Allen & Gledhill successfully represents India-listed company before Singapore Court of Appeal in minority oppression case

4 June 2019

Allen & Gledhill LLP successfully represented Kiri Industries Limited (“Kiri”) before the Singapore Court of Appeal in Senda International Capital Ltd v Kiri Industries Ltd & Ors and another appeal [2019] SGCA(I) 01. Senda International Capital Limited (“Senda”) had appealed against the first decision by the Singapore International Commercial Court (“SICC”) on minority oppression. The appeal was heard before an international bench of judges comprising Judge of Appeal Judith Prakash, International Judge Robert French and International Judge Sir Bernard Rix.

The dispute involved major players in the dye industry and related to Kiri’s investment in Dystar Global Holdings (Singapore) Pte. Ltd (“DyStar”). The majority shareholder in DyStar is Senda International Capital Limited (“Senda”), a wholly-owned subsidiary of Zhejiang Longsheng Group Co. Ltd (“Longsheng”). Kiri is listed on the Bombay Stock Exchange and the National Stock Exchange of India, while Longsheng is listed on the Shanghai Stock Exchange.

The Court of Appeal upheld Kiri’s claim in the SICC that there was oppressive conduct by Senda against Kiri. This decision entrenches the position that while governance mechanisms may vary according to express agreement, the general law standards relating to the duties of the board and the obligations of individual directors remain. Hence, the directors nominated by Senda onto the DyStar board had a fiduciary obligation to act in the best interests of DyStar. The Court of Appeal agreed with the SICC that the acts of Longsheng were oppressive towards Kiri. Such acts included Longsheng:

• Causing DyStar entities to enter into transactions with Longsheng-related entities, such as related party loans and cash pooling arrangements. In December 2014, related party loans from DyStar entities to Longsheng-related entities reached US$102.82 million.
• Causing the payment of US$2 million to a Senda-nominated director in the form of a special incentive.
• Failing to re-assign a DyStar patent to DyStar. Instead, Longsheng collected fees from the licensing of the patent to third parties, and exploited the patent to produce its own dyes and earned revenue from the sale of the same.
• Causing DyStar to pay Longsheng fees amounting to an aggregate sum of US$10.5 million for services which were allegedly rendered. These fees were found to lack bona fides and commercial justification.
• Causing the DyStar board not to declare dividends even though the company made total profits of US$380.53 million between 2013 and end 2017.

Further, the Court of Appeal rejected Senda’s contention that the appropriate relief would not be to buy out Kiri’s shares in DyStar as the prejudicial effects of any conduct could be easily reversed and Kiri compensated for any diminution in the value of its shareholding. The Court of Appeal agreed that the SICC had wide powers to remedy the oppression complained of, and opined that the appellate court should not be substituting its own view where there has been no error demonstrated in the trial court’s approach. Thus, the Court of Appeal dismissed Senda’s appeal and upheld the order for Senda to buy out Kiri’s shareholding in DyStar.

The Allen & Gledhill team representing Kiri before the Court of Appeal and the SICC was led by Partner Dinesh Dhillon and comprised Partners Lim Dao Kai and Margaret Joan Ling.