his reputation would be sullied. He threatened to join Mr Anindo Mukherji as a defendant to the Cayman action and asked him to consider his position, in other words urging him to resign.

On 30 November 2016 he sent an email to Mr Anindo Mukherji and Mr Abraham purporting to set out what was characterised as their “dismal performance” and “lack of action”. It was copied to a number of their subordinates. Further aggressive and disparaging emails were sent by Mr Malhotra to Mr Anindo Mukherji and his senior management team over the following weeks, again sometimes copied to subordinates, and in intemperate terms, for example alleging “total chaos”, “the disease of non performances”, “value destruction created wilfully or by inability” of which the majority of the advisory board were allegedly “in contempt”. He prepared an announcement in very critical terms which alleged that Mr Anindo Mukherji “will milk the company as long as the other shareholder and him hatch plot to destroy value”. These tirades, and copying some of them to subordinates, can only have been intended to undermine Mr Anindo Mukherji and the senior management for the purposes of trying to force their resignation.

Mr Malhotra sought to further this tactic in late November 2016 through the board of directors of SPCPL. This board was not responsible for strategy, which came from the Advisory Board, but focused largely on statutory compliance matters in its local Indian jurisdiction as well as a few more operational aspects of the Indian business. Mr Abraham was a member of the SPCPL board from 3 August 2015, as would obviously befit the Indian CEO. At Mr Malhotra’s behest two more junior employees, Mr Merani and Mr Chakravarthy, each fiercely loyal to Mr Malhotra, were appointed to the board. On 15 December 2016 a detailed agenda for a board meeting on 29 December was circulated which included a review of Mr Abraham’s performance as CEO India. The operational strategy of the company in India had not previously been something for its board to consider; that was a matter for the Advisory Board, as was the performance of the CEO India. To have Mr Abraham’s juniors being invited to review his performance was clearly calculated to undermine him. This tactic culminated in Mr Malhotra seeking to remove Mr Abraham as a director and replace him with Mr Sameer Khan on 26 December 2016.

Meanwhile on 14 December 2016 Mr Malhotra emailed all Advisory Board members criticising Mr Anindo Mukherji as CEO for (1) the poor performance of the group and (2) a “serious issue” in relation to “fictitious invoicing”. The email sought a written board resolution suspending Mr Anindo Mukherji as CEO “pending a decision about his future”, and appointing Mr Malhotra himself as interim CEO “pending the appointment of a long term replacement”. The four Malhotra nominee members of the Advisory Board and Mr Birch signed a resolution in those terms. The Actis nominees and Mr Mateen did not. Mr Shomik Mukherjee responded pointing out that the SSD did not provide for written resolutions and that business could only be conducted at board meetings; and that the effective removal of the CEO was a “Reserved Matter” requiring Actis’ written consent which had not been sought. He went on to outline Actis’ substantive objections to the proposed course, including support for Mr Anindo Mukherji and opposition to the idea of Mr Malhotra taking over the role. Mr Mateen also responded stating that the replacement or removal of the CEO was a shareholder reserved matter for the shareholders, not the Advisory Board, and furthermore that he did not agree that Mr Mukherji was responsible for the underperformance of the group. Mr Birch in turn gave his reasons for supporting Mr Malhotra’s position that Mr Mukherji was responsible for the poor performance of the business.

On 15 December 2016 Actis’ position was set out in a letter from its Cayman Islands lawyers to Mr Malhotra’s Cayman Islands lawyers reserving the right to take steps for injunctive relief if there were an attempt to suspend Mr Anindo Mukherji. Mr Malhotra’s lawyers responded on 16 December 2016 proposing an Advisory Board meeting on Monday 19 December 2016 and confirming that Mr Malhotra would take no further steps pending that meeting. Actis’ lawyers responded on 17 December 2016 that the position of the CEO was a matter for the shareholders as a “Reserved Matter” under the SSD, not the Advisory Board, and repeated a request for a shareholder meeting to seek to resolve the position. The letter sought confirmation that no steps would be taken to seek to use the Advisory Board to require the suspension or removal of the CEO without Actis’ consent; and threatening to seek urgent injunctive relief from the Cayman Islands court in the absence of such confirmation.

Mr Malhotra struck first. Without any further Advisory Board meeting or resolution, and without any forewarning to Mr Anindo Mukherji, on 18 December 2016 Mr Malhotra sent a letter to Mr Mukherji purporting to suspend him from his role as group CEO, instructing him to vacate his office with immediate effect without communicating with anyone, and threatening criminal and civil sanctions under UAE law. The letter listed failings in addition to those identified to the Advisory Board members when seeking the written resolution, including unparticularised allegations against Mr Mukherji of unfair, improper or discriminatory treatment of employees and breaches of the Authority Matrix. The suspension was expressed to be until further notice and whilst the group investigated the matters of complaint.

Mr Malhotra also immediately wrote to the entire workforce informing them of Mr Anindo Mukherji’s suspension; that he had himself assumed executive responsibility for management of the group as group CEO; and that all employees reporting to that position should now report to him.

Mr Malhotra instructed Mr Kishor Wagh, the Group’s Global Head of HR, to terminate the employment of four senior management employees on the evening of 18 December or morning of 19 December 2016. The individuals in question were Mr Raghunathachar Sreeram, the group chief supply officer; Mr Milind Khamkar, the group chief information officer; Mr Ashish Balan, the regional head of Middle East; and Mr Ashish Rawat, the regional head of North/Sub-Saharan Africa.

At about this time Mr Malhotra also appointed Mr Sameer Khan, the former head of sales for India who had left in November 2015, to start work as National Sales Head, Wholesale, India, reporting directly to him. According to both of them, Mr Khan started work in the field on 19 December 2016. This was unknown to Mr Abraham or Mr Anindo Mukherji, neither of whom were consulted about or told of Mr Khan’s appointment. Wholesale sales in India formed a very major part of the business, and in appointing Mr Khan to sit in the hierarchy above the sales force and report directly to himself, Mr Malhotra was sidelining Mr Abraham who was the CEO India with ultimate responsibility for its sales force.

On 20 December 2016, Actis and SMOH (acting by the Actis directors alone) applied ex parte for an injunction against Mr Malhotra, which was granted by Picken J. The judge’s order (“the Picken Order”) was granted at approximately 1400 GMT. It enjoined Mr Malhotra – whether directly or indirectly – from:

“(a)

[Taking] any steps to procure or implement the suspension or removal of Anindo Mukherji from his position as Chief Executive Officer of the Super-Max group of companies;

(b)

[Taking] any steps to procure or implement the suspension or removal of any [group employee] (save in accordance with Clause 17.2.1 of the [SSD]);

(c)

[Holding] himself out as or [purporting] to act as Chief Executive Officer of the Super-Max group of companies.”

Mr Malhotra learned of the Picken Order in a call with Mr Ivinson at 14.42 GMT that day. He was in India, where it was 19.12 local time. Actis’ solicitors, Clifford Chance LLP, emailed a copy of the injunction to Mr Malhotra directly at 18.04 GMT (22.24 in India) and he read it shortly after receipt.

Mr Anindo Mukherji returned to work after Christmas. So too did the four senior employees whose contracts had been terminated by Mr Malhotra: Mr Sreeram and Mr Khamkar on 26 December 2016, Mr Rawat on 27 December 2016, and Mr Balan (after leave) on 3 January 2017.

However on and from 26 December 2016 Mr Anindo Mukherji, Mr Sreeram and Mr Khamkar, together with the Head of Legal India, Mr Sanjay Jagtap, were prevented from entering the group’s Thane premises by security guards acting on the instructions of the labour Union of Thane, Bhiwandi and Aaram, which is known as Maharashtra Rajya Rashtriya Kamgar Sang or MRRKS (“the Union”). They remain locked out to this day.

Mr Malhotra continued to behave in a way which Actis alleges disparaged Mr Anindo Mukherji and senior management and undermined their authority with the workforce. I will return to consider the validity of those complaints. On 6 January 2017, Actis and SMOH (again acting by the Actis directors alone) relied upon them to seek and obtain further ex parte injunctive relief from the English Court. By an order of that date (“the Baker Order”) Andrew Baker J imposed further restrictions on Mr Malhotra’s conduct, including (i) preventing him from entering the Group’s headquarters in Dubai when Mr Anindo Mukherji was also present (para 2(a)); (ii) preventing him from communicating with Group employees in terms which were disparaging of Mr Anindo Mukherji and his team, or likely toundermine their authority in their respective positions (para 2(b)); and (iii) preventing him from communicating with Group employees save for the purpose of “discharging the responsibilities allocated to him in the Authority Matrix” or “discharging any of his other duties under his employment contract” (para 2(c)).

The Baker Order was continued, by agreement between the parties, by an order of Males J dated 27 January 2017. The operative provisions of that order were substantially the same as the Baker Order, save that Mr Malhotra was additionally prohibited from entering the Group’s premises in Thane, India, without Mr Anindo Mukherji’s prior written consent (para 3(a)(ii)).

On 10 February 2017, Clifford Chance LLP, solicitors for Actis and SMOH, wrote to Akin Gump LLP, solicitors on the record for Mr Malhotra, enclosing draft amended Particulars of Claim and informing them that SMOH (again, acting by Actis alone) had accepted Mr Malhotra’s alleged repudiation of his Service Contract with immediate effect, bringing his employment with SMOH to an end.

SMOH alleges that Mr Malhotra was guilty of gross misconduct by reason of the following matters taken individually or collectively:

Mr Malhotra denies he was guilty of any breaches of contract, or that if he was they amounted to gross misconduct justifying summary dismissal. In particular it was submitted on his behalf that:

In the alternative Mr Malhotra contends that:

Mr Malhotra also advances a counterclaim for damages against Actis for breach of the SSD in two respects:

Before turning to these issues it is convenient to say something about the evidence. I heard evidence from the following witnesses:

The Court may draw adverse inferences from a party's failure to call a particular witness or witnesses: see Wisniewski v Central Manchester Health Authority [1998] PIQR 324, 340 and Karis v Lewis [2005] EWCA Civ 1637. I did not hear evidence from Mr Subash Chaudhuri. Mr Chaudhuri had worked at Super-Max until he was dismissed by Mr Anindo Mukherji for expenses fraud. Contrary to Mr Malhotra’s assertion, this was not a “stitch up” by Mr Anindo Mukherji. Mr Malhotra engaged Mr Chaudhuri as a consultant to handle all his personal litigation in India and “any assignments/tasks that I may allocate to you from time to time”. It is clear from the evidence as a whole and from disclosed telephone records in particular, that Mr Chaudhuri’s role as a loyal personal assistant to Mr Malhotra included frequent contacts with Mr Khan, Mr Wagh and others within the group who were loyal to Mr Malhotra, at times when the events in dispute in these proceedings must have been being discussed. Mr Chaudhuri was a go-between, through whom Mr Malhotra communicated with others when he wished to conceal his direct involvement. Mr Chaudhuri’s evidence on the course of events which are in issue would have been relevant to the issues in the case. He was not called to give evidence by Mr Malhotra and disclosed no documents. I have little doubt that he would have been prepared to do so out of loyalty to Mr Malhotra had Mr Malhotra wished him to give evidence and/or provide documents within his control, including phone and messaging records. The natural inference is that his evidence would not stand up to cross examination and would undermine Mr Malhotra’s case.

Ms Bingham QC also asked me to draw adverse inferences from a failure to disclose documents by Mr Malhotra and other individuals whose documents he was in a position to procure if he wanted to. The extent of the non disclosure was set out in detail in Appendix 2 to the Claimant’s written closing submissions and I do not need to lengthen this judgment by repeating it. So far as Mr Malhotra’s own documents are concerned, there are significant gaps where documents which were either referred to in evidence or in other documents are obviously missing, including SMS and WhatsApp messages. The nature and pattern of the missing material makes it difficult to explain these as the result simply of mistake or incompetence. In some cases Mr Malhotra said the documents had been given to his solicitors, Akin Gump LLP, but since the latter failed to respond to subsequent requests to disclose them the obvious inference is that the evidence was untrue and the documents had not been disclosed to his solicitors. So far as concerns documents of others, the Claimant’s solicitors have asked for disclosure of relevant documents from individuals who played a central role in events, including in particular Ms Fernandes and Ms Pereira (personal assistants to Mr Malhotra as Chairman), Ms Gumaste (the Company Secretary), and Mr Merani and Mr Chakravarthy, his nominees on the board of directors of SPCPL, as well as Mr Wagh and Mr Khan. These are all loyal supporters of Mr Malhotra and it is clear he was communicating with them outside the SuperMax communication channels by telephone, SMS, WhatsApp or by email to private email accounts. They have for the most part declined to disclose such communications. Mr Malhotra’s open correspondence asking for them to be disclosed was met by refusals and/or reliance on advice not to disclose. However I have little doubt that Mr Malhotra could have procured the disclosure from these loyal supporters of his had he wished the Court to see it, and the obvious inference is that he thought it would undermine his case.

I am therefore prepared to draw these adverse inferences, which support the conclusions I have reached. Nevertheless such inferences are not critical to any of my findings, all of which are justified by the evidence which was before me without the need to resort to inferences from what was missing.

Mr Adkin QC first argued that whatever might be the position under the SSD, Mr Malhotra’s powers as executive chairman vis a vis the CEO were governed by the Service Contract, which did not import the terms of the SSD. The latter only applied to Mr Malhotra qua shareholder. The Service Contract authorised Mr Malhotra to exercise the functions of an executive chairman in the wide terms of clauses 2.1 and 2.2. Mr Adkin relied upon the evidence of Mr Birch, that an executive chairman usually has the power to remove a CEO, a proposition which was consistent with Mr Mateen’s evidence and not challenged.

I cannot accept this submission. The Service Contract must be construed in the light of the SSD, which formed part of its immediate factual matrix. The SSD expressly provided for the entering into of the Service Contract engaging Mr Malhotra as executive chairman. Although only the heads of terms had at that time been agreed (which were not in evidence) it is clear that the SSD intended to circumscribe Mr Malhotra’s powers of management in particular in relation to the Reserved Matters which required Actis’ written consent. The Service Contract was one of the bundle of contractual documents designed to give effect to that essential bargain. It would render the SSD Reserved Matters otiose if Mr Malhotra were able to remove the CEO in his capacity as executive chairman under his Service Contract. The only sensible reading of his Service Contract is that his powers qua executive chairman were to be no wider than the limitations placed on him qua shareholder in the SSD.

This seems to me obvious, but if there were any doubt about it, such doubt is dispelled by the terms of the Service Contract which by clauses 2.3(ii) and 5 require Mr Malhotra to abide by the terms of the Authority Matrix and by clause 2.3(iii) to comply with SMOH’s articles of association. The articles identify the Reserved Matters at article 29 in identical terms to the SSD. Article 29.1 in terms requires Mr Malhotra to procure that none of the Reserved Matters are carried out by SMOH or any group company without Actis’ written consent. The Authority Matrix listed as its first 35 items the Reserved Matters, including at item 29 the removal of the CEO; in this section there was no role for the executive chairman, in contradistinction to all other functions outside Reserved Matters which formed the subject matter of the remainder of the 100 entries, for which the role of the executive chairman was allocated. The express terms of the Service Contract therefore require Mr Malhotra to procure that none of the Reserved Matters are carried out without Actis’ written consent, including in particular the removal of the CEO.

To be fair to Mr Malhotra, this does not appear to have been a point which he took at the time, but a lawyers’ point, taken on his behalf. It is a bad one. Accordingly if the SSD did not permit Mr Malhotra to suspend Mr Anindo Mukherji in the way he did, then it follows that his conduct was a breach of the Service Agreement.

I have reached the conclusion, without any real hesitation, that Mr Malhotra’s action in suspending Mr Mukherji as CEO and assuming the CEO role himself, was conduct which he was not entitled to take without Actis’ written consent because it was a Reserved Matter within the meaning of paragraph 5.2 of Schedule 2 of the SSD, and Schedule 1 of the SMOH articles of association, and was contrary to the Authority Matrix. For these purposes a suspension (other than perhaps in an emergency for so long as is necessary to seek Actis’ written consent) qualifies as a “removal”. Clearly what matters for the purposes of the contractual bargain between the parties which was struck in the SSD was Actis’ ability to have its approved CEO in place acting as such, performing the important management functions normally ascribed to a CEO, as a counterbalance to the influence on management of the company’s business by Mr Malhotra as executive chairman and through his majority nominee powers on the Advisory Board. It would make no commercial sense for the parties to have agreed that Mr Malhotra were able to upset this balance by suspending the CEO from performing the CEO governance functions and assuming them himself for an indefinite period.

It is clear from this commercial context that “removal” in paragraph 5.2 of Schedule 2 must include an indefinite suspension which removes the CEO from performance of his service in that capacity. The language is notably wider than “termination” which is the verb used elsewhere in the SSD, in particular in relation to the CEO’s service agreement at clause 18.6. As a matter of ordinary language “removal” connotes something being taken away from something and is the antithesis of retention. In an employment context it naturally connotes the employee being taken away from the performance of his duties. A suspended CEO has been removed as CEO, albeit potentially temporarily rather than permanently as would occur with a termination of employment. He does not retain the function of a CEO. Mr Adkin’s argument must be that in order for there to be a “removal” of the CEO there must be taken away from him his status of employment as such. But this would be to attribute to the parties a triumph of form over substance. Actis’ reserved contractual rights would in substance be neutered by an indefinite suspension which had the same effect as a termination.

However, my conclusion on this issue does not depend on whether a distinction can be drawn between a suspension and a termination, because I am satisfied that Mr Malhotra’s intention was permanently to remove Mr Anindo Mukherji as CEO and that is what would have happened but for the Picken Order. This was in substance a termination dressed up as a purported suspension. I have reached that conclusion for the following reasons:

Mr Malhotra knew that he was not entitled to seek to remove Mr Anindo Mukherji permanently under the guise of suspension. Mr Malhotra accepted in cross examination that he knew that Actis had a veto over the removal of the CEO. Accordingly he knew there was no entitlement to do what he purported to do in accordance with the rights of SMOH and Actis under the SSD and Service Contract. For the same reasons Mr Malhotra was not entitled, and knew that he was not entitled, to install himself as CEO without the written consent of Actis.

Although it is not necessary for my determination of this issue, I have reached the same conclusions about Mr Malhotra’s state of mind in relation to a genuinely temporary suspension (which this was not). At the time Mr Malhotra “suspended” Mr Mukherji, he did not have any genuine belief that a suspension, properly so called, was lawful without Actis’ consent. The distinction between suspension and removal was drawn by Mr Malhotra after he had taken legal advice from Akin Gump LLP. Mr Malhotra said in the witness box that the advice was sought on behalf of SMOH. He had claimed privilege in it, but since his evidence meant that the privilege would be that of the Claimant, SMOH, the material was clearly disclosable. When it was requested by SMOH’s solicitors, Akin Gump LLP asserted, and Mr Adkin informed me on instructions, that the advice had been given to Mr Malhotra in his personal capacity as shareholder, not to SMOH. Mr Malhotra, through Mr Adkin, then maintained what was now said to be his, rather than SMOH’s, claim to privilege, on the basis that his evidence about who had sought and received the advice was untrue. Since what Akin Gump LLP asserted is not evidence, and nor is what Mr Adkin said on instructions from them, strictly speaking the position is that there has been a refusal to disclose what on the evidence is disclosable material. However that may be, on 18 December 2016, shortly before the suspension, Mr Malhotra sent an email to Mr Shomik Mukherjee and the other Advisory Board directors (apart it seems from Mr Birch) which included a passage proposing that the CEO should be suspended. It went on: “There is a material difference between that and removal. One may lead to the other but it may not. Contrary to Shomik’s assertion, the company has taken legal advice which [confirms that as Executive Chairman, I may suspend the CEO].” This message was “recalled” by Mr Malhotra because it was obviously in the form drafted for him by Mr Dawkins, a partner of Akin Gump LLP, whose name appeared at the foot of it, or at least was approved by Mr Dawkins. It reveals (a) that the advice was then understood by Mr Dawkins to have been given to “the company”, which must mean SMOH, as Mr Malhotra confirmed in evidence; and (b) that no advice had yet been given by Akin Gump LLP that a suspension would be lawful, because the critical passage remained in the draft in square brackets. Mr Shomik Mukherjee promptly emailed making these points. Once Mr Dawkins’ draft was “recalled” by Mr Malhotra, no message was sent in equivalent terms, confirming that such advice had been given, at any time prior to the suspension letter being sent to Mr Anindo Mukherji later that day and the announcement made to all employees 11 minutes later (although a version with the brackets removed was subsequently sent on 20 December 2016). Since the advice does not attract privilege, I am entitled to draw inferences from the refusal to disclose it. The obvious inference from (a) the refusal to disclose (b) the square bracketed passage in Mr Dawkins draft, coupled with the absence of any message to the same effect prior to the “suspension” and (c) the true legal position as I have found it to be, is that Mr Malhotra had not received advice from Akin Gump LLP prior to the suspension letter that he was entitled to suspend Mr Anindo Mukherji under the terms of the SSD, but decided to do so anyway.

Mr Malhotra also knew that he had no right to appoint himself as a temporary CEO in the event of a suspension of Mr Mukherji, even were the suspension genuinely temporary, which it was not, and even if he were entitled to make that suspension without Actis’ consent, which he was not. Appointment of a CEO, as well as removal, is a Reserved Matter under paragraph 5.2 of Schedule 2 to the SSD, and Mr Malhotra’s only ground for claiming an entitlement to appoint himself as CEO without Actis’ consent was reliance on clause 18.6 of the SSD which requires him to act as temporary CEO only where the CEO’s employment has been “terminated”. What occurred was not, on Mr Malhotra’s case, a termination.

Mr Adkin submitted that it was not open to SMOH or Actis to contend for these conclusions as to Mr Malhotra’s state of mind, on the grounds that they were not put to him in cross examination. That is a false point:

On and after 30 November 2016 Mr Malhotra sent a number of communications intended to undermine Mr Anindo Mukherji and the senior management for the purposes of trying to force their resignation, to some of which I have referred above. Mr Malhotra also ordered Mr Abraham and Mr Sreeram to attend a meeting with him on 19 December 2016 at which about eight members of the Union were present, where Mr Malhotra was highly disparaging of Mr Abraham and Mr Sreeram in front of junior employees. The communications and events which are relied upon as breaches of his Service Contract under the current heading followed the attempted “suspension” of Mr Anindo Mukherji and the Picken Order in the period from 24 December 2016, and in particular the conduct set out in the following paragraphs.

On 24 December 2016 Mr Malhotra sent an email to all the employees of the group to announce that Mr Anindo Mukherji was resuming his responsibilities with immediate effect. The email referred to the Picken Order “to protect Andy and his subordinates notwithstanding my concerns and those of the majority of the Advisory Board about the lack of performance by the executive team for the last two years”. It stated that the litigation would go on for many years. This brought the boardroom dispute before the entire workforce, and criticised the CEO and senior subordinates for inadequate management for two years. In effect Mr Malhotra was saying that Mr Anindo Mukherji and the senior management were not fit to run the business and he would litigate for years to get them out. Coming from Mr Malhotra, this disparaged and undermined Mr Mukherji and the senior management in the eyes of the workforce and was obviously intended to have that effect. When cross examined about the terms of this announcement Mr Malhotra explained that it was intended to convey the message to the workforce that he did not “agree with the idea of Andy Mukherji coming back” i.e. that it was intended to convey his wish that Mr Mukherji be permanently removed.

On 27 December 2016 Mr Anindo Mukherji returned to the Dubai office, having been excluded from the Thane site on 26 December by the Union. Mr Malhotra came into the conference room where Mr Mukherji was working on a number of occasions on that day. As Mr Mukherji put it in his evidence, which I accept, Mr Malhotra appeared to lose any semblance of self-control or professionalism. At about 11.30 am he threatened to sue Mr Mukherji, Mr Desai and Mr Abraham, saying he had decided to include them as defendants in the Cayman Islands proceedings. At around 12.30 pm he came back into the conference room and shouted at Mr Mukherji. Amongst other things, he said “you’re either incompetent or colluding with your Actis friends to destroy my value”; “the staff don’t like you; the Unions don’t like you; what are you doing here?”; “you’re not wanted here”; “you have no shame”; “you just watch, I’ll make your life miserable.” At about 1 pm he came into the conference room and sat down without explanation. When Mr Mukherji enquired whether he could assist him, Mr Malhotra stated he had come to watch how Mr Mukherji “destroy[ed] value”, that he was “shameless” and “nothing but a slimy guy” who was “destroying the company” and “only cared for himself”. At about 2.30 pm Mr Malhotra returned to the conference room and said he would teach Mr Mukherji a lesson, that he would fight him tooth and nail, and said “you’re shameless; you have no integrity, no morals. I’ll make life very difficult for you.” These tirades were recorded in a contemporaneous note by Mr Mukherji.

On the following day Mr Mukherji was in the conference room he was using, with a junior employee, Mr Kishor Nair whom he had asked to accompany him on a market visit he was to make that morning. Mr Malhotra said amongst other things “your market visits are all bullshit; they don’t lead to any results” and “your UAE sales are going down for 2 years and you’re doing nothing about it; you just go for a joy ride in the market; nothing happens to results.” He was shouting at Mr Mukherji throughout the conversation which included these words. Again they are recorded in a contemporaneous note of Mr Mukherji which I accept to be accurate.

This abuse on 27 and 28 December 2016 was sustained, aggressive and personal. It went far beyond any frank business discussion which an executive chairman might properly have with his CEO about conduct of the business. The exchanges on 28 December disparaged and undermined Mr Anindo Mukherji in the presence of a junior employee, as Mr Malhotra was well aware.

That same day, 28 December 2016, Mr Malhotra sent an email again threatening to add Mr Mukherji, Mr Desai and Mr Abraham as defendants to his Cayman Islands proceedings.

On that evening, 28 December, Mr Malhotra sent an extraordinary email first to about 100 employee email addresses and then to all employees. It said: “In light of the failing performance of the CEO and his executive team, if any employee has an issue, they are welcome to directly communicate to me…” It was not merely an attack on the senior management in the eyes of the whole workforce but a specific invitation for insubordination inviting complaint against them. Mr Malhotra’s evidence in cross examination was to justify this approach on the grounds that there was “corruption going on between A Mukherji and his people”, an allegation without any foundation.

On 2 January 2017, Mr Malhotra sent Mr Mukherji a long email in aggressive and intimidatory terms. It was in the context of a dispute over procedure in relation to approval of business travel expenses, which Mr Malhotra had raised as a pretext on which to attack Mr Mukherji, but the email was abusive and disparaging in wider and more general terms, accusing him amongst other things of “value destruction” “incompetence” “a failed track record” “wasting company money” and “a flippant attitude”. It was copied to Mr Desai and a more junior member of the finance department.

On 3 January 2017, Mr Malhotra sent an email to Mr Abraham in relation to the role of Mr Sameer Khan. I deal below with Mr Khan’s position in greater detail, but the significance of the email under the current heading is that it was aggressive and intimidatory towards Mr Abraham, and disparaged him in an email copied to junior employees and, ultimately, the whole workforce. It arose out of Mr Abraham’s rebuke to two more junior employees, Mr Kalavitte (known as Datta K) and Mr Kulkarni, for sending emails with confidential information to Mr Khan and cooperating with him behind Mr Abraham’s back. Mr Malhotra’s email referred to Mr Khan being there to “curb the mess made of the Indian market” by Mr Abraham and Mr Anindo Mukherji. It said that he and Mr Mukherji were being added to the Cayman Islands proceedings as defendants for “value destruction”. It went on to criticise Mr Abraham in offensive and personal terms (eg “you sit in your room and pontificate; there is no connect between you neither with the market nor the team”). It ended by saying that the majority of the board had no confidence in him based on his track record and current delivery. These terms went far beyond anything appropriate to a difference of opinion on business matters between an executive chairman and the CEO of its major territory. Mr Malhotra copied the email to Mr Khan, Datta K and Mr Kulkarni who were junior employees who were subordinate to Mr Abraham. It was plainly intended to undermine him. To Mr Abraham’s credit he responded calmly and courteously, notwithstanding that Datta K had in his response to Mr Malhotra said “thank you” and copied in many more of Mr Abraham’s subordinates. When Mr Malhotra responded to Mr Abraham, he specifically copied in over 20 named subordinates and invited them to “feel free to send your comments here”. He copied the same subordinates into a further response to Mr Abraham on 4 January 2017 which said “Through your incompetence and that of Andys You have also messed up the MT [i.e.Modern Trade] business All rights are reserved against you and the value Destruction you are causing the company (sic)”. This can only have been intended further to belittle and disparage Mr Abraham and Mr Mukherji in the eyes of the many subordinates to whom it was copied, to undermine their authority, and to impair their ability to exercise effective management of the workforce and the business.

On the evening of 3 January 2017 Mr Malhotra instructed Mr Anindo Mukherji to continue to enforce, and not to reverse, any of the organisation structure changes which Mr Malhotra had announced on 20 December 2016 (prior to receipt of the Picken Order) without Mr Malhotra’s approval. Mr Mukherji confirmed that he had been given that instruction in an email the following day. Mr Malhotra’s responsive email disputed the conversation as “blatantly untrue”. However Mr Malhotra’s email went on to say that he needed to “sign off your proposals, to mitigate the value destruction you are causing to the business” thereby reiterating the need for his approval for the reversing the changes. I accept Mr Mukherji’s evidence that what he recorded in his email is an accurate reflection of what was said in the conversation. It was an attempt to continue to control the structure of senior management which was within the proper sphere of the CEO.

On 4 January 2017, Mr Malhotra sent another abusive email to Mr Anindo Mukherji. It referred to his “perpetual failure” and accused him of being “either incompetent or wilfully destroying value to the company.” It described most of the people he had hired as incompetent and accused him of being aligned with the minority shareholders for “ulterior motives”. It was copied to Mr Wagh, Mr Desai and the latter’s subordinate Mr Hada. It concluded; “I recommend that you (a) Stick to the policies (b) Respect authority and stop trying to outsmart your superiors with no foundation (c) Take life seriously and start performing”.

Another email of 4 January 2017 from Mr Malhotra to Mr Anindo Mukherji described the latter’s response as “pathetic”, quite unjustifiably, and accused him of not being hands on which was why he was destroying value in the business. It was copied to Mr Chakravarthy, a subordinate who was Head of Modern Trade and Alternate Channels and one of the group’s longest serving employees who was very closely aligned with and loyal to Mr Malhotra.

SMOH also relied on a number of other communications over this period (up to the Baker Order of 6 January 2017) with similar comments or to similar effect.

Taken as a whole, these events can be characterised as a sustained campaign of aggressive abuse and disparagement by Mr Malhotra towards Mr Anindo Mukherji and Mr Abraham which was intended by Mr Malhotra:

In short, Mr Malhotra allowed his sense of grievance as a shareholder to override any respect for the proper corporate governance of the business or the appropriate treatment of senior management.

Implementing a parallel management structure

This heading covers essentially two allegations. The first aspect complained of is the dismissal of the four senior employees and giving instructions to circulate announcements that, following their departure, other employees had been assigned new responsibilities and reporting lines. The dismissals and announcements, which were initiated prior to Mr Malhotra receiving notice of the Picken Order, were part and parcel of the taking of control by installing himself as CEO. I am satisfied that the dismissals were not motivated by an objective assessment of the merits of the employees or what they could contribute to the business, but rather that those managers were selected and immediately fired without warning because they were regarded as loyal to the remaining senior management which had reported to Mr Anindo Mukherji. They were in part replaced by employees loyal to Mr Malhotra, Mr Nitin Merani and Mr Sanjay Williams. These appointments and the new reporting lines were intended to cement Mr Malhotra’s control as CEO and sideline Mr Abraham.

The arguments as to whether this constituted a breach of the Service Contract mirrored those concerned with the “suspension” of Mr Anindo Mukherji. Mr Adkin argued that if Mr Malhotra was not in breach of the Service Contract by suspending Mr Muhkerji as CEO and taking over as acting CEO, he was plainly entitled to exercise the functions of a CEO in restructuring senior management. The conclusion flows from the premise but the premise is false. It was a breach of the Service Contract for Mr Malhotra to “suspend” Mr Anindo Mukherji, and he did not believe he was entitled to do so or to take over as CEO. For the same reasons his termination of the four employees and restructuring was a breach of the Service Agreement, again to Mr Malhotra’s knowledge.

As a result of the Picken Order, the four employees returned to work after Christmas or in the New Year. I have referred to the exchanges between Mr Malhotra and Mr Anindo Mukherji on 3 and 4 January 2017 in relation to reversing the changes, which rested with Mr Malhotra’s assertion that he needed to retain approval of reversing the changes. Nevertheless Mr Anindo Mukherji expressed himself as satisfied thereafter that so far as the four employees were concerned he had no issue with the reversal of their terminations.

The second aspect of the complaint under this heading relates to the position of Mr Sameer Khan. He had been National Sales Manager for SPCPL and had therefore at one time occupied a relatively senior position as the line manager to whom the senior regional Indian sales force reported, himself reporting directly to Mr Abraham as CEO India. He was not highly regarded by Mr Abraham, and resigned in November 2015 on grounds of “career advancement”. Mr Anindo Mukherji and Mr Malhotra confirmed at the time that they were pleased to see him go. According to Mr Khan’s evidence he remained unemployed until September 2016 when he started to work for a company in competition with Super-Max in the razor blade and personal grooming sector called Super Global Personal Care LLP.

Mr Khan was reappointed as National Sales Manager Wholesale by Mr Malhotra, reporting directly to him. The circumstances and timing of that recruitment were disputed. Mr Khan claimed to have been called by Mr Malhotra out of the blue on 13 or 14 December 2016, having resigned from the competitor company a few days earlier. The coincidence would be striking if this was indeed out of the blue, and the documents suggest otherwise. Mr Khan was feeding information he was getting from members of the Super-Max sales force to Mr Malhotra as early as 2 November 2016, when he provided a detailed sales analysis from his private email address to the private email address of Mr Malhotra. The sales analysis included year to date sales figures for the group in India, broken down by zones and regions. It suggests detailed access to Super-Max sales information for the whole of India. Contrary to Mr Khan’s suggestion that it came largely from market reports, the nature of the information in the document shows that it was compiled with access to detailed and sensitive information from within Super-Max. Mr Khan clearly retained a close relationship with the sales force of which he previously had been head, and had no scruples about obtaining this information at a time when he says he was working for a competitor. Mr Malhotra’s evidence that these were unsolicited is simply not credible given the sensitive and confidential company information they contained, their source, the use of personal email addresses and the fact that they were sent without any covering explanation, which would have been given if they were indeed an out of the blue contact by an employee who had resigned a year earlier. I infer that his recruitment had been discussed and planned rather earlier than either of them was prepared to admit, and that this information was procured from Mr Khan as the first step in what was to follow, namely seeking ammunition with which to attack Mr Anindo Mukherji and Mr Abraham.

Mr Khan and Mr Malhotra both said that he was recruited at a meeting in Mumbai on 18 December 2016, and asked to start work the very next day and report directly to Mr Malhotra; that he started by working in the field on 19 December 2016; and that at the end of the day on 19 December 2016 he reported back to Mr Malhotra in a café in south Mumbai, the location no doubt chosen in order to keep his involvement secret from Mr Abraham who had not been consulted or notified of the appointment.

There is a letter of appointment dated 19 December 2016, purportedly countersigned by Mr Khan, but it is doubtful that it was in truth signed then. A contract of employment was drawn up, again dated and purportedly signed on 19 December 2016, but it is clear from the evidence I heard that it was backdated. The first secure dating is an email of 24 December 2016 to Mr Khan enclosing a draft contract. Despite these irregularities in the documentation I shall proceed on the basis of the joint evidence of Mr Malhotra and Mr Khan that he started in the role on 19 December 2016 in the field. He first came to Mr Abraham’s attention when he came into the office at Thane on 21 December 2016.

In his evidence Mr Malhotra suggested that all that Mr Khan was tasked to do was to find out what the problems in wholesale sales were, and to make a blueprint for Mr Malhotra and the Advisory Board as to what to do about them. But Mr Khan went well beyond this, playing a full part as the man in charge of the sales team, giving them instructions and setting them targets, as I explain below. This can only have been what Mr Malhotra charged him to do, and is consistent with his title and the job description in his backdated contract of employment as well as his actions. The more limited role, which Mr Malhotra suggested, is not consistent with the latter’s email of 5 January 2017 to the Advisory Board which credited Mr Khan with having been responsible for the improvement in sales figures in December.

Mr Malhotra sought to justify this appointment on the grounds that as acting CEO he was entitled to make it, and that he wanted the information because of his concern over the decline in wholesale sales. In fact if it occurred, as he says, on 18 December 2016, it took place prior to Mr Anindo Mukherji’s “suspension” and was a matter for the CEO under the terms of the Authority Matrix. But in any event, even had Mr Malhotra been acting as CEO, there was no justification for deliberately concealing it from Mr Abraham and putting in place a reporting structure which excluded him. Such a course can only have been intended to sideline and undermine Mr Abraham. Moreover after Mr Malhotra had received notice of the Picken Order late on 20 December 2016 restraining him from acting as CEO, he continued to have Mr Khan reporting directly to him as head of wholesale sales in India and continued to support him in that operational role.

Mr Khan’s twin roles of acting as parallel management in charge of the sales force, sidelining Mr Abraham, and undermining Mr Abraham and Mr Anindo Mukherji by fostering criticism of them, are evident from the following:

Mr Malhotra also obstructed the legitimate attempts of senior management to confine Mr Khan’s role. On 26 December 2016 Mr Abraham gave instructions for Mr Khan to leave the premises but was stymied by Mr Wagh acting on Mr Malhotra’s instructions. On 27 December 2016, Mr Abraham ordered Mr Khan’s email to be blocked because he was using it to write to the sales force. Mr Malhotra effectively countermanded Mr Abraham by instructing staff that email blocking required his consent and refusing to give it. In his evidence he sought to justify this on the grounds that he was Mr Khan’s line manager and he was entitled to have direct appointees. This was merely confirmation of his use of Mr Khan as part of a parallel management structure.

I conclude that Mr Khan’s continuing disruption was part of the continuing attempt by Mr Malhotra to impose his own strategy on the business in parallel to the management which Mr Anindo Mukherji and Mr Abraham have been trying to carry through. It is inconceivable that Mr Khan would continue to behave in this way without Mr Malhotra’s approval and authority. It is not necessary to decide whether this is as a result of direct communication between the two, or whether others such as Mr Chaudhuri have been involved, as they clearly were in the past.

Mr Adkin relied upon an offer made by Mr Malhotra for Mr Khan to be put on paid leave for the duration of the proceedings with a view to him resuming employment in a role “which fits in to the group structure existing at the time”, with Mr Malhotra indemnifying SMOH for the cost. This offer was rejected by Mr Anindo Mukherji for a number of reasons, including his fear that even if on paid leave Mr Khan could influence and disrupt the sales force. Since this offer came on 9 March 2017, after the purported termination of Mr Malhotra’s Service Contract, it is not of direct relevance to the issues I have to decide. Nevertheless I have considered whether the fact of the offer casts doubt on my conclusion that in the relevant period Mr Khan was being used by Mr Malhotra to disrupt the workforce, and concluded that it does not. Mr Anindo Mukherji’s fear that if Mr Khan retained his status as an employee he would be in a position to disrupt the workforce was a legitimate one, and Mr Malhotra’s offer was tied to Mr Khan being a permanent employee in some capacity after conclusion of the proceedings.

The core facts are not in dispute. Super-Max’s Indian headquarters are in Thane, Maharashtra, on the outskirts of Mumbai. Thane is the group’s Indian headquarters and flagship factory. Until recently, it is where Mr Abraham and the group’s Indian management team had their offices. Mr Anindo Mukherji, Mr Desai and other group managers would visit regularly. It is obviously of prime importance for the group’s managers to be able to access the Thane premises.

Messrs Anindo Mukherji, Sreeram and Khamkar have been excluded from Thane since their return on Monday 26 December 2016. Sanjay Jagtap, the India General Counsel, has been excluded since Monday 9 January 2017. Messrs Abraham and Desai have each been excluded since 3 April 2017. The exclusion of the latter two is not directly relevant to the issues I have to decide since it occurred after the purported termination of the Service Contract on 10 February 2017.

These exclusions have been made by the Union. On the face of the correspondence, the Union asserts that the exclusions are the result of grievances with “Actis-appointed management”. SMOH and Actis submit that they have been procured or encouraged by Mr Malhotra. Mr Malhotra denies any such involvement and points to communications from him urging the Union to allow the managers into the plant.

The case for SMOH/Actis on this issue is based on a number of pieces of circumstantial evidence. I am satisfied that it is made good to the relevant standard by reason of the following matters in particular:

I conclude that Mr Malhotra used Mr Chaudhury to direct or encourage the Union to exclude Messrs Mukherji, Sreeram, Khamkar and Jagtap from the factory. I judge that he was motivated by three objectives. First it was to assist him in his attempts to impose his own strategy on the business through Mr Khan. It was part of a parallel management initiative which not only inserted Mr Khan, but excluded Mr Anindo Mukherji and senior management so as to impede their ability to restrain or control him. Secondly it was to make it more difficult for Mr Anindo Mukherji and his senior management team to carry on the business effectively, and thereby to provide himself with further ammunition with which to attack the Actis appointed management in the context of the litigation and the shareholder dispute. Thirdly it was to assist in maintaining and consolidating his own power base amongst the workforce in India.

Mr Adkin pointed to the fact that Mr Malhotra had sent a number of emails and letters to the Union requesting access for the excluded individuals. However since he was, through Mr Chaudhury, directing the responsive refusals, these were no more than deceptive window dressing. Nor is my conclusion undermined by the fact that Mr Malhotra had himself been included amongst the Defendants in an action commenced in November 2016 before the Industrial Court at Thane alleging unfair labour practices. The evidence as a whole established that he maintained a very good relationship with the Union, and the motive for including him as one of many defendants to that action was not explained by, or explored with, any of those responsible.

On 5 January 2017 Mr Malhotra sent an email to the Advisory Board members which commenced: “Wholesale made a comeback with 41 percent growth Thanks to the efforts of Sameer Khan”. The email included figures which made it clear that the 41% being referred to was the increase in revenue for wholesale CSP sales for December 2016 from those for November 2016.

It was seriously misleading to attribute this increase to the efforts of Mr Khan. Mr Anindo Mukherji’s evidence, which I accept, was that the increase in figures had nothing to do with Mr Khan. Rather they were due to external factors which had a negative impact on the market for all fast moving consumer goods companies in November 2016 in India, primarily issues arising out of the demonetisation of certain notes.

Mr Malhotra knew that it was misleading to attribute these increases to Mr Khan’s efforts. Mr Khan had only been involved for 7 working days in December 2016; he had not been involved for the majority of the month, only starting on 19 December 2016, as Mr Malhotra was well aware. I reject Mr Malhotra’s evidence that he was responsible for the increase because wholesalers had confidence in him and “the minute he came in the money poured in” for that reason. Mr Malhotra was aware of the effects on the market of the demonetisation, which were the subject of newspaper comment at the time. His email came against the background of Mr Anindo Mukherji’s detailed email to the board of the previous day complaining of Mr Malhotra’s conduct, including the appointment of Mr Khan. Mr Malhotra was anxious to justify Mr Khan’s appointment and exaggerate its effect as part of his campaign to persuade the board members that the business needed him to act as CEO in order to rescue it from the incompetent management of Mr Anindo Mukherji.

Ms Bingham also relied upon the fact that Mr Malhotra forwarded to the board a series of 10 emails sent to him on 5 January 2017 from senior employees criticising current management and/or praising the efforts and success of Mr Khan. These were sent to Mr Malhotra within the space of a few hours. I reject his evidence that they were unsolicited. His explanation that the employees happened to have been talking amongst themselves because they were “tickled pink at the upbeat of the sales” is improbable. I conclude that he procured these messages, through Mr Khan, as part of the campaign to justify Mr Khan’s appointment and exaggerate its effect, with the same motives as the misleading 41% growth email. This is of a piece with his procuring emails from customers and distributors through Mr Khan in February 2017, to which I have referred above. This was not pleaded in the Amended Particulars of Claim as a separate breach comprising an attempt to mislead the advisory board, and I do not treat it as such. Nevertheless it supports my conclusion that such was Mr Malhotra’s intention in the 41% email of the same date.

Breach of the Picken Order and/or Baker Orders

SMOH/Actis have brought proceedings against Mr Malhotra for committal for contempt of court in relation to these allegations. Those committal proceedings have been ordered to be tried separately from this trial on civil liability and subsequent to it. In any committal proceedings the standard of proof is the criminal one and a party is entitled to invoke the privilege against self-incrimination if so advised. I have reached my conclusions on the issues necessary to determine civil liability on the balance of probabilities bearing in mind the heightened need for scrutiny necessitated by the gravity of the allegations being made and the inherent probabilities involved. I do not find it necessary in determining the outcome of the civil claim to express conclusions as to whether Mr Malhotra was in breach of the orders, and nor is it desirable to do so even to the civil standard, given the pending contempt proceedings. I recognise that if the conduct complained of constituted a knowing breach of court orders, that would be an additional reason for treating them as breaches, indeed grave breaches of the Service Contract because it would be a serious breach for a senior employee deliberately to disobey a court order obtained by his employer against him. But since I can decide the outcome of the case without recourse to such an approach, it is fairer to Mr Malhotra to do so. If the contempt proceedings are pursued they will have to be addressed on the basis of the evidence then before the Court and the criminal standard of proof required.

Expenses claims

The complaints made by SMOH in relation to expenses fall into different categories, referenced to Table A and Tables B2-5 annexed to the Amended Particulars of Claim:

By the conclusion of her final speech, Ms Bingham advanced the case in three ways:

The table of daily rates in Chapter 2 of the travel policy are not expressed as limits. They are categorised as “Budget Guidelines”. If the employee’s contract only entitles him or her to reimbursement of reasonable and necessary expenses, the policy provides guidance in advance of what will generally be regarded as reasonable and necessary for that grade of employee. The document states its purpose as being to educate employees on incurring expenses whilst on business travel. Mr Desai stated that the amounts were subject to reasonable variation. They are not fixed limits. For an employee to claim expenses in excess of the guidelines is not a breach of the employment agreement. It is for the finance department to vet and allow or disallow such expenses. In Mr Malhotra’s case they were allowed: there was nothing clandestine about the amounts being claimed and no challenge was made to them until they were included in these proceedings as an additional ground to support the termination. There was no breach of contract and no entitlement for SMOH to recoup what has been allowed.

Mr Adkin submitted that it was very unfair to complain of the failure to provide supporting documentation so long after the event when Mr Malhotra’s practice in claiming expenses and providing documentary support had been consistent and transparent throughout the periods in question and before. I agree. Neither the travel policy nor the hospitality policy requires any particular form of vouching or supportive documentation. The latter merely requires that there be an accurate record of it. Mr Desai’s evidence was that in practice what was required was an invoice or receipt and identification of the names of the person receiving the hospitality. That may have been a legitimate policy to operate as a precondition to being satisfied that the expense should be reimbursed. It is no basis for holding that a claim without such documentation is a breach of contract, and especially so when the expense has been allowed on the basis of the documentation in fact provided.

I have not lost sight of the fact that the method by which Mr Malhotra was allowed to incur and claim expenses involved a blanket payment of his personal Amex card with subsequent adjustment for personal expenses. This was an additional line of credit for the company in respect of business expenses, and a system which the company chose to operate. Although Mr Desai says he was unaware of it until February 2017, there was nothing secretive about the arrangement which involved emails between finance department personnel. Mr Malhotra could properly regard any expenses for which he had not volunteered personal reimbursement as having been allowed by the company in the absence of contemporaneous challenge or request for further information. It is too late to be doing so now. If, contrary to my findings, there was any breach in relation to claiming such expenses, SMOH clearly waived it by paying them through its subsidiary Super-Max America.

The examples are in respect of four purchases of airmiles with Silverwings Travel which were for redemption on business flights. The complaint is that these were first class flights and that first class flights are not authorised by the travel policy. For reasons I have already given in relation to the travel policy generally there can have been no breach of contract or right to reimbursement. Moreover Mr Malhotra explained that the cost was less than would have been incurred if the points had not been purchased but he had booked business class flights through the Dubai office. There was no evidence to challenge this, which affords a further ground for holding that there was no breach in this respect.

Of the four meals expenses claims identified in Table B4, only one was explored in cross examination on the basis that it was an unreasonable and excessive expense. In respect of the other three, Ms Bingham suggested that they fell within the category of expenses for which there was inadequate supporting documentation. Mr Malhotra’s case was that he had in fact reimbursed SMOH for these three meals as personal expenses and he had provided such supporting documentation as he now had available in respect of the reimbursement. He was not challenged on this in cross examination. I am not therefore persuaded that these are expenses he has claimed as business expenses or that they have been borne by Super-Max. Even on the Claimant’s case of inadequate vouching, there would have been no breach of the Service Contract and/or it would have been waived.

The steak house meal in Dallas was explored in cross examination, and Mr Malhotra identified the attendees and the business purpose of the meal. The real complaint was the size of the bill for a meal for three people. Mr Malhotra explained that he was entertaining the chairman and senior director of the second largest retailer in Mexico with whom Super-Max had a $3 million relationship going back 12 years. Large though the bill was, I am not persuaded that it was unreasonable for the executive chairman to incur such an expense in that context.

Mr Malhotra accepted that these were personal expenses. He said he had reimbursed them and had provided such supporting documentation as he now had available. Again this was not challenged in cross examination. I am not therefore persuaded that these are expenses he has claimed as business expenses or that they have been borne by Super-Max. In the end Ms Bingham did not pursue the case in relation to these payments.

The allegation of fraudulent claiming in respect of some flights was not pleaded, as it should have been (paragraph 47(b) of the Amended Particulars of Claim is insufficient to give proper notice or particulars of such an allegation of fraud). For that reason alone I would reject it, particularly since the generic way in which the Table B2 allegations have been advanced has made them difficult for Mr Malhotra to address. In any event, in the light of his explanations in cross examination that these flights were merely intermediate legs on journeys to or from places where he was conducting company business, I am not satisfied that the allegations of fraudulent claiming are made out.

Accordingly the expenses claims allegations afford no grounds for justifying the termination of Mr Malhotra’s Service Contract. Nor do they give rise to an entitlement to an inquiry as to damages.

There were the following terms of the Service Contract:

Mr Malhotra’s conduct, as I have found it to be, was a breach of these terms. In particular:

Gross misconduct is the epithet which is given to breaches of contract by an employee which are sufficiently serious to amount to a repudiation which the employer can accept by summary dismissal. Whether conduct is sufficiently serious to reach this threshold is a matter of fact and degree. The focus is on the damage to the employment relationship between the parties; deliberate actions which poison the relationship by undermining the mutual trust and confidence which is an essential part of it will amount to gross misconduct: see Adesokan per Elias LJ at paragraph [23]. I have little hesitation in concluding that Mr Malhotra’s breaches were sufficiently serious as to amount to gross misconduct.

I should record that his conduct also constituted breaches of his fiduciary duties as a director of SMOH. That is not relied on as a separate ground justifying termination, but it may be relevant to the form of relief granted.

Mr Adkin argued that the matters complained of took place on or before 6 January 2017, and that by 10 February 2017 when SMOH terminated the Service Contract:

I am bound by Court of Appeal authority that English law does not permit a party in repudiatory breach unilaterally to cure the breach once it has been committed, so as to affect the innocent party’s right to rely upon it to put an end to the contract. The innocent party may terminate unless he has lost the right to do so because of an election to affirm or a deemed affirmation from the passage of time. This was confirmed by the Court of Appeal in Bournemouth University Higher Education Corpn v Buckland [2011] QB 323 specifically in the context of a breach of the duty of mutual trust and confidence in an employment contract: see especially per Sedley LJ at paragraphs [33]-[44] and per Jacobs LJ at paragraphs [52]-[53].

Mr Adkin relied on a dictum of Lewison LJ in Ampurius Nu Homes Holdings v Telford Homes (Creekside)[2013] EWCA Civ 577, at paragraph [63], endorsing a passage in the judgment of Rix LJ in Stocznia Gdanska SA v Latvian Shipping Company[2002] 2 Lloyd’s Rep 436 at paragraph [87]:

“A breach of contract, although serious, may be capable of remedy. If it is remedied before the injured party purports to exercise a right of termination, then the fact that the breach has been remedied is an important factor to be taken into account. Likewise if there is delay in performance of an ongoing obligation it may well be possible for the delay to be made up by faster performance.”

Ampurius was concerned with a breach by a developer which consisted of his suspending building works he was obliged to carry out. By the time of the purported termination he had resumed work. The breach in that case was a delay in performance, the extent, and therefore seriousness, of which fell to be judged at the date of purported termination when the works had restarted. Whether the default was repudiatory, as a breach of an innominate term, depended upon the length of the delay in performance. The case was not concerned with cure of an existing breach as such, but with defining the extent of breach of an innominate term. It casts no doubt on the principle that a party who has committed a repudiatory breach cannot cure it, at least where the repudiatory character of the breach is not itself dependent on the passage of time. Mr Malhotra’s breaches were complete when committed. Accordingly as a matter of law Mr Malhotra’s breaches could not be cured.

If I were wrong in this conclusion, I would nevertheless hold that Mr Malhotra’s breaches were not cured on the facts of this case for two reasons. First the breaches were continuing breaches in a number of respects which amounted to continuing gross misconduct. In particular between 6 January and 10 February 2017 Mr Malhotra:

Secondly, even if the gross misconduct had ceased at 6 January 2017, it had not been cured by 10 February 2017. Where an employee’s misconduct is sufficiently serious to damage the mutual trust which is essential to the employment relationship, such breach is not remedied merely by cessation of the conduct. What would need to be remedied would be the effect of the breach on the relationship. In this case the effect of Mr Malhotra’s gross misconduct was fundamentally to destroy the trust which SMOH could have in the proper exercise of his functions as executive chairman. Even assuming, which I do not decide, that Mr Malhotra abided by the Baker Order, there was nothing that he did in the 5 weeks between 6 January and 10 February 2017 which was sufficient to repair the deleterious effect of his conduct on the parties’ relationship or remedy its effects on the business or the parties. Nor did the passage of time have that effect.

Mr Adkin drew no distinction between waiver and affirmation. A party will be taken to have affirmed a contract if, with knowledge of the breach and of his right to choose, he does some unequivocal act which is consistent only with a decision to affirm, or allows too much time to pass by without indicating a decision.

There are four separate reasons why there was no affirmation in this case. First, there was no unequivocal act which was consistent only with a decision to affirm. Throughout the relevant period SMOH was pursuing the litigation against Mr Malhotra in which it was claiming, amongst other things, a declaration that Mr Malhotra’s conduct “amounts to gross misconduct within the meaning of Clause 13.4 of [the Service Contract]”. Clause 13.4 is the provision conferring an express right to summary dismissal for gross misconduct. Accordingly anything which was happening in relation to Mr Malhotra acting in the meantime as executive chairman was against the background of SMOH’s continuing assertion in the proceedings of a right to dismiss him for gross misconduct. It was not unequivocally consistent only with an intention to affirm the contract; on the contrary there was a continuing assertion of a right to terminate the contract. In such circumstances there is no affirmation: see W.E. Cox Toner (International Ltd) Ltd v Crook [1981] ICR 823, 829.

Secondly, in the employment context, a party faced with apparent gross misconduct is entitled (and often obliged) to take a reasonable period of time to investigate and form a view about whether to terminate: see for example Cook v Ministry of Sound[2009] EWCA Civ 624 at paragraph [56]. That was what SMOH was doing through the litigation. Accordingly for that reason also, any continued employment and associated conduct in the meantime is not an unequivocal election to affirm.

Thirdly, affirmation requires full knowledge of the facts giving rise to the right to affirm and knowledge that it gives rise to such right. SMOH was throughout the relevant period seeking to ascertain the true facts, significant aspects of which only became apparent after 5 January 2017. At no time prior to 10 February 2017 did SMOH have full knowledge of the facts I have held constitute the full extent of the gross misconduct of Mr Malhotra.

Fourthly, Mr Malhotra’s gross misconduct continued up until 10 February 2017 in the respects I have identified. Accordingly any prior affirmation of earlier breaches would not preclude SMOH from terminating the employment on 10 February 2017 for the continuing and subsequent gross misconduct.

It follows from my conclusions thus far that SMOH was entitled to terminate the Service Contract for gross misconduct on 10 February 2017. The next question is whether Actis had the power under the SSD to exercise that right on behalf of and on the name of SMOH.

I reject Actis’ reliance on clause 16.3 as conferring the power. Clause 16.3 allows Actis to “conduct” and “prosecute” a “right of action” which SMOH has against Mr Malhotra. It is concerned with pursuing, including by litigation, existing claims which have given rise to a cause of action. It does not confer authority on Actis to create a new cause of action, save to the extent conferred by the authority to “negotiate, litigate and settle any claim arising out of such right of action”. When Actis commenced proceedings against Mr Malhotra in SMOH’s name it was exercising the power under clause 16.3 to pursue an accrued right of action in respect of prior breaches of the Service Contract in order to recover damages or injunctive relief. That is a different right of action from that which results from the exercise of the right to terminate the Service Contract as a result of those breaches. Exercising a termination right does not amount to conducting or prosecuting the right of action for breach; nor does termination of the contract amount to negotiating, litigating or settling the cause of action for breach or any claim arising out of that cause of action. Termination involves the creation of new rights, and the authority to create those new rights is not to be found in an authority to litigate about them if and when created.

However clause 16.4 does confer the necessary authority on Mr Shomik Mukherjee of Actis. There was a decision and discretion to be exercised by SMOH against Mr Malhotra in respect of one of the Transaction Documents, namely the Service Contract, i.e. whether to exercise the accrued right to terminate it. Mr Adkin argued that all that clause 16.4 allowed Actis to do was to direct SMOH to take the relevant action, but that there needed to be a subsequent board decision of both the Advisory Board and the board of directors of SMOH to do so. I see no justification for imposing any requirement of any board decision. Mr Adkin relied on clauses 17.1.5 and 18.1 of the SSD but neither of them prescribe a decision of either board as necessary. Clause 16.4 covers a potentially wide range of discretions and decisions which may be exercised by any Group Company against any Malhotra Party or their affiliates in respect of a range of Transaction Documents and the Tax Structure Paper. Whether such a decision or discretion requires a board meeting is a matter for the internal governance regime of the particular company in question.

The articles of association of SMOH include the following:

“26 POWERS OF DIRECTORS

…

26.3

Subject to the provisions of the Law, the Memorandum and these Articles, the business of the Company shall be managed by the Directors who may for that purpose exercise all the powers of the Company.

28 MEETINGS OF DIRECTORS

...

Quorum

28.6

No business shall be transacted at any meeting of the Board unless a quorum is present at the time when the meeting proceeds to business and remains present during the transaction of such business. Until such time as an [Actis nominated] Director is appointed, the quorum for the transaction of business of the Board shall be one Director. At any time following an [Actis nominated] Director having been appointed, the quorum for the transaction of business of the Board shall be three Directors, one of whom must be an [Actis nominated] Director and one of whom must be a [Malhotra nominated] Director, subject in each case to Article 28.7. In the event Article 28.7 applies, then the quorum shall be any one Director who is not prohibited from voting pursuant to Article 28.7, or in the event of a matter referred to in Articles 29.3 or 29.4, the quorum shall be any [Actis nominated] Director.

28.7

The relevant members of the Board shall be required to recuse themselves from voting on any matter which relates to a Group Company, on the one hand, and the Shareholder appointing or nominating them or any of its Affiliates, on the other, and shall not be required to form part of the quorum of any Board meeting or any committee thereof, as regards such matter.

RESERVED MATTERS

…

29.4

All decisions and discretions which may be exercised by any Group Company as against a Malhotra Party or any of their Affiliates in respect of the Transaction Documents or the Tax Structure Paper shall be exercised at the instructions of Actis, and the [Malhotra nominated] Shareholders and the Company shall not, and shall procure that each member of the Group shall not, vary, novate, supplement, waive or replace or agree to vary, novate, supplement, waive or replace the terms or conditions of, or give any consent or exercise any such discretion in respect of any of the Transaction Documents or the Tax Structure Paper (in each case whether subject to conditions or not), or do anything which is not contemplated by, or is inconsistent with, any of them, or agree to do any of the foregoing, without the prior consent in writing of Actis.”

Article 26.3 confers upon the directors the authority to exercise all the powers of the company. This includes the decision to terminate Mr Malhotra’s Service Contract. The three SMOH directors were Mr Malhotra, his nominee Professor Norchi, and Mr Shomik Mukherjee. All three would be bound by article 29.4, which is in the same terms as clause 16.4 of the SSD, to exercise their powers as directors to comply with Actis’ instruction. Accordingly upon a true construction of the articles, in circumstances where Actis has given a valid instruction under article 29.4 (and clause 16.4 of the SSD), any one director is empowered to give effect to that instruction because all are bound to do so. Moreover, even if there were to have been a requirement of a board decision, clause 18.4.3 of the SSD and article 28.7 of the SMOH articles of association would have required Mr Malhotra and his nominee, Professor Norchi, to have recused themselves. The last sentence of article 28.6 expressly provides that in those circumstances Mr Mukherjee acting alone would constitute a quorate body, both because the other two were bound to recuse themselves under article 28.7 and because the decision was one in respect of a matter governed by article 29.4. Accordingly Mr Shomik Mukherjee had power to take the decision on behalf of SMOH on his own under the company’s articles, and it was he who did so pursuant to Actis’ directions. It matters not whether Mr Mukherjee’s decision is treated as an executive act of a director or the act of a quorate board comprising only himself. His conduct in procuring the termination of the Service Contract was a duly authorised act of SMOH pursuant to a direction of Actis. This makes obvious business sense. The structure of the SSD was such that Mr Malhotra was to have the majority of nominees on the SMOH board and therefore to have control. Clause 16.4 is concerned with circumstances in which SMOH’s rights are adverse to Mr Malhotra’s and therefore directed to situations in which Mr Malhotra could not reasonably be expected to exercise his controlling interest in SMOH to make decisions adverse to himself. If Mr Adkin’s argument were sound, Mr Malhotra would either be in a position to neutralise the central purpose of clause 16.4 by delaying or blocking any board resolution, which is a construction contrary to its central purpose, or else the requirement of a board meeting would serve no useful purpose, in which case the construction would lead to a triumph of form over substance. Neither construction is dictated by the words used or consistent with business common sense.

Since I have held that SMOH was entitled to terminate the Service Contract and that Actis validly procured that it did so, this issue does not arise.

Mr Malhotra’s case is that there was an implied term of the SSD that Actis would not exercise the discretion conferred on it by clause 16.1 in a manner which was arbitrary, capricious, irrational or unreasonable; or in other words that Actis’ written consent under clause 16.1 of the SSD would not be unreasonably withheld. Mr Adkin confirmed in the course of argument that “unreasonable” was here used in its public law sense as Wednesbury unreasonable.

Ms Bingham argued that there were no such implied terms: Actis had an unfettered right to decide whether to consent to any of the Reserved Matters; alternatively, if there was any such term, Actis was not in breach of it in relation to Mr Anindo Mukherji’s removal because Actis’ written consent to such removal was not requested and/or in any event a refusal would not have been capricious, arbitrary, irrational or Wednesbury unreasonable.

The principles governing the implication of terms were authoritatively restated in Marks & Spencer Plc v BNP Paribas Securities Services trust Co (Jersey) Ltd[2016] AC 742. A term of the nature contended for has often been implied in contracts containing a contractual discretion vested in one party: see Abu Dhabi National Tanker Co v Product Star Shipping Ltd (The “Product Star”) (No 2)[1993] 1 Lloyd’s Rep 397,404; Paragon Finance Plc v Nash[2002] 1 WLR 685 at paragraphs [39]-[41]; Socimer International Bank (in liquidation) v Standard Bank London Ltd[2008] 1 Lloyd’s Rep 558, 575-577; British Telecommunications Plc v Telefonica O2 UK Ltd[2014] 4 All ER 907; Braganza v BP Shipping Ltd [2015] 1 WLR 1661; and Waaler v Hounslow London Borough Council[2017] 1 WLR 2817. It is likely to be implicit in any commercial contract under which one party is given the right to make a decision on a matter which affects both parties whose interests are not the same: see Braganza per Baroness Hale at paragraph [18]; JML Direct Ltd v Freestat UK Ltd [2010] EWCA Civ per Moore-Bick LJ at [14]; and Waaler per Lewison LJ at [20]. The rationale is that such a term is necessary in order to prevent the abuse of the power conferred on one party. The discretion conferred on Actis in clause 16.1 in relation to Reserved Matters fall squarely within the rationale for such implication. It contains a power vested in Actis to make decisions which affect the potentially conflicting interests of the other parties in relation to the governance of the group in a wide variety of different ways enumerated in Schedule 2.

Ms Bingham argued that the discretion in clause 16.1 is a binary decision which renders it outside the field in which decisions are subject to the implied term; and that it is essentially a veto which is no different in kind from a requirement that unanimity is required in relation to Reserved Matters in a vote in general meeting; and that since shareholders are entitled to vote their shares in accordance with their own wishes and even with malice, the same unfettered discretion should apply to clause 16.1. I am unable to accept this analysis. I agree with Asplin J, as she then was, in Property Alliance Group Ltd v The Royal Bank of Scotland Plc [[2016] EWHC 3342 (Ch) at paragraph [277] that to focus on whether the decision in question is binary is not helpful in resolving whether the term is to be implied. What matters is whether the decision involves an assessment or choosing from a range of options, of which there may only be two. Nor is the position of voting shares in general meeting analogous, which is based on shares being property and having property rights attached to them. This is a commercial contract regulating contractual rights; and the clause 16.1 discretion applies to a wide variety of reserved matters set out in Schedule 2 which fall to be considered in the light of Actis’ investment as a private equity house.

Accordingly there is to be implied the term for which Mr Malhotra contends.

Clause 16.1 does not require Actis to make a decision in relation to a Reserved Matter unless and until its written consent is sought. There can have been no decision to refuse written consent unless such written consent was requested, and in the absence of such decision there is nothing to which the implied term can attach. In this case there was no request for the written consent of Actis to the removal of Mr Anindo Mukherji as CEO. Mr Adkin relied in particular on Mr Malhotra’s email to all Advisory Board members seeking a written board resolution suspending Mr Mukherji as CEO “pending a decision about his future”, and appointing himself as interim CEO “pending the appointment of a long term replacement”. Ms Bingham advanced a threshold submission that since Mr Malhotra’s case was that such a suspension was not a Reserved Matter, he should not be allowed to advance a case that this was a written request to exercise a discretion in relation to a Reserved Matter for the purposes of clause 16.1. I do not regard that threshold submission as sound. I have rejected Mr Malhotra’s case that suspension is not removal, and it follows that the request for a board resolution on 14 December did involve a Reserved Matter. Mr Malhotra is entitled to argue that the email constitutes the written request for consent which is necessary under clause 16.1, in the alternative to his argument which I rejected that suspension is not removal.

The email seeking the board resolution was not, however, a written request to Actis. The written resolution request was made to Mr Shomik Mukherjee and Mr Rathinam in their capacity as members of the Advisory Board. They were nominated as such by Actis, but they were not delegates and they were acting in a personal capacity as members of the board. A request to them did not constitute a request to Actis. By contrast, on previous occasions on which written requests for consent had been made under clause 16.1, they had taken the form of letters to Actis’ registered office, including a letter from Mr Malhotra of 6 January 2013 seeking consent to the removal of the CEO then in office.

That is sufficient to dispose of the counterclaim. However in case I be wrong on this issue, I will consider whether if Actis’ attitude to the retention of Mr Anindo Mukherjee had been a decision under clause 16.1 it would have been in breach of the implied term.

It is important to keep in mind two considerations which inform the answer to this question. The first is the scope of the limitation imposed on Actis by the implied term. The Court is not concerned to apply its own views of what would or would not have been reasonable. Reasonableness in the current context is not an objective standard to be applied by the Court, but a criterion applied to the decision making process of the decision maker. Apart from challenges to the procedural manner in which the decision comes to be made, or challenges to the relevance or irrelevance of considerations which were or were not taken into account, neither of which arise in the present case, the test focuses on the outcome of the process; and in order for there to be a breach of the term, the decision maker must have reached a decision which is so outside the range which any decision maker could reasonably have reached that it is properly categorised as irrational or perverse: see Hayes v Willoughby[2013] 1 WLR 935 per Lord Sumption JSC at paragraph [14] approved in Braganza at [23]-[24]. It is a high threshold, as the public law cases make clear.

Secondly, it is important to look at the nature of Actis’ decision. If, contrary to my conclusion, Mr Shomik Mukherjee is to be equated with Actis for these purposes, his response was not a simple refusal, but an indication that there should not be any removal yet without further discussion. In his email of 14 December 2016, he said:

“… Actis’ written consent has not been sought to date. I can inform this Board that Actis is happy to make itself available to discuss the Group’s performance and next steps with Mr Malhotra. … At the very least … a much more considered, unemotional and evidence-based assessment is needed of the current issues facing the Group and potential solutions.”

Mr Malhotra’s case on this issue depended entirely on the disappointing financial performance of the group, which he attributed to the incompetence of Mr Anindo Mukherji and his senior management. However it is quite impossible to treat this as sufficient to treat Mr Shomik Mukherjee’s approach to the written resolution request as unreasonable for three separate reasons, each of which is sufficient.

First, there was clearly room for two views, at the lowest, as to whether Mr Anindo Mukherji was sufficiently at fault or incompetent such that the financial results required his removal. It is fallacious to suggest that disappointing financial results ipso facto prove incompetent management, or that they must be met by a change in management. I need not set out the very considerable body of evidence before the Court as to the problems faced by the group and their causes, in respect of which Mr Anindo Mukherji and Mr Abraham provided cogent and convincing explanations in their evidence. It is enough to record my conclusion that a reasonable decision maker in Actis’ position in December 2016 could reasonably have taken the view that the financial performance was substantially due to historic problems and external market conditions; and that turning the business round was a longer term task for which Mr Anindo Mukherji remained well qualified and competent. It is not for the Court to determine whether that was or was not the case, but it was certainly a tenable and rational view to take. Actis could reasonably have taken the view that for the time being, at least, the retention of Mr Anindo Mukherji as CEO was in the best interests of the group. That was the view of one of the independent Advisory Board members Mr Mateen; and the other, Mr Birch, whilst disagreeing, described Mr Mateen’s views as “very understandable”.

Secondly, Actis could reasonably have concluded that there was no viable alternative to Mr Anindo Mukherji at the time. No other CEO was identified to take over from Mr Mukherji, save only that Mr Malhotra would be acting CEO for an indefinite period, which would likely be a substantial one to give sufficient time to identify and recruit a suitable replacement given past experience. Actis was entitled to take the view that Mr Malhotra was not a suitable replacement, both temperamentally and as a matter of operational experience, even on a temporary basis. Such a view would not have been unreasonable, as my findings in relation to his subsequent conduct illustrate. Mr Birch said to Mr Shomik Mukherjee in a telephone conversation a month later, on 17 January 2017 “…..Rocky can’t run the business because he’s got too many girlfriends, and too many interests elsewhere in the world…….he’s got a huge amount of personality and charisma, but he’s not a businessman, he’s a playboy.” Mr Shomik Mukherjee’s evidence was that it would not have been possible to attract an alternative CEO of the calibre of Mr Anindo Mukherji if he were to be removed at that time; and that had he been removed, and the senior management to have left with him, as was likely, including experienced and effective zonal sales managers in India, that would not have been in the group’s best interests. That was a rational and tenable view, at the lowest.

Thirdly, at the time Mr Malhotra provided no evidence to Mr Shomik Mukherjee that advice had been taken in relation to the contractual right to remove Mr Anindo Mukherji, or that such removal was lawful under UAE law. At the very least it would not have been unreasonable to refuse to agree to his immediate and indefinite suspension without such advice.

Mr Malhotra was in breach of his Service Contract and it was validly terminated on 10 February 2017. I will hear the parties on the appropriate form of relief on the claim. The counterclaim fails and is dismissed.