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COAPPL41.12
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
COMPANY APPEAL (L) NO. 41 OF 2012
IN
CLB COMPANY APPLICATION NO. 85 OF 2012
IN
CLB COMPANY PETITION NO. 87 OF 2010
1. JER RUTTON KAVASMANECK )
alias JER JAWAHAR THADANI, )
residing at 193, Jupiter Apartment,
Cuffe Parade, Mumbai 400 005.
)
)
2. DARIUS RUTTON KAVASMANECK )
residing at 626, Parsi Colony, )
Dadar, Mumbai 400 014. ) ... APPELLANTS
V/S
1. GHARDA CHEMICALS LIMITED )
a Company incorporated under the )
Companies Act, 1956 and having its )
registered address at Gharda House, )
48, Hill Road, Bandra (West), )
Mumbai 400 050. )
2. KEKI HORMUSJI GHARDA )
of Mumbai, Indian Inhabitant, )
having his address at Gharda House, )
48, Hill Road, Bandra (West), )
Mumbai 400 050. )
3. ABAN KEKI GHARDA )
of Mumbai, Indian Inhabitant, )
having his address at Gharda House, )
48, Hill Road, Bandra (West), )
Mumbai 400 050. )
4. ALMIRA H. PATEL )
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COAPPL41.12
of Mumbai, Indian Inhabitant, )
having his address at Gharda House, )
48, Hill Road, Bandra (West), )
Mumbai 400 050. )
5. D.T.DESAI )
of Mumbai, Indian Inhabitant, )
having his address at Gharda House, )
48, Hill Road, Bandra (West), )
Mumbai 400 050. )
6. MAHARUKH MURAD OOMRIGAR, )
having her address at T/176, )
AA Palm Beach, Juhu Tara Road, )
Juhu, Mumbai 400 049.
ig )
7. PERCY RUTTON KAVASMANECK, )
residing at 134, Olivera Way, )
Palm Beach Garden 33418, Florida, )
USA. )
8. ABAN PERCY KAVASMANECK, )
residing at 134, Olivera Way, )
Palm Beach Garden 33418, Florida, )
USA. ) ... RESPONDENTS
...................
Mr Pravin Samdhani, Senior Advocate along with Mr.Shriraj Dhruv, Mr.Snehal Shah, Ms Khyati Ghevaria and Mr.Manish Acharya, i/b. M/s Dhruv & Co. for the Appellants.
Mr Ravi Kadam, Senior Advocate along with Mr.Suhas Tulzapurkar, Mr.Nishad Nadkarni, Mr.Vineet Srivastava, Mr.Abhishek Adke, Mr.Ashutosh Sampat, i/b. Legasis Partners for Respondent No.1.
Mr Vinod Bobde, Senior Advocate along with Mr.Suhas Tulzapurkar, Mr.Nishad Nadkarni, Mr. Vineet Srivastava, Mr. Abhishek Adke, Mr. Ashutosh Sampat, i/b. Legasis Partners for Respondent No.2.
Mr T.N. Subramaniyam, Senior Advocate along with Mr. Suhas Tulzapurkar, Mr.Nishad Nadkarni, Mr.Vineet Srivastava, Mr.Abhishek Adke, Mr.Ashutosh Sampat, i/b. Legasis Partners for Respondent No.3.
::: Downloaded on - 09/06/2013 19:30:59 :::hvn 3/195 COAPPL41.12 Mr Sunip Sen along with Mr.Suhas Tulzapurkar, Mr.Nishad Nadkarni, Mr.Vineet Srivastava, Mr.Abhishek Adke, i/b. Legasis Partners for Respondent Nos.4 and 5.
Dr Birendra Saraf along with Ms. Ankita Singhania, i/b. M/s D.H.Law Associates for Respondent Nos.7 and 8.
Mr.V.R.Dhond, Senior Advocate alongwith Mr.Amit Jamsandekar and Ms.Pratibha Mehta, i/b. M/s.Little & Co. for Applicant Godrej Industries Intervenor.
CORAM : R.D.DHANUKA J.
RESERVED ON : OCTOBER 16, 2012
PRONOUNCED ON : DECEMBER 20, 2012
ORAL JUDGMENT :
Admit. By consent of the parties, the present appeal was heard finally
at the admission stage and is disposed of by this Judgment.
2. The appellants have formulated following questions of law for determination of this Court :
A. Whether the CLB does not have the power to review its earlier Order when the earlier order was not obtained on fraud or fabricated documents ?
B. Whether the CLB could not have entertained an application filed by the 1stRespondent, which was in effect and even stated to be for review of an earlier order passed by the CLB ?
C. Whether the CLB could not have vacated its Order dated May ::: Downloaded on - 09/06/2013 19:30:59 ::: hvn 4/195 COAPPL41.12 21, 2012 on the same grounds on the basis of which the Order dated May 2012 was passed ?
D. Whether the CLB is required to "pronounce" its orders and whether an order merely posted by speed post without its being "pronounced" is not a judicial order in the eyes of law?
E. Whether the CLB could not have permitted the 1st Respondent from implementing a resolution purportedly passed at its Extraordinary General Meeting when :
(i) the CLB itself permitted amendment of the Company Petition impugning the convening of the said EOGM, and
(ii) the CLB had adjourned another Company Application for further amendment of the Company Petition questioning the conduct at the impugned EOGM?
F. Whether the CLB could not have permitted the 1st Respondent to implement the resolution purportedly passed at the impugned EOGM when the conduct of the impugned EOGM was under serious dispute and challenge and without even considering the prima facie case made out by the Appellants ?
G. Whether the abrogation of the vested right of preemption from the Articles of Association itself amounts to oppression?
H. Whether the majority rights cannot be abused for amending the Articles of Association of a Company in a manner that is oppressive to the minority shareholders ?
::: Downloaded on - 09/06/2013 19:30:59 :::hvn 5/195 COAPPL41.12 I. Whether the Appellants are entitled to challenge the conduct of the impugned EOGM as well as the rulings given by the Chairman on the ground that the same were patently illegal, mala fide and a part of the preconceived deliberate oppressive design ?
J. Whether the CLB could not have permitted the 1st Respondent to implement the resolution deleting Article 57 on the ground that it was invalid when the challenge to the validity of the said Article was itself pending in the Hon'ble Supreme Court ?
3. Some of the relevant facts which have bearing on various issues raised by the parties and which emerge from the pleadings and documents filed by the parties are as under.
This appeal filed under Section 10F of the Companies Act, 1956 is directed against an order dated 13th August 2012 passed by the Company Law Board, Mumbai (for short CLB) allowing Company Application No.85 of 2012 which was filed by the first respondent in Company Petition No.87 of 2010.
By the said order, the CLB has allowed Company Application No.85 of 2012 by which the first respondent had applied for vacating and/or modifying ad interim order dated 21st May 2012 passed by the CLB. By order dated 21st May 2012 in C.A.No.73 of 2012 filed by the appellants, the CLB allowed the first respondent company to proceed with the Extra Ordinary General Body Meeting (EOGM) on 22nd May 2012 and ordered that the resolutions passed if any, in the EOGM on 22nd May 2012 shall be kept in abeyance till further ::: Downloaded on - 09/06/2013 19:30:59 ::: hvn 6/195 COAPPL41.12 orders. The said C.A. (73/12) was filed by the appellants in Company Petition No.87 of 2010 under Sections 397, 398 read with 402 of the Companies Act, 1956 alleging oppression and mismanagement in respondent No.1 company by respondent No.2. In the said Company Petition (87/10) filed by the appellants, the appellants sought injunction against holding of EOGM then proposed to be held on 12th November 2010 to consider resolutions to delete certain Articles including Art.57 which provides for a right for preemption to the shareholders of the first respondent company.
4. Jer Rutton Kavasmaneck @ Jer Jawahar Thadani (herein after referred as JRK) is original first claimant in Company Petition No. 87/397-398/CLB/MB/2010. Darius Rutton Kavasmaneck (herein after referred as DRK) is original second claimant in the said Company Petition.
DRK is a son of JRK.
The first respondent is a company (hereinafter referred as the said company) in which the appellants and the respondents are shareholders. The second respondent Mr Keki Hormusji Gharda (herein after referred as Dr Gharda) is the brother of JRK and is Chairman and Managing Director of the said company. The third respondent is wife of Dr Gharda and also a Director of the said company. The fourth respondent is wife of ex Chairman and Director of the said company. The fifth respondent is Chartered Accountant and is on the Board of Directors of the said company. The sixth to eighth respondents ::: Downloaded on - 09/06/2013 19:30:59 ::: hvn 7/195 COAPPL41.12 were joined as additional respondents to C.A.No.73 of 2012 before the CLB.
The sixth respondent is daughter of JRK and sister of DRK. She owns and/or controls 3814 equity shares of the said company constituting approximately 6%. The seventh respondent is the son of JRK and brother of DRK. The eighth respondent is wife of the seventh respondent and they between themselves hold and/or otherwise control 4301 equity shares of the first respondent constituting approximately 7%.
5. On 28th April, 1962 under a Deed of Partnership of M/s Gharda Chemicals, Kavasmanecks and Gharda became the partners. On 7th March, 1967 M/s Gharda Chemicals Pvt. Ltd. was incorporated to take away the affairs of said M/s Gharda Chemicals. On 7th August, 1988, the said M/s Gharda Chemicals Pvt. Ltd., became a deemed public company as a result of turnover criteria under Section 43A of the Companies Act.
6. In 1990 JRK, DRK along with other Kavasmanecks and Rebello filed Company Petition (77 of 1990) in this Court under Section 397 and 398 of the Companies Act against the said company. After the first respondent Company became a deemed public Company pursuant to Section 42 of the Companies Act with effect from 17th August 1988, necessary changes were carried out in the Certificate of incorporation by the Registrar of Companies.
Section 43(A) permitted deemed Public Limited Company to retain the ::: Downloaded on - 09/06/2013 19:30:59 ::: hvn 8/195 COAPPL41.12 provisions referred to in Section 3(i)(iii) of the Companies Act. Pursuant to the Companies Amendment Act 2000, Section 3 of the said Act was amended to add further requirement viz (d) prohibits any invitation or acceptance of deposits from the persons other than its members and directors or their relatives and Section 43(A) deleted by way of amendment in the year 2000.
Consequently the third category of the Company i.e. Deemed Public Limited Companies which continued to be permitted to include provisions applicable to Private Limited Company ceased to exist. Thereafter there are only two categories of Companies in the Companies Act viz. 'Private' and 'Public'.
7. On 2nd April 2001, the first respondent Company issued a notice calling upon EOGM to pass special resolution to amend Art. 3 of the Articles of Association to insert clause (d) prohibiting acceptance of deposits from persons other than members, directors or their relatives and also to change the name of the Company from Gharda Chemicals Limited to Gharda Chemicals Private Limited. However, the said resolution was defeated in the EOGM dated 5th January 2001 by the appellants and their group who approx. hold more than 32% of the paid-up capital.
8. By letter dated 17th May 2001, the first respondent Company informed the appellant No.2 that a transfer notice dated 15th May 2001 from Ms P.E. Daruwalla had been received by the Company ::: Downloaded on - 09/06/2013 19:30:59 ::: hvn 9/195 COAPPL41.12 expressing her desire to transfer her shares of the first respondent company and requesting the company to offer the same to all members as per Article 57 of the Articles of Association of the Company. The Company requested appellant No.2 to intimate his desire to purchase any or all such shares offered by Mrs. B.E.Daruwalla within 15 days as stipulated in Article 57 of the Articles of Association.
9. By another letter dated 28th May 2001, the first respondent company intimated the second appellant about a transfer notice dated 23rd May 2001 received from Shakuntala C. Gandhi expressing her desire of transferring 35 equity shares of the first respondent company and requesting appellant No.2 to intimate his desire to purchase any or all her shares within 15 days.
10. By letter dated 6th June 2001, appellant No.2 informed the first respondent Company which read as under :
" I have received Transfer Notices dated 17th May and 28th May from Mrs. B.E.Daruwalla and Mrs. S.C.Gandhi, circulated by the Company purportedly under Article 57 of the Articles of Association of the Company.
I am surprised to receive the above Transfer Notices. I am unable to understand as to how the Company continues to circulate Transfer Notices under Article 57, especially in view of the recent turn of events.
I wish to put on record my objection to the Company, circulating Transfer Notices purportedly under Article 57 of the Articles of Association. I am ignoring these Transfer Notices and shall ignore ::: Downloaded on - 09/06/2013 19:30:59 ::: hvn 10/195 COAPPL41.12 further Transfer Notices, if any, circulated by the Company purportedly under Article 57.
11. On 30th September, 2002, Government of India, Ministry of Finance, Department of Company Affairs issued a Circular and made it clear that these companies which did not approach the Registrar of Companies, seeking reversion back to private company's status, are deemed to have chosen to remain as public company.
12. On 8th September, 2005, the JRK and DRK and Rebello withdrew from the said Company Petition (77 of 1990) and other Kavasmanecks continued to pursue the said petition. By an order dated 8th September 2005 passed by Shri Justice A.M.Khanvilkar, in the said petition, this Court recorded statement of the appellants and two other parties who were also petitioners in the said petitions that those parties were not interested in prosecuting the Company Petition (77 of 1990). This Court accepted the said request of the appellants and two others to permit them to withdraw from proceedings by deleting their names from the array of parties. Petitioner Nos.4 and 5 in the said petition, however, continued to pursue the said company petition (77 of 1990). This Court permitted petitioner Nos.4 and 5 to the said petition to carry out necessary amendment to the said Company Petition (77 of 1990).
13. By an order dated 14th November 2008 passed by Shri Justice A.M.
::: Downloaded on - 09/06/2013 19:30:59 :::hvn 11/195 COAPPL41.12 Khanvilkar, the said company petition No.77 of 1990 came to be dismissed. It is a common ground that none of the parties have challenged the said Judgment and Order dated 14th November 2008 passed by this Court.
14. On 11th December, 2009, JRK and DRK filed another company petition before the CLB (CP 132 of 2009) under Section 397 and 398 of the Companies Act. On 25th January, 2010, the CLB granted interim injunction in favour of JRK and DRK in the said C.P.(132 of 2009). On 26th March, 2010, this Court in Company appeal, did not interfere with the interim order passed by the CLB on 25th January, 2010 however directing that the hearing of the C.P. (132 of 2009) be held and permitted inter member transfers. On 14th May 2010, the CLB dismissed C.P.(132 of 2009) filed by JRK and DRK on the ground that the Company was a public limited company and article 57 of the Articles of Association was consequently invalid.
15. On 28th June, 2010 this Court admitted the appeal filed by JRK and DRK under Section 10F of the Companies Act, 1956 and granted interim relief.
During the pendency of the said appeal, the said company convened an EOGM for deleting Article 57 on the ground that it was declared as invalid by the CLB by an Order dated 14th May, 2010. In the month of October, 2010, JRK and DRK filed C.P.(87 of 2010) before the CLB interalia challenging the action of the said company to convene an EOGM for deleting Article 57 of the ::: Downloaded on - 09/06/2013 19:31:00 ::: hvn 12/195 COAPPL41.12 Articles of Association. On 9th November, 2010, the CLB rejected the interim injunction prayer for by JRK and DRK to restrain holding of the proposed EOGM. CLB however, directed hearing of the petition on a later date and the parties were directed to complete the pleadings.
16. On 10th November, 2010 JRK and DRK filed Company Appeal under Section 10F of the Companies Act, 1956 in this Court which was numbered as Company Appeal (2 of 2011).
ig This Court passed an Order dated 10th November, 2010, directing holding of the meeting, however not to implement the resolution passed therein till 18th November, 2010.
17. On 9th December, 2010, the said company withdrew notice of EOGM.
On 14th June, 2011, this Court dismissed Company Appeal filed by JRK and DRK on the ground that the said company was a public company and thus Article 57 was invalid.
18. The appellants challenged the Judgment and Order dated 14th June 2011 delivered by this Court by filing Special Leave Petition in the Supreme Court (Special Leave to Appeal (Civil) No.16994/11). On 22nd July, the Supreme Court passed the following order :
" Let this matter be listed on 27th July, 2011, before other matters, to consider issuance of notice.
Till then, the interim orders which had been passed by the ::: Downloaded on - 09/06/2013 19:31:00 ::: hvn 13/195 COAPPL41.12 Bombay High Court, will continue.
19. On 27th July 2011, the Supreme Court passed the following Order in the same Special Leave to Appeal No.16994/2011) filed by the appellant :
" Issue notice, returnable six weeks hence.
All the respondents, except for the respondent No.4, are duly represented on caveat. Accordingly, service on the said respondents is dispensed with. As far as the respondent No.4, is concerned, since he was a nominee Director and is no longer on the Board, service of notice on the said respondent is dispensed with.
The respondents will be entitled to file their respective counter affidavits to the special leave petition within 4 weeks. Rejoinder, if any, may be filed within two weeks thereafter.
The interim order, which was passed on 22nd July, 2011, will continue in the meantime.
Let the matter be listed on the returnable date."
The said Special Leave to Appeal (16994/11) is pending and is not yet admitted by the Supreme Court.
20. On 8th August 2011, the appellants withdrew Company Appeal (2 of 2011). This Court passed the following order.
" 1. Mentioned. Not on board.
2. It is stated that two Company Appeals were on this Court's board. One company Appeal has been disposed of, whereas no orders are made on the other Company Appeal.
3. It is stated that by a letter dated 9-12-2010, the Extra Ordinary General Meeting which was scheduled to be held on 10-12-2010 has been adjourned/postponed. A fresh notice will be issued intimating the date of the Extra Ordinary General Meeting.::: Downloaded on - 09/06/2013 19:31:00 :::
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4. In these circumstances, the Learned Counsel Mr Samdhani appearing for the Appellants seeks leave to withdraw this Appeal with liberty to adopt appropriate proceedings, in case an occasion arises and if fresh meeting is convened.
5. The application for withdrawal is granted. The Company appeal is allowed to be withdrawn and is dismissed as such with liberty to the Appellants to adopt appropriate proceedings in case a fresh Extra Ordinary General Meeting is convened. All contentions of both the sides in that behalf including the maintainability are kept open.
6. Needless to, therefore, state that if the Appellants adopt appropriate proceedings, the Company Law Board or such other Forum may decide the same on its own merits and in accordance with law.
7. Needless to state that a fresh Extra Ordinary General Meeting is convened, that would necessarily mean a fresh cause of action and once this Appeal is withdrawn, there is no doubt that the Company Law Board or such other forum which is approached by the Appellant, will decide the proceedings independent of the observations made in the earlier order."
21. On 31st March 2012, the respondent Nos.6 to 8 collectively holding 12.58% of the paid-up share capital issued by the first respondent Company, issued a notice under Section 169 of the Companies Act 1956 and Article 76 of the Articles of Association to convene an Extra Ordinary General Meeting (EOGM) of the members of the Company to transact the following business by special resolution.
" Amendment of Articles of Association of the company for deletion of Article 57 of the Articles of Association of company."
"RESOLVED THAT pursuant to section 31 of the Companies Act, 1956 and other applicable provisions ::: Downloaded on - 09/06/2013 19:31:00 ::: hvn 15/195 COAPPL41.12 thereof, if any, the Articles of Association of the Company be amended by deleting the existing Article 57 of the Articles of Association of the Company."
The said notice was received by the first respondent company on 20th April 2012.
22. On 25th April 2012, the first respondent company issued a notice to the shareholders in compliance with requisition dated 31st March 2012 under Section 169 of the Companies Act 1956 and Article 76 received from respondent Nos.6 to 8 and proposed to hold EOGM on 22 nd May 2012 at 11.30 am to pass a following resolution as special resolution.
" RESOLVED THAT pursuant to section 31 of the Companies Act, 1956 and other applicable provisions thereof, if any, the Articles of Association of the Company be amended by deleting the existing Article 57 of the Articles of Association of the Company."
23. Along with the said notice, the Company annexed the copy of requisition dated 31st March 2012 and informed that the original could be inspected at the registered office of the company. It was made clear that a member entitled to attend and vote in the meeting was entitled to appoint a proxy to attend and vote instead of himself and the proxy need not be a member. It was also conveyed that no explanatory statement had been received by the company from the requisitionists and hence did not form part of the said notice.
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24. The appellants filed C.A.(73/12) before the CLB in C.P.(87 of 2010) and sought amendment to C.P.(87/10) and stay in respect of the notice dated 25th April 2012 issued by the first respondent company from convening EOGM on 22nd May 2012 or on any subsequent dates for the purpose of considering and/or passing resolution referred to in the said notice dated 25th April 2012 or any part thereof or any other resolution similar thereto.
25. On 19th May 2012, one of the requisitionist Ms Mahrukh Oomrigar respondent No.6 holding 6% shares addressed a letter to her Advocates and Solicitors M/s Juris Corp instructing to support the C.A.(73 of 2012) filed by the appellants and to concede to the injunction prayed for in the said application. The sixth respondent conveyed that she did not propose to move or support the proposed resolution for deletion of Art.57. She informed that a copy of the said letter was also sent to the Registrar of CLB and to the Advocates for the petitioner/applicants.
26. On 19th May 2012, M/s Godrej Industries Ltd., addressed a letter to the first respondent company informing that the Godrej Industries Ltd., was pledgee of 6355 shares of Gharda Chemicals standing in the names of Darius and Jer Kavasmaneck and hold the said shares as security for loan aggregating to Rs. 10.34 crores granted by Godrej Industries Ltd. to them and to certain ::: Downloaded on - 09/06/2013 19:31:00 ::: hvn 17/195 COAPPL41.12 other shareholders of the company. The said shareholders had executed loan/pledge agreement and irrevocable power of attorneys. Copies of powers of attorney were annexed. It is stated that the power of attorney expressly authorised Godrej Industries Ltd., to attend, vote and/or otherwise take part in all meetings held in connection with the company in relation to shares and to sign proxies for the purposes of voting and for any other purposes connected therewith as freely as the shareholders could themselves do. By the said letter, the Godrej Industries Ltd., authorized Mr Rajiv Bakshi, Executive Vice President (Legal) to attend, participate and vote at the EOGM of the company to be held on 22nd May 2012 or on any adjourned date thereof pursuant to the powers contained in irrevocable powers of attorney. Godrej Industries Ltd., certified signature of Mr Bakshi appended thereon. The said letter was signed by Mr Clemant Pinto, Vice President (Finance) on behalf of Godrej Industries Ltd. The said letter was received by the first respondent company on 19th May 2012.
27. Mr Rajiv Bakshi signed a proxy form on behalf of the second appellant on the strength of the powers of attorney granted in favour of Godrej Industries Ltd. The said proxy form was in respect of 4645 shares held by appellant No.2 in the first respondent company. The said proxy form was received by first respondent company on 19th May 2012. A similar proxy form was signed by Mr Rajiv Bakshi on behalf of Godrej Industries Ltd. being constituted ::: Downloaded on - 09/06/2013 19:31:00 ::: hvn 18/195 COAPPL41.12 attorney (CA) of the first appellant in respect of 1710 shares. The said proxy form was received by the first respondent company on 19th May 2012. It is the case of respondent No.1 company as well as Godrej Industries Ltd., that the appellants had authorized the Godrej Industries Ltd., to appoint Mr Rajiv Bakshi as proxy to vote for the appellants at the EOGM to be held on 22nd May 2012 and at any adjournment thereof.
28. On 21st May 2012, the CLB passed an Order in C.A.No.73/12 thereby allowing the first respondent company to proceed with the convening of the meeting, however directed that resolution if passed, cannot be allowed to preempt adjudication of questions of law before the Apex Court and hence resolution passed, if any, in the EOGM on 22nd May 2012 shall be kept in abeyance till further orders. The relevant paragraphs of the said order dated 21st May 2012 are as under :
5. ... CLB has the jurisdiction on the issue of convening of EOGM by the R-1 Company which is in the affairs of the R1 Company in which a petition No.87/10 is pending adjudication on completion of pleadings which are not complete as yet. It is noted that CP.No.87/10 has not become infructuous as alleged by the Respondents. Besides the issue of deletion of Articles (including Article 57) of this Public Ltd. Company which is not a listed company, the petitioners have made other allegations as well as the CLB in its order dated 9-11-2010 had required the parties to complete pleadings in the matter. In the facts and circumstances of this case, it is noted that filing of SLP before the Apex Court which has also allowed the interim injunctions granted by the Hon'ble High Court at Mumbai to continue, does not fetter the rights of the requisitionists to move for convening of EOGM, nor does it restrict the R-1 company from convening of EOGM. The R-1 Company ::: Downloaded on - 09/06/2013 19:31:00 ::: hvn 19/195 COAPPL41.12 has not choice under Section 169 of the Act but to convene the meeting. Even if the R-I Company does not convene the meeting, the requisitionists have the right, after the prescribed period, to go ahead with convening of the meeting. This right of the shareholders is, except in exceptional circumstances, not curtailed by the CLB.
6. In view of the foregoing, I hereby allow the R-1 Company to go ahead with the convened Meeting, but keeping in view the questions of law raised in the SLP in which the Apex Court has decided to permit continuation of the interim injunction granted by the Hon'ble High Court, the Resolutions, if passed, cannot be allowed to pre-exempt adjudication of the questions of law before the Apex Court, hence, the Resolutions passed, if any, in the EOGM on 22nd May 2012 shall be kept in abeyance till further orders.
29. The Chairman of the first respondent company appointed the second appellant and one Mr Michael Raj as Scrutinizers for the EOGM dated 22nd May 2012. On 22nd May 2012, appellant No.2 and Mr Michael Raj submitted a report to the Chairman in the said EOGM recording of various observations made by them. In the said report, the appellant No.2 rejected the power of attorney under which Mr Rajiv Bakshi had voted in respect of 1710 shares held by the first appellant. It is submitted that Mr Rajiv Bakshi was not relative of Godrej Industries Ltd., and hence power of attorney itself was to be considered defective, invalid and ought to be rejected. In the said report, it was observed that no board resolution authorizing Mr Rajiv Bakshi on behalf of Godrej Industries Ltd. to attend and vote at the meeting was lodged with the company.
30. On 22nd May 2012 in the said EOGM of the first respondent, 8 members were personally present. One power of attorney holder was present, two ::: Downloaded on - 09/06/2013 19:31:00 ::: hvn 20/195 COAPPL41.12 authorised representatives were present. Number of shares represented by proxies were at 10408. The Chairman declared that special resolution was passed to delete Art.57 of Articles of Association of the first respondent company with requisite majority. The amended Article 57 before deletion reads as under :-
ARTICLES OF ASSOCIATION ARTICLE 57 (As amended) The amended Article 57 of the Articles of Association which has been deleted reads thus :-
57. Save as aforesaid, the following provisions shall apply to the transfer of shares :-
(a) A member of the Company may transfer a share to his lineal descendent, but save as aforesaid no share shall be transfered to a person who is not a member of the Company so long as any member is willing to purchase the same at the fair value as hereinafter provided ;
(b) The member proposing to transfer any shares (hereinafter called the proposing transferor) shall give notice in writing (hereinafter called a transfer notice) to the Company that he desires to transfer the same ;
(c) Within the period of seven days from the receipt of a transfer notice as aforesaid the Company shall offer to each of ::: Downloaded on - 09/06/2013 19:31:00 ::: hvn 21/195 COAPPL41.12 the existing members of the Company respectively such number of the shares included in the transfer notice as a pro rata or as nearly as may be to the holding of each member respectively on the footing that if he desires to purchase any or all of such numbers of the said shares at the fair value he shall within fifteen days of the offer be entitled to apply for the purchase and transfer of the same and the Company shall be bound, upon payment to the transferor of the fair value of such shares to transfer the shares of member applying;
(d) In case of any member or members shall not have applied for the purchase and transfer of any or all of the shares to which he is entitled, the Company shall within seven days of the date at which the offer closed, offer the untaken shares to such of the members as have applied for the purchase and transfer of all of the shares to which they were entitled by the terms of the original offer in proportion as the holding of each of such members bears to the total number of shares held by them and they shall be entitled within fifteen days of the offer to apply for the purchase and transfer of a pro rata number of the said untaken shares and the Company shall be bound, upon payment to the transfer of the fair value of such shares to transfer the shares to the member applying;
(e) The proposing transferor shall be bound to execute a transfer in respect of any shares so sold and in default thereof be deemed to have executed such a transfer. The Company shall thereupon cause the names of the members who have purchased the shares to be entered in the Registrar as the ::: Downloaded on - 09/06/2013 19:31:00 ::: hvn 22/195 COAPPL41.12 holders of such shares and thereafter the validity of the proceedings shall not be questioned by any person;
(f) In case no member shall apply for any of the shares included in the transfer notice or in case any are untaken after compliance with the foregoing provisions of this Article the intending transferor shall have the right (which right shall endure for the period of one year from the date of transfer notice) to sell and dispose of his shares to any person and at any price and to apply for registration of the transfer of the same and the company shall be bound to give effect to the transfer of such shares accordingly;
(g) For the purpose of this clause the fair value of the share shall be such sum, if any, as the auditors for the time being of the Company shall certify as the fair value thereof provided that it expressly declared that the fair value shall be (1) the amount of capital paid up thereon plus, (2) a sum bearing the same proportion to the value as appearing in the Company's last balance sheet of any reserve fund or other fund of the Company as the capital paid up on all the shares of the Company for the time being issued plus or minus as the case, may be, (3) a sum bearing the same proportion to the value as appearing in the Company's last chance sheet of any balance in the profit and loss account consisting of or representing undivided profits or losses account consisting of or representing undivided profits or losses as the capital paid up on such shares, bears to the total capital paid up on all the shares of the Company for the time being issued.
::: Downloaded on - 09/06/2013 19:31:00 :::hvn 23/195 COAPPL41.12 Amendment to Articles : Article Nos. 57(h), 57(i), 57(j) and 57(k) were inserted as additional clauses to Article 57 pursuant to Special Resolution dated 15th February, 1990.
Nothing contained in clauses 57(a) to 57(g) hereof shall apply to any transfer of shares which falls under any one or more of the following circumstances :-
57(h) transfer by a person to another person who is a "relative" within the meaning ascribed thereto in the Companies Act, 1956.
57(i) transfer to a body corporate in which a majority of directors (or other persons who in law are to be regarded as Directors) or shareholders holding not less than 51% of the voting rights are persons who are the members of the company.
57(j) transfer by way of gift whether on account of love and affection between persons who are relatives of each other or by way of philanthropy.
57(k) transfer by a person to another person who is an existing member of the company.
PROVIDED THAT in each case the question as to whether the case falls under any of the foregoing circumstance shall be subject to a decision by the Board of Directors who shall be entitled to call for such information and particulars as ::: Downloaded on - 09/06/2013 19:31:01 ::: hvn 24/195 COAPPL41.12 may be reasonably required to examine as to whether the case does infact bona fide fall under any of the foregoing circumstances."
31. The Chairman of the meeting signed minutes of EOGM dated 22nd May 2012. According to the said Minutes, the Chairman gave ruling after giving due consideration to the objection and observations made by both the scrutinizers as referred in the minutes of meeting and announced the result of the poll.
According to the said minutes of meeting of EOGM dated 22 nd May 2012, the total votes polled were 62883. Votes in favour of the resolution were 47623 (75.73%) and the votes against the resolution were 15260 (24.26%).
32. On 9th June 2012, the appellants filed CA (91/12) for further amendment to CP(87/10) before the CLB challenging the meeting dated 22nd May 2012 and seeking injunction on implementation of the resolution dated 22nd May 2012.
On 12th June, 2012, the first respondent company filed CA (85/12) before CLB for vacating and/or modifying interim injunction order dated 21st May 2012 passed by CLB in CA (73/12).
33. On 10th August, 2012 arguments on C.A. (73/12) and C.A.(85/12) were closed and orders were reserved. C.A.(91/12) was adjourned to 6th September 2012. On 13th August 2012, the CLB passed a detailed order and judgment allowing C.A.(73/12) seeking amendment to C.P.(87/10) filed by the ::: Downloaded on - 09/06/2013 19:31:01 ::: hvn 25/195 COAPPL41.12 appellants. The CLB also by the same order allowed C.A. (85/12) filed by the first respondent company and vacated order dated 21st May, 2012.
34. Being aggrieved by order dated 13th August 2012 passed by the CLB allowing CA No.73/12 filed by the appellants herein, the first respondent company has filed Company Appeal (L) No.45/12 under Section 10F of the Companies Act 1956 in this Court which was heard along with present company appeal and being disposed of by a separate order. Being aggrieved by order dated 13th August 2012 allowing C.A. No.85/12 filed by the first respondent company, the appellants have filed this appeal.
35. Some of the relevant provisions of Companies Act and Company Law Board Regulations, 1991 relied upon the parties are extracted as under :
Section 3. Definitions of "company", "existing company", "private company" and "public company".
(1), (2) Not relevant.
(3) Every private company, existing on the commencement of the Companies (Amendment) Act, 2000, with a paid-up capital of less than one lakh rupees, shall, within a period of two years from such commencement, enhance its paid-up capital to one lakh rupees.
(4) Every public company, existing on the commencement of the Companies (Amendment) Act, 2000, with a paid-up capital of less ::: Downloaded on - 09/06/2013 19:31:01 ::: hvn 26/195 COAPPL41.12 than five lack rupees, shall within a period of two years from such commencement, enhance its paid-up capital to five lakh rupees. Section 9. Act to override memorandum, articles, etc. :-
(a) the provisions of this Act shall have effect notwithstanding anything to the contrary contained in the memorandum or articles of a company, or in any agreement executed by it, or in any resolution passed by the company in general meeting or by its Board of directors, whether the same be registered, executed or passed, as the case may be, before or after the commencement of this Act; and
(b) any provision contained in the memorandum, articles, agreement or resolution aforesaid shall, to the extent to which it is repugnant to the provisions of this Act, become or be void, as the case may be.
Sec.10F. : Appeals against the order of the Company Law Board :- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order:
Provided that the High Court may, if its is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.
Sec.43 : Consequences of default in complying with conditions constituting a company a private company, - Where the articles of a company include the provisions which, under clause (iii) of sub-section (1) of section 3, are required to be included in the articles of a company in order to constitute it a private company, but default is made in complying with any of those provisions, the ::: Downloaded on - 09/06/2013 19:31:01 ::: hvn 27/195 COAPPL41.12 company shall cease to be entitled to the privileges and exemptions conferred on private companies by or under this Act, and this Act shall apply to the company as if it were not a private company:
Provided that the (Central Government) on being satisfied that the failure to comply with the conditions was accidental or due to inadvertence or to some other sufficient cause, or that on other grounds it is just and equitable to grant relief, may, on the application of the company or any other person interested and on such terms and conditions as seem to the (Central Government) just and expedient, order that the company be relieved from such consequences as aforesaid.
Sec.43(A) : A private company to become public company in certain cases :- (1) Save as otherwise provided in this section, where not less than twenty-five per cent of the paid-up share capital of a private company having a share capital, is held by one or more bodies corporate, the private company shall :
(a) on an from the date on which the aforesaid percentage is first held by such body or bodies corporate, or
(b) where the aforesaid percentage has been first so held before the commencement of the Companies (Amendment) Act, 1960 (65 of 1960), on and from the expiry of the period of three months from the date of such commencement unless within that period the aforesaid percentage is reduced below twenty-five per cent of the paid-up share capital of the private company, become by virtue of this section a public company:
Provided that even after the private company has so become a public company, its articles of association may include provisions relating to the matters specified in clause (iii) of ::: Downloaded on - 09/06/2013 19:31:01 ::: hvn 28/195 COAPPL41.12 sub-section (1) of section 3 and the number of its members may be, or may at any time be reduced, below seven: Provided further that in computing the aforesaid percentage, account shall not be taken of any share in the private company held by a banking company, if, but only if, the following conditions are satisfied in respect of such share, namely;
(a) that the share -----
(i) forms part of the subject-matter of a trust,
(ii) has not been set apart for the benefit of any body corporate, and
(iii) is held by the banking company either as a trustee of that trust or in its own name on behalf of a trustee of that trust, or
(b) that the share ---
(i) forms part of the estate of a deceased person,
(ii) has not been bequeathed by the deceased person by his will to any body corporate, and
(iii) is held by the banking company either as an executor or administrator of the deceased person or in its own name on behalf of an executor or administrator of the deceased person, and the registrar may, for the purpose of satisfying himself that any share is held in the private company by a banking company as aforesaid, call for at any time from the banking company such books and papers as he considers necessary.
Sec.43(2)(A) : Where a public company referred to in sub-section (2) becomes a private company on or after the commencement of the Companies (Amendment) Act, 2000, such company shall ::: Downloaded on - 09/06/2013 19:31:01 ::: hvn 29/195 COAPPL41.12 inform the Registrar that it has become a private company and thereupon the Registrar shall substitute the word "private company" for the word "public company" in the name of the company upon the register and shall also make the necessary alterations in the certificate of incorporation issued to the company and in its memorandum of association within four weeks from the date of application made by the company.
Sec.397. Application to Company Law Board for relief in cases of oppression :- (1) Any member of a company who complain that the affairs of the company are being conducted in a manner prejudicial to public interest or in a manner oppressive to any member or members (including any one or more of themselves) may apply to the Company Law Board for an order under this section, provided such members have a right so to apply in virtue of section 399.
(2) If, on any application under sub-section (1), the Court is os opinion :
(a) that the company's affairs (are being conducted in a manner prejudicial to public interest or) in a manner oppressive to any member of members; and
(b) that to wind up the company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a winding-up order on the ground that it was just and equitable that the company should be wound up, the Company Law Board may, with a view to bringing to an end the matters complained of, make such order as it thinks fit.::: Downloaded on - 09/06/2013 19:31:01 :::
hvn 30/195 COAPPL41.12 Sec.398 : Application to Company Law Board for relief in cases of mismanagement :
(1) Any members of a company who complain :-
(a) that the affairs of the company are being conducted in a manner prejudicial to public interest or in a manner prejudicial to the interests of the company; or
(b) that a material change not being a change brought about by, or in the interests of, any creditors including debenture holders, or any class of shareholders, of the company) has taken place in the management or control of the company, whether by an alteration in its Board of directors, or manager), or in the ownership of the company's shares, or if it has no share capital, in its membership, or in nay other manner whatsoever, and that by reason of such change, it is likely that the affairs of the company will be conducted in a manner prejudicial to public interest or in a manner prejudicial to the interests of the company, may apply to the Company Law Board for an order under this section, provided such members have a right so to apply in virtue of section 399.
(2) If, on any application under sub-section (1), the Company Law Board is of opinion that the affairs of the company are being conducted as aforesaid or that by reason of any material change as aforesaid in the management or control of the company, it is likely that the affairs of the company will be conducted as aforesaid, the Company Law Board may, with a view to bringing to an end or preventing the matters complained of or apprehended, make such order as it thinks fit.
::: Downloaded on - 09/06/2013 19:31:01 :::hvn 31/195 COAPPL41.12 Sec.402. Powers of "Company Law Board" to apply under section 397 and 398 : - Without prejudice to the generality of the powers of the Company Law Board under section 397 or 398, any order under either section may provide for
(a) the regulation of the conduct of the company's affairs in future ;
(b) the purchase of the shares or interests of any members of the company by other members thereof or by the company ;
(c) in the case of a purchase of its shares by the company as aforesaid, the consequent reduction of its share capital.
(d) the termination, setting aside or modification of any agreement, howsoever arrived at, between the company on the one hand, and any of the following persons, on the other, namely
(i) the managing director.
(ii) any other director,
(iii)
(iv)
(v) the manager, upon such terms and conditions as may, in the opinion of the Company Law Board, be just and equitable in all the circumstances of the case ;
(e) the termination, setting aside or modification of any agreement between the company and any person not referred to in clause (d), provided that no such agreement shall be terminated, set aside or modified except after due notice to the party concerned and provided further that no such agreement shall be modified except after obtaining the consent of the party concerned ;
(f) the setting aside of any transfer, delivery of goods, payment, execution or other act relating to property made or done by or against the company within three months before the date of the application under section 397 or 398, which would, if made or done by or against an individual, be deemed in his insolvency to be a fraudulent preference ;
(g) any other matter for which in the opinion of the Company Law Board it is just and equitable that provision should be made.
::: Downloaded on - 09/06/2013 19:31:01 :::hvn 32/195 COAPPL41.12 Company Law Board Regulations, 1991.
29. Order of the Bench.- (1) Every order of the Bench shall be in writing and shall be signed by the member or members constituting the Bench which pronounces the order.
(2) In case of difference of opinion among the members of the Bench, the opinion of the majority shall prevail and the opinion or orders of the Bench shall be expressed in terms of the views of the majority: Provided that where a matter is heard by a Bench consisting of an even number of members and such members are divided equally in their opinion, it shall be placed before the Chairman who may himself deal with the matter or nominate any other member to deal with the same.
(3) Any order of the bench deemed fit for publication in any journal, authoritative report or the Press may be released for such publication on such terms and conditions as the Board may specify by general or special order.
(4) A copy of every interim order granting or refusing or modifying interim relief and final order passed on any petition or reference shall be communicated to the petitioner or the applicant and to the respondents and other parties concerned free of cost:
Provided that in the case of an order under section 17 confirming change of registered office, two copies of the order shall be supplied to the petitioner company free of cost.
(5) If the petitioner or the applicant or the respondent to any proceeding requires a copy of any document or proceeding, the same shall be supplied to him on such terms and conditions and on payment of such fee as may be fixed by the Bench by general or special order.
(6) The Bench may make such order or give such direction as may be necessary or expedient to give effect to its orders or to prevent abuse of its process or to secure the ends of justice. (7) It shall be lawful for a Bench to fix, and award, costs to any of the parties before it where it is of opinion that the award of such costs is necessary.
33. Registers of petitions and applications :- (2) In every register, referred to in sub regulation (1), there shall ::: Downloaded on - 09/06/2013 19:31:01 ::: hvn 33/195 COAPPL41.12 be entered the following particulars, namely,
(a) to (i) not relevant.
(j) the date when the formal order is drawn up and communicated to the parties.
44. Saving of inherent power of the Bench.- Nothing in these Rules shall be deemed to limit or otherwise affect the inherent power of the Bench to make such orders as may be necessary for the ends of justice or to prevent abuse of the process of the Bench.
36. On question of maintainability of present appeal, Mr.Bobde, the learned senior counsel appearing for respondent no. 2 submits as under :
(a) Under section 10F of the Companies Act, the appeal to the High Court is maintainable from the order of the CLB only on the question of law.
CLB is the final authority on facts unless the said findings are perverse based on no evidence and or are otherwise arbitrary. The jurisdiction of the appellate court under section 10F is restricted to the question as to whether on the facts as noticed by the CLB, the inference could reasonably be arrived at that such conduct was against the probity and good conduct and or was mala fide or for a collateral purpose or was burdensome, harsh or wrongful. The present appeal makes out no case warranting any interference by this court.
Section 10F of the Companies Act, 1956 reads as under :
"10F. 3[ Appeals against the orders of the Company Law Board. Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company ::: Downloaded on - 09/06/2013 19:31:01 ::: hvn 34/195 COAPPL41.12 Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.] "
(b) This court can only consider if the question of law has been wrongly decided and can not substitute its own discretion with that of the CLB and or inquire into the merits of the case on facts unless the order is arbitrary, capricious or has ignored settled principles regulating grant or refusal of injunctions or other interim orders. In the present case, no such case is made out by the appellants warranting interference. The respondents placed reliance upon the judgment of the Supreme Court in the case of V.S.
Krishnan Vs. Westfort Hi-tech Hospital Limited and Ors. (2008) 3 S.C.C. 363 and more particularly para 16 which reads :
"16. It is clear that Section 10F permits an appeal to the High Court from an order of the Company Law Board only on a question of law i.e., the Company Law Board is the final authority on facts unless such findings are perverse based on no evidence or are otherwise arbitrary. Therefore, the jurisdiction of the appellate Court under Section 10F is restricted to the question as to whether on the facts as noticed by the Company Law Board and has placed before it, an inference could reasonably be arrived at that such conduct was against probity and good conduct or was mala fide or for a collateral purpose or was burdensome, harsh or wrongful. The only other basis on which the appellate Court would interfere under Section 10F was if such conclusion was (a) against law or (b) arose from consideration of irrelevant material or (c) omission to construe relevant materials."
37. Mr. Samdani, learned senior counsel appearing for the appellant submits that the question of law have been framed in appeal and are to be found at ::: Downloaded on - 09/06/2013 19:31:02 ::: hvn 35/195 COAPPL41.12 Paragraphs (A) to (J). It is submitted that it is settled law that mixed question of law and fact is also a question of law. The appellant placed reliance upon the judgment of the Supreme Court in the case of Sree Meenakshi Mills Ltd.
Vs. Commissioner of Income Tax, AIR 1957 SC 47 more particularly para 10 which reads thus :
"10. It was next contended for the appellant that inference from facts was a question of law, and that as the conclusion of the Tribunal that the intermediaries were dummies and that the sales standing in their names were sham and fictitious was itself an inference from several basic facts found by it, it was a question of law and that the appellant had the right under section 66(1) to have the decision of the court on its correctness, and support for this position was sought from certain observations in Edwards (Inspector of Taxes) v. Bairstow , Bomford v. Osborne ; , Thomas Fattorini (Lancashire), Ltd. v. Commissioners of Inland Revenue : 24 T. C. 328.], Cameron v. Prendergast ; 8 I. T. R. Supplt. 75.] and The Gramophone and Typewriter Company, Ltd. v. Stanley ; 5 T. C. 358.]. At the first blush, it does sound somewhat of a contradiction to speak of a finding of fact as one of law even when that finding is an inference from other facts, the accepted notion being that questions of law and of fact form antithesis to each other with spheres distinct and separate. When the Legislature in terms restricts the power of the court to review decisions of Tribunals to questions of law, it obviously intends to shut out questions of fact from its jurisdiction. If the contention of the appellant is correct, then a finding of fact must, when it is an inference from other facts, be open to consideration not only on the ground that it is not supported by evidence or perverse but also on the ground that it is not a proper conclusion to come to on the facts.
In other words, the jurisdiction in such cases is in the nature of a regular appeal on the correctness of the finding. And as a contested assessment - and it is only such that will come up before the Tribunal under section 33 of the Act, must involve disputed questions of fast, the determination of which must ultimately depend on findings on various preliminary or evidentiary facts, it must result that practically all orders of assessment of the Tribunal could be brought up for review before courts. That will, in effect, be to wipe out the distinction between questions of law and questions of fact and to defeat the policy underlying sections 66(1) and 66(2). One should ::: Downloaded on - 09/06/2013 19:31:02 ::: hvn 36/195 COAPPL41.12 hesitate to accept a contention which leads to consequences so startling, unless there are compelling reasons therefore. Far from that being the case, both principle and authority are clearly adverse to it."
38. In rejoinder on this issue the learned counsel appearing for the respondent no.2 distinguished the judgment of the Supreme Court in the case of Sree Meenakshi Mills (supra) on the ground that the said judgment did not pertain to appeal under section 10F of the Companies Act, 1956 and in any event does not hold that the question of law means mixed question of facts and law or that this court is empowered to reconsider the facts and come to a different conclusion on such reconsideration. It is reiterated that plain reading of section 10F of the Companies Act makes it clear that the appeal may be filed only on the question of law. The CLB has rendered findings of facts and thus interference of this court under section 10F is not permissible.
39. In my view, the appeal lies to the High Court under Section 10F on any question of law arising from any decision or order of the Company Law Board. The finding of fact recorded by CLB Is final and is not appealable unless it is perverse, based on no evidence or otherwise arbitrary. Even if the court would have come to a different conclusion on the facts, appeal cannot be entertained on a mere finding of fact. The Supreme Court in case of V.S.Krishnan (supra) has held that section 10F can be invoked only on a question of law and CLB is final authority on facts unless such findings are ::: Downloaded on - 09/06/2013 19:31:02 ::: hvn 37/195 COAPPL41.12 perverse based on no evidence or otherwise arbitrary. The jurisdiction of appellate court under section 10F is restricted to the question as to whether on the facts as noticed by the CLB and has placed before it, an interference could reasonably be arrived at that such conduct was against probity and good conduct or was malafide or for a collateral purpose or was burdensome, harsh or wrongful. The appellate court can also interfere if the conclusion was against law or arose from consideration of irrelevant material or omission to construe relevant materials.
40. The appellants have formulated various questions which are setout in para (2) of this order which shall be dealt with by this court in the subsequent paragraphs of this order as to whether any question of law as formulated by the appellants arise for the determination of this court or not.
41. Mr. Samdhani, learned senior counsel appearing for the appellant submitted that the impugned order passed by the CLB in Company Application (85 of 2012) on 13th August, 2012 is in the nature of review. It is submitted that the CLB has no power to review and thus Company Application (85 of 2012) ought to have been rejected. In the alternate, it is submitted that even if CLB did have power to review its earlier order, it could not come to the diametrically opposite conclusion on the same arguments that were advanced before passing the order of 21st May, 2012. It is submitted that Company ::: Downloaded on - 09/06/2013 19:31:02 ::: hvn 38/195 COAPPL41.12 Application (85 of 2012) was thus not maintainable and thus injunction order dated 21st May, 2012 could not have been vacated by the CLB. It is submitted that under the guise of clarification or modification one can not seek review.
The learned counsel submits that notwithstanding that the appellant had contended that the order was an ad interim order, the fact remains that the respondents did not agree with that interpretation of the appellants. It is submitted that the nature of the order dated 21st May, 2012 has to be ascertained on the perusal of the order itself. From the reading of the order, it clearly states that the order of 21st May, 2012 was not ad interim order but was interim order disposing of the application regarding injunction. The only new event was that the impugned meeting had now been held. It is submitted that merely because meeting was held would not entitle the respondents to seek vacation/modification/review of the order dated 21st May, 2012. The CLB had already considered possibility of the resolution being passed.
42. Mr. Bobde, the learned senior counsel appearing on behalf of the respondents, on the other hand submits as under :
(a) The power of review is vested in civil courts by section 114 and order XLVII Rule 1 of Code of Civil Procedure, 1908 in relation to final decrees/orders passed under the Code. The order sought to be reviewed must have finally disposed of the case. No review is permissible under the Criminal Procedure Code. Variation, modification or vacation of interim order does ::: Downloaded on - 09/06/2013 19:31:02 ::: hvn 39/195 COAPPL41.12 not amount to review of that order. By its very nature, interim order or ad interim orders are capable of being modified or vacated on the latter date.
(b) Order XXXIX rule 1 and 2 of C.P.C. 1908 provide for grant of temporary injunction. Rule 4 expressly provide for discharge, variation or setting aside of a temporary injunction. The CLB exercises inherent powers when granting, refusing, modifying or vacating an interim order. It is submitted that the sole question is whether the interim order is just and equitable and secures the ends of justice. Earlier order dated 21st May, 2012 was ad interim order "till further orders" and was passed without having benefit of resolution which was passed next day. It is submitted that the order was passed on the very preliminary view of the order since the EOGM was scheduled for the next date and that is why it was expressly stated to be "till further orders". It is submitted that when EOGM was held, the respondent no.
1 company filed Company Application (85 of 2012) for vacating/modifying the order dated 21st May, 2012 after bringing on record the resolution passed In EOGM by Respondent No. 1. The respondents placed reliance on the judgment of the Supreme Court in the case of Manohar Lal Vs. Seth Hiralal, AIR 1962 SC 527 and more particularly para 23 thereof which reads thus :
"The section itself says that nothing in the Code shall be deemed to limit or otherwise affect the inherent power of the Court to make orders necessary for the ends of justice. In the face of such a clear statement, it is not possible to hold that the provisions of the Code control the inherent power by limiting it or otherwise affecting it.
The inherent power has not been conferred upon the Court; it is a power inherent in the Court by virtue of its duty to do justice ::: Downloaded on - 09/06/2013 19:31:02 ::: hvn 40/195 COAPPL41.12 between the parties before it. "
43. The learned counsel for the respondents placed reliance on Regulation 29(4) of the Company Law Board Regulation, 1991 which reads as under:
"A copy of every interim order granting or refusing or modifying interim relief and final order passed on any petition or reference shall be communicated to the petitioner or the applicant and to the respondents and other parties concerned free of cost."
44. Relying upon Regulation 29(4) it is submitted that the said Regulation postulates that CLB has power to grant interim order or refuse or modify that.
It is submitted that the source of that power is to be found in section 403 of the companies Act, 1956 read with regulation 44 which saves inherent power of the Bench. It is submitted that on a conjoint reading of Regulation 44 and 29(4), the CLB has inherent powers to grant interim relief and to modify or vacate or refuse interim relief as may be necessary for the ends of justice or to prevent the abuse of the process of the Bench.
45. Mr. Kadam, the learned senior counsel appearing for respondent no. 1 submitted that no provisions in law can control inherent powers of the court.
The inherent powers are exercised to do complete justice. It is submitted that the order dated 21st May, 2012 passed by CLB clearly provide that the same was "till further orders". The first respondent company had applied for ::: Downloaded on - 09/06/2013 19:31:02 ::: hvn 41/195 COAPPL41.12 vacating the said ad interim order and the said application was not for seeking any review. It is submitted that the as per Order XXXIX rule 4, the order of injunction also may be varied if there is change in circumstances or if hardship is caused to the party. The learned counsel for the first respondent placed reliance upon the judgment of the Supreme Court in the case of Gujarat Bottling Co. Ltd. Vs. Coco Cola Co. (1995) 5 S.C.C. 545 and more particularly para 47 which reads thus :
"46. The grant of an interlocutory injunction during the pendency of legal proceedings is a matter requiring the exercise of discretion of the court. While exercising the discretion the court applies the following tests - (i) whether the plaintiff has a prima facie case; (ii) whether the balance of convenience is in favour of the plaintiff; and
(iii) whether the plaintiff would suffer an irreparable injury if his prayer for interlocutory injunction is disallowed. The decision whether or not to grant an interlocutory injunction has to be taken at a time when the existence of the legal right assailed by the plaintiff and its alleged violation are both contested and uncertain and remain uncertain till they are established at the trial on evidence. Relief by way of interlocutory injunction is granted to mitigate the risk of injustice to the plaintiff during the period before that uncertainty could be resolved. The object of the interlocutory injunction is to protect the plaintiff against injury by violation of his right for which he could not be adequately compensated in damages recoverable in the action if the uncertainty were resolved in his favour at the trial. The need for such protection has, however, to be weighed against the corresponding need of the defendant to be protected against injury resulting from his having been prevented from exercising his own legal rights for which he could not be adequately compensated. The court must weigh one need against another and determine where the 'balance of convenience' lies. See : Wander Ltd. and Anr. v. Antox India P. Ltd. MANU/SC/0595/1990 . In order to protect the defendant while granting an interlocutory injunction in his favour the Court can require the plaintiff to furnish an under taking so that the defendant can be adequately compensated if the uncertainty were resolved in his favour at the trial."::: Downloaded on - 09/06/2013 19:31:02 :::
hvn 42/195 COAPPL41.12
46. Mr. Sen, the learned counsel appearing for Respondent nos. 4 and 5 invited my attention to Para 6 of the order dated 21st May, 2012 passed by CLB allowing the first respondent company to go ahead with convening the meeting, however, making it clear that the resolution passed, if any in the EOGM on 21st May, 2012 shall be kept in abeyance till further orders. The learned counsel invited my attention to the order sheet dated 21st May, 2012 in the Company Application (73 of 2012) which reads thus :
"Part heard. Company Application No. 74 of 2012 with respect to interim injunction as prayed for in Company Application No. 73 of 2012. R-I company is hereby allowed to hold EOGM scheduled on 22-5-2012 at 11.30 a.m. That the resolution if any passed, shall not be given effect to till further orders. Detailed order follows."
47. Mr. Sen, the learned counsel submits that it is clear that the order passed by the CLB on 21st May, 2012 was pro tem/ad interim order and the matter being part heard, was to be heard subsequently after EOGM was held on 21st May, 2012. Company Application (73 of 2012) was specifically kept part heard. The learned counsel submits that thus the CLB has not passed any order reviewing its earlier order but has passed the final order on the Company Application (85 of 2012) after hearing the parties after EOGM meeting came to be held. The final order dated 13th August, 2011 also records that the order dated 21st May, 2012 was ad interim order and the matter was part heard. It is submitted that the order dated 21st May, 2012 was ::: Downloaded on - 09/06/2013 19:31:02 ::: hvn 43/195 COAPPL41.12 thus operative only until further orders as recorded in the said order. Since no date was posted, the matter did not appear on board and therefore, the first respondent company applied for further orders. Thus, there is no question of any review or modification or any other similar issue having arisen. It is submitted that in any event, any interim/ad interim order can always be modified or recalled under Regulation 29(4) of the Company Law Board Regulations, 1991.
48. In rejoinder, Mr. Samdhani, learned counsel appearing for the appellant submits that in the pleadings the first respondent had categorically stated that the Company Application (85 of 2012) was for the review of the order dated 21st May,2012 passed in Company Application (73 of 2012). It is submitted that the power of review is not inherent power. It is submitted that even if the CLB modified its earlier order, it can do so only on some additional material or in the changed circumstances. In the present case there was neither any additional material nor any changed circumstance. It is submitted that even if holding of EOGM was to be viewed as the changed circumstance, its conduct was expressly subject matter of the challenge in Company Application (91 of 2012) and without adjudicating the Company Application (91 of 2012), CLB could not have vacated the injunction granted earlier. The learned counsel placed reliance on the judgment of the Supreme Court reported in (2010) 9 S.C.C. 437 and more particularly para 12 which reads as under :
::: Downloaded on - 09/06/2013 19:31:02 :::hvn 44/195 COAPPL41.12 "12. It is settled legal proposition that unless the statute/rules so permit, the review application is not maintainable in case of judicial/quasi-judicial orders. In absence of any provision in the Act granting an express power of review, it is manifest that a review could not be made and the order in review, if passed is ultra-vires, illegal and without jurisdiction. (vide: Patel Chunibhai Dajibha v. Narayanrao Khanderao Jambekar and Anr. MANU/SC/0287/1964 : AIR 1965 SC 1457 and Harbhajan Singh v. Karam Singh and Ors"
49. The CLB has dealt with the issue of Review raised by the appellant in the impugned order in Paragraphs 25, 28 and 34. para 34 of the impugned order as under :
" The Applicant has rightly contended that what it is seeking in Application 85 is modification/variation/vacation of an ad interim order dated 21.05.2012 given in C.A. 73/2012 which was not disposed off when this ad interim order was given and further that this ad interim order was given till further orders. Variation/modification/Vacation of an ad interim order of CLB in a Company Application/Company Petition can by no stretch of imagination be called review of CLB's orders. It has also been correctly pointed out that this order was till further orders in this matter which can in all events be considered for Vacation/modification/Variation depending upon the facts and circumstances of a case. Considering the facts and circumstances of this case, in view of the final hearing of Applications in this mater and perusing of further affidavits clarifying the parties contentions before the higher courts, I find no reason for not considering the Applicant's prayer for modification/Vacation of the ad interim given till further orders."
50. The question that arises for consideration of this court is whether the impugned order passed by CLB on 13th August, 2012 in Company Application (85 of 2012) is in the nature of review of its earlier order dated 21st May, 2012 and if it is in the nature of review, whether CLB has power to review its ::: Downloaded on - 09/06/2013 19:31:02 ::: hvn 45/195 COAPPL41.12 earlier order under the provisions of the Companies Act, 1956 or under the Company Law Board Regulation, 1991. By the impugned order dated 13th August, 2012 the CLB has vacated the order dated 21st May, 2012 by holding that there was no justification in restraining the first respondent company from implementation of the special resolution passed and from filing of the requisite forms with R.O.C. in that regard. The CLB has rendered a finding of fact that the first respondent in Application (85 of 2012) was seeking modification/varification/vacation of the ad interim order dated 12th may, 2012 passed in Company Application (73 of 2012) which was not disposed of when that ad interim order was passed and the same was till further orders. It has been held that the variation/modification/vacation of the ad interim order of the CLB in Company Application by no stretch of imagination be called review of the CLB's orders.
51. On 21st May, 2012, the CLB passed order in Company Application (73 of 2012) filed by the appellants herein seeking impleadment of respondent nos. 6, 7 and 8 and amendment of the Company Petition on the ground of subsequent alleged acts of oppression and also seeking stay of the notice of requisition dated 31st Mach, 2012, notice dated 25th April,2012 as well as seeking injunction against holding of the EOGM on 22nd May, 2012. In the order dated 21st May, 2012, CLB observed that the first respondent company had no choice under section 169 of the Companies Act but to convene the ::: Downloaded on - 09/06/2013 19:31:02 ::: hvn 46/195 COAPPL41.12 meeting and if the company does not convene the meeting, the requisitionists have the right after the prescribed period to go ahead with the convening of the meeting. It is observed that this right of the shareholders is except in exceptional circumstances not curtailed by the CLB. In view thereof, the CLB allowed the first respondent to convene the meeting proposed to be held on 22nd May, 2012 and recorded that the resolution passed if any in the EOGM dated 22nd May, 2012 shall be kept in abeyance till further orders. The attendance cum order sheet dated 21st May, 2012 indicates that the Company Application (73 of 2012) was part heard with respect to interim inunction as prayed for in the said application. It is not in dispute that the meeting was thereafter held on 22nd May, 2012 as scheduled and it was resolved to delete article 57. Perusal of the Company Application (85 of 2012) filed by the first respondent company shows that the company had prayed for modifying/vacating and/or varying ad interim order dated 21st May, 2012.
From the perusal of the order dated 21st May, 2012, it is clear that the said order was an ad interim order and was operative only until further orders.
Company Application (73 of 2012) filed by the appellants for seeking interim injunction was part heard and was pending. The CLB had not fixed any further date for hearing of the said company application and this mater did not appear on board. The first respondent thereafter applied for vacating/modifying and or varying the said order dated 21st May, 2012 in view of the meeting having been held on22nd May, 2012 and the resolution to delete ::: Downloaded on - 09/06/2013 19:31:02 ::: hvn 47/195 COAPPL41.12 article 57 having been passed by requisite majority. The record indicates that the CLB considered the detailed affidavits filed by the parties in response to the said application (85 of 2012) and considering those affidavits and considering the fact that the resolution was already passed by the requisite majority to delete article 57, ad interim order passed on 21st May, 2012 came to be modified and/or vacated. The CLB itself had directed convening of the meeting on 22nd May, 2012 while passing ad interim order dated 21st May, 2012 and was conscious of the fact of passing of resolution if any would have to be considered while hearing the matter finally which was admittedly part heard on 21st May, 2012. In my view, the first respondent was justified in making the application for modifying and vacating and/or varying the ad interim order dated 21st May, 2012 in the pending application in view of the subsequent events more particularly passing of the resolution to delete article 57. While hearing the matter finally by the CLB, in my view, the CLB was justified in considering the subsequent events and more particularly crucial events of passing of the resolution to delete article 57 while disposing of the Company Application (85 of 2012). In my view, any ad interim order in the pending matter is capable of being modified, vacated and/or varied at the time of final disposal of the interim application and it does not amount to review. In my view, the order sought to be reviewed shall be an order finally disposing of the case. However, in this case it is clear that when the order dated 21st May, 2012 was passed by the CLB, it was ad interim order in the pending company ::: Downloaded on - 09/06/2013 19:31:02 ::: hvn 48/195 COAPPL41.12 application which was part heard. In my view in no circumstances, the impugned order dated 13th August, 2012 passed by the CLB can be construed as an order reviewing the earlier order i.e. dated 21st May, 2012.
52. Since, the counsel for both the parties have made submissions about the powers of the CLB to review, I am considering the said submissions also.
53. In my view, the Companies Act, 1956 is a self contained code. Unless statute/rules permit or provides power to the court or quasi judicial authority to review its own order, no order in review can be passed by the court or such authority. In my view inherent powers cannot be exercised so as to review any order passed by the court and or authority. In my view, Mr.Samdani, learned senior counsel appearing for the appellant is right in placing reliance upon the judgment of the Supreme Court reported in (2010) 9 S.C.C. 437 by which it has been held that in the absence of any provisions under the Act granting express power of review, it is manifest that the review cannot be made and the order in review if passed is ultra vires, illegal and without jurisdiction. In my view, section 403 which empowers the CLB to pass interim order pending making of the final order under section 397 or 398 read with Regulation 29(4) of the Company Law Board Regulation 1991 does not empower the CLB to review its order. The judgment relied upon by the respondents in the case of Manoharlal (supra) and in the case of Gujarat Bottling (supra) are not applicable to the facts of this case as the said ::: Downloaded on - 09/06/2013 19:31:02 ::: hvn 49/195 COAPPL41.12 judgments does not deal with similar provisions, either under the provisions of the Companies Act, 1956 or under the CLB Regulation 1991.
54. In my view, CLB does not have power to review its earlier order.
However, in the facts of this case, after considering the pleadings and record, I have already taken a view that the respondent company had not sought any review in Company Application No. 85 of 2012 and the CLB has not reviewed its earlier order. In my view, thus CLB has rightly entertained an application filed by the 1st respondent (85/2012) for modification and/or vacation of the order dated 21st May, 2012 as the said order was ad-interim order operative during the pendency of the Company Application (85 of 2012). On perusal of the impugned order passed by CLB, it is clear that the CLB has not vacated its earlier order dated 21st May, 2012 on the same grounds on which order dated 21st May, 2012 was passed. It is common ground that pursuant to the said order dated 21st May, 2012, the CLB permitted the 1st respondent to conduct EOGM on 22nd May, 2012 but not to implement resolution if any during the pendency of the company application (85 of 2012). It is not in dispute that the meeting was thereafter held on 22nd May, 2012 and resolution was passed resolving to delete Article 57 from Articles of Association. Both parties thereafter filed affidavit before CLB which have been considered by CLB while passing final order on 13th August, 2012 in (85 of 2012). The CLB has given various reasons in the impugned order dated 13th August, 2012. In my ::: Downloaded on - 09/06/2013 19:31:03 ::: hvn 50/195 COAPPL41.12 view, there is no question of law arises as formulated by the appellant and setout in paragraphs 2B and 2C of this order.
55. The next submission of Mr. Samdhani, the learned counsel for the appellant is that the impugned order passed by the CLB had not been pronounced. It is submitted that the respondents had received the impugned order and took steps to implement it even before the appellants learnt and/ or received the said order. It is submitted that the order that is not pronounced is not an order in the eyes of law.
56. On the other hand, Mr.Bobde, the learned senior counsel for the respondent no.2 submits that :
(a) Pronouncement or delivery of a judgment or order "in open court"
has a two-fold object, firstly, the court or tribunal cannot alter the judgment once it is delivered and secondly, the parties know with certainty as to what the judgment, or its operative part, is and how their rights are affected and the period of limitation for challenging the judgment beings to run. It matters not that the judgment is signed later and certified copy is received later. The essence of the matter is to make known to the parties exactly what the judgment is, that is to say, communication of the judgment to the parties. The knowledge of the judgment may be either actual or constructive. It is actual when parties or their counsel are present when the judgment is delivered immediately after the hearing is concluded, or in case of a reserved judgment, ::: Downloaded on - 09/06/2013 19:31:03 ::: hvn 51/195 COAPPL41.12 parties or counsel are present pursuant to a notice intimating them about the date of delivery of judgment. The notice may be by the cause-list or by a separate notice. It is constructive when parties or counsel have notice of the date of delivery but choose not to remain present in court, in either case, the delivery "in open court" makes the judgment effective against the parties because it stands communicated to them.
(b) Where the Act or Rules do not require pronouncement "in open court", the pronouncement or delivery does not have the effect of making the judgment known to the parties. The manner of making such pronouncement or delivery is a matter of practice of that tribunal and it matters not how it is done. While the tribunal cannot alter the judgment so delivered, the parties come to know when the copies of the judgment are communicated to them by post or e-mail or hand delivery. Such communication makes the judgment fully effective so far as the parties are concerned by imparting to them knowledge of the judgment.
(c ) The real purpose of delivery "in open court" and delivery otherwise, followed by communication, is to make known to the parties what the judgment is. The essence of both modes is communication of the judgment to the parties. There is no universal or inflexible rule or principle of law that a judgment must always be pronounced "in open court"by every tribunal. The mode of delivery of judgment or order depends on the particular Act and Rules or Regulations. Moreover, the exact way in which such delivery takes place ::: Downloaded on - 09/06/2013 19:31:03 ::: hvn 52/195 COAPPL41.12 may take various forms.
(d) The Companies Act, 1956 enacted by Parliament provides in Section 397 and 398 that the CLB shall "make such orders as it thinks fit".
Section 10E(4B) provides for "order made" by a bench of the CLB. Section 10F provides that the limitation for the appeal shall commence from the date of communication of the decision or order". Hence, the Act prescribes two essential things, firstly, the making of the order and secondly, the communication of the order. The CLB Regulations of 1991 framed by the CLB under Section 10E(6) vide Regulation 29(1) that the order shall be in writing and shall be signed by the member or members constituting th bench which pronounces the order. This is the manner of"making" the order and the essential elements are that the order is in writing and is signed. The emphasis in Regulation 29(1) is on the order being written and signed by the Member or Members who pronounced it. Regulation 29(1) does not say that the order shall be pronounced nor does it prescribe the mode of pronouncement. The word "which pronounces the order" merely describe the bench which delivers the order in writing and signs the same. Pronouncing the order is simply the act of making, delivering or rendering the written and signed order. In the context of Regulation 29(1), the word "pronounces"must take its colour and meaning from Section 397 and 398 which use the word "make" and hence, cannot, in or under a statute, have the meaning of only an oral utterance in open court.
The Bench by deciding the case and making an order, pronounces it.
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(e) It is further submitted that there is no requirement that the pronouncement has to be "in open Court",. The purpose of providing that the order shall be in writing and signed is to "secure certainty in the ascertainment of what the judgment was". The absence of the words "in open court" clearly indicates that the pronouncement or delivery of the order is not required to be done in open court.
(f) It is further submitted that the second step is of the utmost importance, namely, to make the order known to the parties so that they know what it is and not it affects their rights and enables them to pursue the remedy of appeal. Regulation 29(4) provides for communicating copies of the order to the parties free of cost. This provision obviates the need for applying for certified copies which needs to be done when an order or judgment is pronounced in open court under Order XX of Civil Procedure Code, 1908.
Communication imparts knowledge of the order and concludes and binds the parties.
(g) It is further submitted that it is settled law that even in cases covered by the CPC and Cr.P.C. where the judgment has to be pronounced in open court, the Hon'ble Supreme Court has held that small irregularities in the manner of pronouncement or the mode of delivery do not matter and irregularities in the manner which the judgment is authenticated or signed and sealed can be cured because they are all rules designed to secure certainty about the contents of the judgment.
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57. The learned senior counsel Mr. Bobde, placed reliance upon the judgment of the Supreme Court in the case of State Bank of India and Ors Vs. S.N. Goel (2008) 8 S.C.C. 92 and more particularly paragraph 28 which reads thus :
".....The position is different with reference to quasi judicial authorities. While some quasi judicial tribunals fix a day for pronouncement and pronounce their orders on the day fixed, many quasi judicial authorities do not pronounce their orders. Some publish or notify their orders. Some prepare and sign the orders and communicate the same to the party concerned. A quasi judicial authority will become functus officio only when its order is pronounced, or published/notified or communicated (put in the course of transmission) to the party concerned. When an order is made in an office noting in a file but is not pronounced, published or communicated, nothing prevents the Authority from correcting it or altering it for valid reasons. But once the order is pronounced or published or notified or communicated, the Authority will become functus officio......"
58. The learned senior counsel also placed reliance upon the judgment of the Supreme Court in the case of Harish Chandra Raj Singh Vs. Land Acquisition, AIR 1961 S.C. 1500 and more particularly para 6 which reads thus :
"The knowledge of the party affected by such a decision, either actual or constructive, is an essential element which must be satisfied before the decision can be brought into force. Thus considered the making of the award cannot consist merely in the physical act of writing the award or signing it or even filing it in the office of the Collector; it must involve the communication of the said award to the party concerned either actually or constructively. If the award is pronounced in the presence of the party whose rights are affected by it it can be said to be made when pronounced. If the date for the pronouncement of the award is communicated to the party and it is ::: Downloaded on - 09/06/2013 19:31:03 ::: hvn 55/195 COAPPL41.12 accordingly pronounced on the date previously announced the award is said to be communicated to the said party even if the said party is not actually present on the date of its pronouncement. Similarly if without notice of the date of its pronouncement an award is pronounced and a party is not present the award can be said to be made when it is communicated to the party later. .........."
59. The learned senior counsel also placed reliance upon the judgment of the Supreme Court in the case of Transport Commissioner Vs. Nand Singh (1979) 4 S.C.C. 19 and more particularly paragraph 2 which reads thus :
"The order must be communicated either directly or constructively in the sense of making it known, which may make it possible for the authority to say that the party affected must be deemed to have known the order in a given ease, the date of putting the order in communication under certain circumstances may be taken to be the date of the communication of the order or the date of the order but ordinarily and generally speaking, the order would be effective against the person affected by it only when it comes to his knowledge either directly or constructively, otherwise not......"
60. The learned counsel placed reliance upon the judgment of the Supreme Court in the case of Commissioner of Central Excise Vs. M.M. Rubber and Co. 1992 Supp (1) S.C.C. 471 and more particularly para 13 which reads thus :
"The knowledge of the party affected by such a decision, either actual or constructive, is thus an essential element which must be satisfied before the decision can be said to concluded and binding on him. Otherwise, the party affected by it will have no means of obeying the order or acting in conformity with it or of appealing against or otherwise having it set aside. This is based upon, as observed by Ranmannar, CJ in Muthia Chettiar vs. CIT, AIR 1951 Mad. 204 "a salutary and just principle." The application of this rule so far as the aggrieved party is concerned is not dependent on the ::: Downloaded on - 09/06/2013 19:31:03 ::: hvn 56/195 COAPPL41.12 provisions of the particular statute, but is so under general law."
61. The learned senior counsel submitted that whenever parliament considers it necessary that the courts must pronouncement in the open court, it provides for express provisions under the statute. The learned counsel placed reliance upon Order 20 rule 1 and Order 41 rule 30 of Code of Civil Procedure, section 397 and 398 of the Companies Act, Regulation 29(1) and Regulation 29(4) of the Company Law Board Regulation 1991, section 31(5) of the Arbitration and Conciliation Act, 1996, various provisions of Central Excise Act, 1944, Customs Act, 1962, Mines and Minerals Development Regulation Act, 1957, Electricity Act, 2003, Administrative Tribunals Act, 1985, Telecom Disputes Settlement and Appellate Tribunal Procedure, 2005, Consumer Protection Regulation 2005, Computation Commission of India (General) Regulation, 2009, Mineral Concession Rules, 1960. The learned counsel placed reliance on the judgment of the Court of Appeal, New Zealand reported in Bell-Booth Vs. Bell-Booth (1999) 4 L.R.C. 1, the judgment of the Supreme Court in the case of Ram and Shyam Co. Vs. State of Haryana, (1985) 3 S.C.C. 267, Vinodkumar Vs. Banaras Hindu University (1988) 1 S.C.C. 80, Yadlapati Vs. State of Andhra Pradesh 1995 supp (2) SCC 590 in support of the plea that the pronouncement of the judgment by the CLB in the open court was not mandatory.
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62. Mr. Sen, the learned counsel for respondent nos. 4 and 5 submits that neither under the provisions of the companies Act, 1956 nor under the Company Law Board Regulations, 1991, there is any requirement for pronouncement. The word used "pronouncement" in the context of the requirement for signature of all the members of the Bench are only with a view to identify the Bench and could not have been intended to impose the obligation to pronounce much less in open court. It is submitted that the order stands "communicated" once it is pronounced in an open court. Once the order is pronounced in open court, there should be no further requirement of communication of the same. It is submitted that Regulation 29(4) requires communication of the order inspite of the word "pronounced" used in Regulation 29(1). If the intent of the Legislature In using the word "pronounced" under article 29(1) was to require pronouncement in open court, the provisions in Regulation 29(4) requiring communication shall be totally redundant since the order already have been communicated upon pronouncement. It is submitted that Regulation 29 therefore, has not required pronouncement of the order in the open court.
63. In rejoinder Mr. Samdhani learned senior counsel appearing for the appellant submits that the Regulation 29 itself caste obligation on the CLB "to pronounce the judgment and order. It is submitted that the word "pronouncement" indicate that it can only be done in the open court. The ::: Downloaded on - 09/06/2013 19:31:04 ::: hvn 58/195 COAPPL41.12 learned counsel invited attention of this court to order at page 380, Vol. III which is another order of CLB to demonstrate that it was practice of CLB of making pronouncement of order/judgment in the open court. The learned counsel submits that even the judgment relied upon by the second respondent and particularly reported in AIR 1954 S.C.C. 194 and (1988) 1 S.C.C. 80 holds that the communication of the judgment has to be done in the judicious way by pronouncing it. It is submitted that the judgment that is not signed but pronounced is a valid whilst the judgment that is signed but not pronounced is invalid.
64. It is not in dispute that the impugned order dated 13th August, 2012 passed by the CLB was not pronounced in the open court. It is also not in dispute that the impugned order was communicated to all the parties and copy of the same had been received by all the parties from CLB. The grievance however, made by the appellant is that the respondent had received the copy of the impugned order from CLB before the same was communicated to the appellants and as a result whereof the respondents took steps to implement it even before the appellants learnt and or received copy of the said order.
Regulation 29(1) and 29(4) of the CLB Regulation, 1991 is pressed into motion by the learned counsel appearing for the appellant and the respondents in support of their respective arguments. On conjoint reading of Article 29(1) read with 29(4) it is clear that there is no mandatory requirement of ::: Downloaded on - 09/06/2013 19:31:04 ::: hvn 59/195 COAPPL41.12 pronouncement of the order by the CLB in open court. From reading of Regulation 29(1) and (4) it is clear that it is the intention of the legislature that the order passed by the CLB has to be communicated to the parties in the absence of any mandatory requirement of pronouncement of the judgment and order in the open court. The essence of pronouncement and communication is that the parties are made aware of the order or judgment exactly. Once the order or judgment is delivered, the parties have constructive notice of delivery. Once the parties are communicated with the order of judgment, the CLB cannot make any alterations in the said judgment so delivered. In my view, once the order is communicated to the party, it becomes fully effective. The limitation for challenging to such order or judgment would commence when the certified copy is received. The Supreme Court in the case of State Bank of India Vs. S.N.Goel (supra) has held that the position in the case of quasi judicial authorities is different. Many times, the quasi judicial authorities though fix the date for pronouncement, the orders are not pronounced. Some time orders are signed and communicated to the parties concerned. It is held that the quasi judicial authority will become functus officio only when its order is pronounced, published and notified or communicated to the party concerned. It is held that once the order is pronounced or published or notified or communicated, the authority would become functus officio. In my view even if the order of CLB impugned in this proceedings was not formally pronounced in the open court, but ::: Downloaded on - 09/06/2013 19:31:04 ::: hvn 60/195 COAPPL41.12 admittedly communicated either on the same or the next day at most, it would lead to small irregularity in the matter of pronouncement or mode of delivery and cannot be construed as illegal or invalid order. I am not inclined to accept the submissions made by Mr. Samdani the learned senior counsel appearing for the appellant that the impugned order was though served by the CLB, however, not having been pronounced in the open court, is invalid and/or illegal.
65. Though the learned counsel for both the parties have placed reliance on various judgments referred to in the earlier paragraphs of this order, in view of the clear wording of Regulation 29, I need not to deal with all the judgments referred to and relied upon by the learned counsel in detail. In my view there was no illegality committed by the CLB in not pronouncing the impugned order in the open court.
66. As far as question 2D formulated by the appellant regarding pronouncement of the order is concerned, in my view issue raised by the appellant raises question of law. I have already dealt with this question in detail and have taken a view that even if impugned was not formally pronounced in the open court but was admittedly communicated, it would lead to small irregularities in the matter of pronouncement and the order cannot be ::: Downloaded on - 09/06/2013 19:31:04 ::: hvn 61/195 COAPPL41.12 construed illegal. I have already taken a view that once the order is communicated to the parties, it becomes totally effective. The question of law formulated by the appellant in para (2D) is answered accordingly.
67. Mr. Samdani, the learned senior counsel for the appellants submits that the record and the proceedings reveals that there are serious justifiable allegations with regard to the manner in which the resolution is purportedly passed and the said allegations forms part of the Company Application (91 of 2012) which is pending before the CLB. It is submitted that by the impugned judgment passed by the CLB Company Application (91 of 2012) has been rendered infructuous. The CLB has permitted the first respondent to implement the resolution, challenge to which is pending adjudication. The CLB has recoded a finding that the resolution had been validly passed without even adjudicating upon various objections raised by the appellants.
68. On the other hand, the learned counsel appearing for the respondents submits as under :
(a) Company Application (85 of 2012) was first mentioned on 18th June, 2012 and was directed to be listed for hearing on 28th June, 2012. On this date, the Company Application (91 of 2012) was not even filed. The Company Application (91 of 2012) was filed on 19th June, 2012. On 28th June, ::: Downloaded on - 09/06/2013 19:31:04 ::: hvn 62/195 COAPPL41.12 2012 the Company Application (85 of 2012) was argued, part heard and adjourned to 10th July, 2012 when the direction for completion of pleadings in Company Application (91 of 2012) were given. On 10th July, 2012, Company Application (85 of 2012) and (73 of 2012) were heard partly and were adjourned for conclusion of hearing on 21st July, 2012. The respondent was granted liberty to file sur-rejoinder in Company Application (91 of 2012). The appellant sought adjournment of the hearing on 21st July, 2012 and accordingly the matter was adjourned to 10th August, 2012. Hearing of the Company Application No. 73 and 85 of 2012 was completed on 10th August, 2012 when the appellant sought time to argue Company Application No. 91 of 2012.
(b) The appellants themselves in their affidavit in reply in Company Application (85 of 2012) had sought to challenge the conduct of the EOGM held on 22nd May, 2012 as also passing of the resolution therein. The observations made in the impugned order with regard to the conduct of the EOGM held on 22nd May, 2012, the decision of the Chairman and passing of the resolution therein are correct and does not require any interference. The CLB was correct in making observations in relation thereto in the impugned order and no fault can be found in not having heard the Company Application (91 of 2012).
69. In its alternate submission, the respondent no.2 submits as under :
::: Downloaded on - 09/06/2013 19:31:04 :::hvn 63/195 COAPPL41.12 The pleadings, facts and documents in Company Application No. 91 of 2012 filed in the present appeal in Volume VII cannot be considered for the purposes of the present appeal since the same were not the record before the Hon'ble CLB and not under consideration for the purposes of the impugned order dated 13.8.2012. The facts contained therein are therefore, beyond the scope of and can not be considered in a section 10F appeal filed against an order passed in Company Application (85 of 2012).
70. In rejoinder, Mr. Samdhani learned senior counsel for appellants submits that all the parties have made their submissions on the various claims and issues raised by the appellants in Company Application (73/2012) and also in Company Application (91 of 2012) and in view of the fact that the CLB also in the impugned order has made certain observations in respect of the subsequent events, this court shall consider subsequent events also which are permitted to be brought on record in Company Application (73/2012) which were forming part of the Company Application (91 of 2012) while deciding this appeal. It is submitted that the CLB has referred to Company Application (91 of 2012) in Para 28 29, 32 and 36 to 40 of the impugned order.
71. The appellants have formulated, the question 2E and F based on the ::: Downloaded on - 09/06/2013 19:31:04 ::: hvn 64/195 COAPPL41.12 contention that CLB could not have permitted the 1st respondent from implementing a resolution purportedly passed at its EOGM when the CLB itself permitted the amendment in the company petition impugning convening of the said EOGM and has adjourned the company petition (91 of 2012) for further amendment of the company petition questioning the conduct at the impugned EOGM. Though initially the appellants raised this issue, later invited my attention to paragraphs 4, 28, 36 to 39 of the impugned order passed by CLB referring to and dealing with the facts and issues raised by the appellant as well as respondents arising out of application for amendment (73/2012) and also company application (91/2012). Mr.Samdhani, the learned senior counsel also invited my attention to the pleadings and documents which are produced in various compilation filed by both parties. The learned senior counsel submits that the CLB could not have deferred the hearing in Company Application Nos. 91 of 2012 and 73 of 2012 in which appellant had questioned the conduct at the impugned EOGM and the same was pending.
72. The learned counsel submits that as a result of the CLB deferring the hearing in Company Application Nos. 91 of 2012 and 73 of 2012 , decision rendered by the CLB in Company Application No. 85 of 2012 has made the applications filed by the appellants which are pending before the CLB infructuous. The learned counsel accordingly submits that since all parties in this proceedings have relied upon the pleadings and documents including the ::: Downloaded on - 09/06/2013 19:31:04 ::: hvn 65/195 COAPPL41.12 applications which are pending before the CLB, considering that and also in view of the fact some of this facts are observed and dealt with in the impugned order by CLB, this court shall render its decision on all such issues in the present appeal. It is not in dispute that though the respondents initially opposed that fact that pleadings and documents forming part of the Company Application Nos. 91 of 2012 and 73 of 2012 were not subject matter of Company Application No. 85 of 2012, this court shall not permit the appellants to agitate those issues in this appeal, however, have during the course of argument relied upon the pleadings and documents filed by the respondents on those issues and have made their detail oral and written submissions in the present proceedings. This court, therefore, permitted all parties to make their submissions on all such issues which are forming part of the Company Application Nos. 91 of 2012 and 73 of 2012 and has dealt with all those issues in the subsequent paragraphs of this order.
73. Mr.Samdhani, the learned senior counsel appearing for the appellant submits that by convening EOGM On the requisition of the requisitionist for the purpose of deleting Article 57 was without any such direction in the order passed by Shri Justice S.C.Dharmadhikari and was during the pendency of Special Leave Petition filed by the appellant challenging the said order, the 1st and 2nd respondents have committed an act of oppression in continuation of its ::: Downloaded on - 09/06/2013 19:31:04 ::: hvn 66/195 COAPPL41.12 past oppressive acts which are prejudicial to the public interest and oppressive to the members of the 1st respondent company. It is submitted that thus, the CLB ought not to have permitted the company to give effect to the resolution passed in the EOGM held on 22nd May, 2012. The learned counsel submits that the appellants were thus justified in filing petition under Sections 397 and 398 read with Section 402 of the Companies Act, 1956 which is still pending before the CLB. It is submitted that the said company petition is maintainable as the appellants have made out a case for reliefs under those provisions of law.
74. On the other hand, the learned senior counsel appearing for the respondent no. 2 submits that the Company Petition filed by the appellants under section 397 and 398 read with section 402 of the Companies Act,1956 itself is not maintainable and made the following submissions :
(a) The petition filed by the appellants under section 397 and 398 of the Companies Act, 1956 does not disclose any cause of action under section 397 and 398. The appellants have not made out any case as to why the facts of the present case would justify winding up of respondent no.1 company on just and equitable grounds as per requirement of section 397 and
398. Consequence of section 402 would only be applicable if the appellant have made out any case under section 397 and 398 of the companies Act.
(b) The first respondent company has acted in accordance with law in ::: Downloaded on - 09/06/2013 19:31:04 ::: hvn 67/195 COAPPL41.12 calling EOGM at the instance of the requisitionists under section 169 of the Companies Act and passing of the resolution in the EOGM can never amount to oppression of the minority or mismanagement or justify winding up on just and equitable cause under section 433. It was simple corporate democracy and an action pursuant to and in compliance with law. The deletion of Article 57 benefits all the shareholders and is also in the interest of company and in the public interest since the shareholders can sell their shares at market value and the public can freely buy the shares of the company subject to the powers of the Board of Directors of the Company to either register or refuse to register the transfer.
(c) Calling of the EOGM was in compliance of the notice received from the requisitionists under section 169 of the Companies Act read with Article 76 of the Articles of Association. There was no option available to the first respondent company but to call EOGM in compliance with the provisions of the law. The respondents place reliance upon section 169 of the companies Act and Article 76 of the Articles of Association which reads as under :
"Section 169 - Calling of extraordinary general meeting on requisition :
(1) The Board of directors of a company shall, on the requisition of such number of members of the company as is specified in sub-section (4), forthwith proceed duly to call an extraordinary general meeting of the company.::: Downloaded on - 09/06/2013 19:31:04 :::
hvn 68/195 COAPPL41.12 (2) The requisition shall set out the matters for the consideration of which the meeting is to be called, shall be signed by the requisitionists, and shall be deposited at the registered office of the company.
(3) The requisition may consist of several documents in like form, each signed by one or more requisitionists.
(4) The number of members entitled to requisition a meeting in regard to any matter shall be--
(a) in the case of a company having a share capital, such number of them as hold at the date of the deposit of the requisition, not less than one-tenth of such of the paid-up capital of the company as at that date carried the right of voting in regard to that matter;
(b) in the case of company not having a share capital, such number of them as have at the date of deposit of the requisition not less than one-tenth of the total voting power of all the members having at the said date a right to vote in regard to that matter.
(5) Where two or more distinct matters are specified in the requisition, the provisions of sub-section (4) shall apply separately in regard to each such matter; and the requisition shall accordingly be valid only in respect of those matters in regard to which the condition specified in that sub-section is fulfilled.
(6) If the Board does not, within twenty-one days from the date of the deposit of a valid requisition in regard to any matters, proceed duly to call a meeting for the consideration of those matters on a day not later than forty-five days from the date of the deposit of the requisition, the meeting may be called--
(a) by the requisitionists themselves;
(b) in the case of a company having a share capital, by such of the requisitionists as represent either a majority in value of the paid-up share capital held by all of them or not less than one-tenth of such of the paid-up share capital of the company as is referred to in clause (a) of sub-section (4), whichever is less; or ::: Downloaded on - 09/06/2013 19:31:04 ::: hvn 69/195 COAPPL41.12
(c) in the case of a company not having a share capital by such of the requisitionists as represent not less than one-tenth of the total voting power of all the members of the company referred to in clause (b) of sub-section (4).
Explanation.--For the purposes of this sub-section, the Board shall, in the case of a meeting at which a resolution is to be proposed as a special resolution, be deemed not to have duly convened the meeting if they do not give such notice thereof as is required by sub-section (2) of section 189.
(7) A meeting called under sub-section (6) by the requisitionists or any of them--
(a) shall be called in the same manner, as nearly as possible, as that in which meetings are to be called by the Board; but
(b) shall not be held after the expiration of three months from the date of the deposit of the requisition.
Explanation.--Nothing in clause (b) shall be deemed to prevent a meeting duly commenced before the expiry of the period of three months, aforesaid, from adjourning to some day after the expiry of that period.
(8) Where two or more persons hold any shares or interest in a company jointly, a requisition, or a notice calling a meeting, signed by one or some only of them shall, for the purposes of this section, have the same force and effect as if it had been signed by all of them.
(9)Any reasonable expenses incurred by the requisitionists by reason of the failure of the Board duly to call a meeting shall be repaid to the requisitionists by the company; and any sum so repaid shall be retained by the company out of any sums due or to become due from the company by way of fees or other remuneration for their services to such of the directors as were in default."
Article 76 of the Articles of Association :
::: Downloaded on - 09/06/2013 19:31:04 :::hvn 70/195 COAPPL41.12 "76. All General Meeting other than Annual General Meeting shall be called Extraordinary General Meeting. The Board may, whenever it thinks fit, call an Extraordinary Meeting. The Board shall also call an Extraordinary General Meeting on the requisition of members of the Company in accordance with all the provisions of Section 169 of the Act, which shall apply to this Company."
(d) The provisions of section 397 can not be attracted to passing of the resolution permitted under section 31 and mandated under section 169 of the Companies Act, for altering or deleting articles in public interest. Merely because some of the requisitionists had withdrawn their consent or ceased to be members the requisition does not become invalid and more particularly by virtue of the letter dated 19th May 2012 addressed by respondent no.6 to the first respondent company. The learned senior counsel placed reliance upon paragaph 2.1 from Ramaiya's Guide to Companies Act, 1956, Part II, 17th Edition at page 1982 which reads thus :-
Once a valid requisition has been submitted, the directors can act upon it and it remains their obligation to call the meeting even if some of the requisitionists have withdrawn their consent or ceased to be members.
75. Mr.Samdhani submitted that the decision of the Chairman is subject to judicial scrutiny and would be subject matter of section 397 and 398 petition.
Such decision is not conclusive or unchallengable.
76. The Supreme Court in the case of Shri. V.S. Krishnan (supra) has called out the situation in which the oppression attracting section 357 would be ::: Downloaded on - 09/06/2013 19:31:04 ::: hvn 71/195 COAPPL41.12 made out. The Supreme Court in the said judgment has held thus :
"10. In a number of judgments, this Court considered in extenso the scope of Sections 397 and 398. The following judgments could be usefully referred to:
(a) Needle Industries (India) Ltd. and Ors. v. MANU/SC/0050/1981 : Needle Industries Newey (India) Holding Ltd. and Ors. [1981]3SCR698 .
(b) M.S. Madhusoodhanan and Anr. v. MANU/SC/0553/2003 :
Kerala Kaumudi (P) Ltd. and Ors. (2004)9SCC204 .
(c) Dale and Carrington Investment (P) Ltd. and Anr. v. MANU/SC/0748/2004 : P.K. Prathapan and Ors. (2005)1SCC212 .
(d) Sangramsinh P. Gaekwad and Ors. v. MANU/SC/0052/2005 : Shantadevi P. Gaekwad (Dead) Through L.Rs. and Ors. AIR2005SC809
(e) Kamal Kumar Dutta and Anr. v. MANU/SC/8408/2006 : Ruby General Hospital Ltd. and Ors. 2006(7)SCALE668 .
From the above decisions, it is clear that oppression would be made out:
(a) Where the conduct is harsh, burdensome and wrong.
(b) Where the conduct is mala fide and is for a collateral purpose where although the ultimate objective may be in the interest of the company, the immediate purpose would result in an advantage for some shareholders vis-a-vis the others.
(c) The action is against probity and good conduct.
(d) The oppressive act complained of may be fully permissible under law but may yet be oppressive and, therefore, the test as to whether an action is oppressive or not is not based on whether it is legally permissible or not since even if legally permissible, if the action is otherwise against probity, good conduct or is burdensome, harsh or wrong or is mala fide or for a collateral purpose, it would amount to oppression under Sections 397 and 398.
(e) Once conduct is found to be oppressive under Sections 397 and ::: Downloaded on - 09/06/2013 19:31:04 ::: hvn 72/195 COAPPL41.12 398, the discretionary power given to the Company Law Board under Section 402 to set right, remedy or put an end to such oppression is very wide.
(f) As to what are facts which would give rise to or constitute oppression is basically a question of fact and, therefore, whether an act is oppressive or not is fundamentally/basically a question of fact."
77. In my view, in the proceedings filed under Sections 397 and 398, the petitioners have to show that there has been some sort of oppression on the part of majority shareholders of the company on the minority shareholders. In my view, an isolated act or incident is not oppressive. Petitioner has to prove the act of oppression which must continue upto the date of filing of the petition.
The petitioner has to prove that oppression was of minority shareholders by majority shareholders and that facts exist which would justify winding up of the company on the ground that it would be just and equitable to do so but in the facts and circumstances, to wind up the company would unfairly prejudice the petitioners.
78. The expression "public interest" has not been defined under the provisions of the Companies Act, 1956. It may have to be distinguished from self interest of individual or sectional or class or group interest, as circumstances may indicate. What is required is that it should not be such as to be prejudicial to public interest i.e. common ground or general welfare of the community.
::: Downloaded on - 09/06/2013 19:31:05 :::hvn 73/195 COAPPL41.12
79. Mr.A.Ramaiya in his work "Guide to the Companies Act" has considered the Dictionary Of Sociology on this aspect and says "it is essentially anything is said to the public interest where it is or can be made to appear to be contributive to the general welfare rather than to the special privileges of a class, group or individual". In my view, in the absence of any proof that affairs of the company are being conducted in a manner prejudicial to the public interest or in the manner oppressive to the petitioners, the CLB would not have jurisdiction to pass an order under Section 397. Oppression or management is not enough. The act of oppression must have continued or existed at the time of application filed under section 397 of the Act. In my view, past acts which have come to an end would not attract section 397. The averments in the petition filed by the appellant shows that the same is basically filed on the basis of alleged past oppressive conduct on the part of the majority shareholders which have been already considered in the earlier proceedings filed in this case and have been dealt with and negatived.
80. In the order and judgement delivered by this Court on 14th June, 2011, a finding is rendered that there was no act of oppression on the part of the majority shareholders on the minority shareholders. Question now arises for the consideration of this court in this proceeding is that by the requisitioning EOGM by the management of the 1st respondent company and by passing a resolution to delete Article 57 from the Articles of Association would amount ::: Downloaded on - 09/06/2013 19:31:05 ::: hvn 74/195 COAPPL41.12 to an act of oppression and would attract section 397 read with section 402 of the Companies Act, 1956 which shall be dealt with by this court in the later part of this order.
81. Both parties have addressed this court at length on the issue as to whether order dated 14th November, 2008 passed by Shri Justice A.M.Khanwilkar in Company Petition No. 77 of 1990 would apply to the present appellant and would operate in rem and also on the issue as to whether order and judgment dated 14th June, 2011 in Company Appeal No. 24 of 2010 would be executable and binding on the parties in the absence of stay of the said judgment by the Supreme Court in the pending Special Leave Petition filed by the appellants. Both parties have also addressed this court on the effect of the pendency of Special Leave Petition filed by the appellants on the present proceedings. The submission of the respondent is that admittedly, the judgment delivered by this court on 14th June, 2011 in Company Appeal No. 24 of 2010 has not been stayed and was not even applied for by the appellant whereas the submission of the appellant is that the issues arises in the present appeal is subjudice before the Supreme Court in the pending Special Leave Petition and thus order and judgment delivered by this court on 14th June, 2011 cannot be relied upon by the respondents. The submission of the respondent is that independently of pendency of the matter in the Supreme Court, this court can decide the issue raised in the present appeal on the basis of the pleadings ::: Downloaded on - 09/06/2013 19:31:05 ::: hvn 75/195 COAPPL41.12 and documents placed on record by both parties and this court can come to the conclusion as to whether majority shareholders have committed any act of any oppression on the minority shareholders in requisitioning the meeting and passing a resolution for deletion of the Article 57 from the Articles of Association and pass resolution thereon.
82. I shall, therefore, first decide whether on the basis of the pleadings and documents produced by both the parties on record before the CLB whether CLB was justified in recording the finding that no act of oppression was committed by the majority shareholders on minority shareholders under section 397 of the Companies Act, 1956 or not. In that context, I shall also decide that if the order and judgment dated 14th June, 2011 passed by this court holding that Article 57 is void and is of no effect, whether an act of convening EOGM and resolution passed therein pursuant to the requisition of a meeting at the instance of the members for the purpose of deleting Article 57 and to give a effect to the order passed by this Court would amount to an act of oppression or not. I shall also decide the issue as to whether in case of the respondent no.1 being a public limited company, Article 57 in the Articles of Association was redundant, dead and was unenforceable considering the effect of Section 9 of the Companies Act.
83. It is not in dispute that the 1st respondent company was incorporated on ::: Downloaded on - 09/06/2013 19:31:05 ::: hvn 76/195 COAPPL41.12 6th March, 1963 under the Companies Act, 1956, as private limited company.
On 17th August, 1988, the 1st respondent became the deemed public limited company pursuant to Section 43(A) of the Companies Act, 1956. At the meeting of the members of the 1st respondent held on 5th May, 2001, a special resolution was proposed to insert an additional clause (d) in its Articles of Association pursuant to the Companies (Amendment) Act, 2000. On and from December 13, 2000 when the Companies (Amendment) Act 53 of 2000 came into effect, the concept of the deemed public limited company was done away.
The 1st respondent company which was initially incorporated a private limited company became a deemed company by virtue of section 43(A) of the Companies Act. 1st respondent company had accordingly issued notice of EOGM on 2nd April, 2001 seeking to amend Article 3 of the Articles of Association and also to change its name from Gharda Chemicals Ltd. to Gharda Chemicals Pvt. Ltd. and thereby revert to be a private limited company.
In the said meeting, the appellant and other members of Kavasmaneck Rebello group collectively held 32% of the shareholding of the 1st respondent defeated the said resolution. As a consequence thereof on and from 5th May, 2001, the 1st respondent company became and continued to be a public limited company.
As a result thereof, all the statutory filing of the 1st respondent have been made on the basis of the fact that it is a public company. It is not in dispute that the 1st respondent has more than 50 members and has more than three directors as is obligatory under the Companies Act, 1956 in case of a public limited ::: Downloaded on - 09/06/2013 19:31:05 ::: hvn 77/195 COAPPL41.12 company. The 1st respondent has also accepted the deposit in the form of fixed deposit from the public and is public limited company for all purposes. It is not in dispute that the appointment of the managing director of the 1 st respondent was also after following the provisions of section 269 of the Companies Act as applicable to the public limited company. The requisite approval of the State Government has been sought and obtained which are not required in case of the private limited company. The 1st respondent has done various acts which are applicable to a public limited company and not to private limited companies.
84. On 17th May, 2001 and 20th May, 2001 respectively the 1st respondent company received from its members Mr.B.E.Daruwalla and Mr.S.G.Gandhi expressing their desire to transfer their shares in the first respondent which transfer notice came to be circulated amongst all the members under Article 57 of the Articles of Association by the 1st respondent. In response to the said letters, the appellant no.2 by his letter dated 6th June, 2001 stated that he was unable to understand as to how the company continue to circulate transfer notice under Article 57 especially in view of the recent turn of events being a non passing of special resolution for amendment of articles. Appellant No.2 recorded his objection that he would be ignoring the transfer notice if any circulated by the 1st respondent under Article 57 of the Articles of Association.
The appellant no.2 applied for transfer of some of his shares as a result where ::: Downloaded on - 09/06/2013 19:31:05 ::: hvn 78/195 COAPPL41.12 the strength of members of 1st respondent exceeded 50 and increased to 54.
85. In my view, this conduct on the part of the appellant and defeating the resolution which was proposed by the 1st respondent company in EOGM held on 5th May, 2001 and thereafter by taking a stand that notice inviting objection from the appellant for transfer of shares by two of the members under Article 57 was unwarranted and any such notice given in future would be ignored, one of the appellant having transferred some of his shares in favour of his family members in the 1st respondent company and thereby membership of the 1st respondent having exceeded 50 and thereby taking advantage of 1st respondent having become a public limited company, in my view, the appellants are estopped from challenging the status of the 1st respondent company as public limited company. The appellants have acted upon and have proceeded on the footing that the 1st respondent company has become public limited company.
In my view 1st respondent is a public limited company.
86. The CLB in para 40 of the impugned order has rendered a finding that passing of the resolution by the shareholders of the company in exercise of their democratic rights in a EOGM requisitioned by the shareholders of the company does not in any manner amount to oppression or mismanagement and cannot form a subject matter of a petition under Section 397/398 of the Companies Act and thus there is no reason to interfere with the internal ::: Downloaded on - 09/06/2013 19:31:05 ::: hvn 79/195 COAPPL41.12 democracy of the company. In my view the conclusion drawn by the CLB that passing of a resolution by the shareholders of the company in EOGM did not in any manner amount to oppression or management and cannot be subject matter of the petition under section 397/398 of the Companies Act cannot be interfered with. In my view, the decision was taken by the majority of the share holders and the said decision was rightly upheld by the CLB keeping in mind principles of corporate democracy. In my view, the CLB has rightly vacated the ad-interim order dated 21st May, 2012. In my view, the respondents have not committed any act as alleged by the appellants which can be called as an act of oppression by the majority shareholders on minority shareholders.
87. The question that now arises for consideration of this court is that in view of the 1st Respondent Company being the public limited company, whether Article 57 of the Articles of Association which was inserted in the Articles of Association giving right to preemption to the members when the status of the company was private limited company could be continued in the Articles of Association or the same is inconsistent and not inconformity with the provisions of the Companies Act, 1956.
88. The question that arises for consideration of this court is whether there can be any restriction on transfer of shares of the first respondent. In this ::: Downloaded on - 09/06/2013 19:31:05 ::: hvn 80/195 COAPPL41.12 regard reference to Section 82 of the Companies Act, 1956 would be relevant which reads thus :-
Section 82 in The Companies Act, 1956
82. Nature of shares. The shares or other interest of any member in a company shall be movable property, transferable in the manner provided by the articles of the company.
89. On the plain reading of Section 82, it is clear that shares in the company are moveable property transferable in the manner provided in the Articles. In my view in case of a public limited company, articles cannot impose and onerous terms which would affect substance of right to transfer shares by applying right of preemption. The appellants had also understood the effect of the status of the 1st respondent company being a public limited company and had rightly opposed the consent sought by the company in the year 2001 for transferring shares applied for by few other members of the company. Under Section 111 of the Companies Act and more particularly Section 111(14) which was inserted w.e.f. 20th September, 1995, it was clarified that Section 111 applies to the company which is a private company and include the private limited which has became public limited by virtue of Section 43(A) of the Companies Act. On reading of Section 111 read with Section 43(A) of the ::: Downloaded on - 09/06/2013 19:31:05 ::: hvn 81/195 COAPPL41.12 Companies Act, it is clear that Section 111 is not applicable to the 1 st respondent. Section 111A deals with register of transfer and sub-section (1) of Section 111A provides that the word "company" unless the context otherwise requires means a company other than a company referred to in sub-section 14 of section 111 of the Companies Act and immediately by sub-section 2 clarifies that subject to the provisions of section 111A the shares or debentures and any interest therein of a company shall be freely transferable. In my view, article 57 which provides right of preemption became redundant and infructuous in view of the change of status of 1st respondent company as public limited company. In my view, 1st respondent company could no longer be governed by Article 57 in view of the change of status. The 1st respondent company is thus right in passing resolution to delete such article which had become redundant, infructuous and dead in view of the change in status of the 1 st respondent company in conformity with Section 9 of the Companies Act which reads thus :-
9. Act to override memorandum, articles, etc.- Save as otherwise expressly provided in the Act -
(a) the provisions of this Act shall have effect notwithstanding anything to the contrary contained in the memorandum or articles of a company, or in any agreement executed by it, or in any resolution ::: Downloaded on - 09/06/2013 19:31:05 ::: hvn 82/195 COAPPL41.12 passed by the company in general meeting or by its Board of directors, whether the same be registered, executed or passed, as the case may be, before or after the commencement of this Act; and
(b) any provision contained in the memorandum, articles, agreement or resolution aforesaid shall, to the extent to which it is repugnant to the provisions of this Act, become or be void, as the case may be.
90. In my view the 1st respondent company has rightly exercised its right for alteration of Articles under Section 31 of the Act by following procedure under Section 169 read with Articles of Association. In my view, continuity of Article 57 in the Articles of Association after 1st respondent having become a public limited company would be inconsistent with the provisions of Companies Act 1956. Under Section 9 of the Companies Act, the provision of the act shall have effect notwithstanding anything to the contrary contained in the Articles of Association of such company and any provisions in such articles terms or agreement to the extent which is to the provisions of the Act become void. In my view Article 57 thus being inconsistent contrary to and repugnant to the provisions of the Companies Act became void, redundant, dead and thus has been rightly deleted from the articles of association with a view to make ::: Downloaded on - 09/06/2013 19:31:05 ::: hvn 83/195 COAPPL41.12 articles of association consistent with the provisions of Companies Act, 1956.
In my view steps taken by the 1st respondent company to impleadment the mandate provided under Section 9 of the Act by deleting, such articles which was redundant and repugnant to the provisions of the Companies Act cannot amount to oppression under Section 397 of the Companies Act. In my view any legal steps taken by the company to follow provisions of law cannot amount to oppression. In my view, on the contrary by making the shares freely transferable, such act on the part of the 1st respondent would be in the public interest and not against it. In my view, action taken by the 1 st respondent and majority of the shareholders in passing a resolution to delete Article 57 was a simple corporate democracy and is in compliance with law. Such powers given to the Board of Directors to transfer shares of the company by allowing shareholders to transfer shares and market value is undoubtedly subject to the powers of the board of the directors to either register or refuse to register the transfer in accordance with law.
91. In my view, action on the part of the appellant in opposing the resolution passed by the 1st respondent company to delete Article 57 cannot be construed in public interest. The application filed by the appellants under section 397 of the Companies Act thus does not satisfy the conditions for attraction of Sections 397 and 398 of the Companies Act in this case. In my view requisitioning of a meeting by the board of the 1st respondent company was a ::: Downloaded on - 09/06/2013 19:31:05 ::: hvn 84/195 COAPPL41.12 ministerial act of convening EOGM for the purpose of deleting Article 57 so as to comply with the provisions of law and to delete the articles which has become redundant and void and does not amount to act of oppression under section 397 of the Act. In my view, deletion of Article 57 and allowing free transferability of shares is for the benefit of all the shareholders of first respondent company and in the interest of justice and public interest.
92. In my view, the appellants have failed to prove that conduct on the part of the majority shareholders is harsh, burdensome, wrong, malafide, is for collateral purpose, advantageous to some of the shareholders vis-a-vis others, against probity and good conduct. CLB can exercise discretionary powers under Section 402 read with Section 397 of the Companies Act to set right, remedy or put an end to such oppression only if the criteria laid aforesaid are satisfied. Thus in my view, petition filed by the petitioner under Sections 397, 398 read with Section 402 itself is misconceived and not maintainable.
93. In the alternate to the submissions referred in this order, the learned senior counsel for respondent no.2 submits that the judgment and order dated 14th May, 2010 passed by CLB in Company Petition No. 132 of 2009 is upheld by the judgment and order dated 14th June, 2011 passed by this court in Company Appeal (24 of 2010) after considering all the submissions and contentions on behalf of the appellants and holding that Article 57 is void ::: Downloaded on - 09/06/2013 19:31:05 ::: hvn 85/195 COAPPL41.12 and unenforceable.
94. The CLB has recorded a finding of fact and has followed the judgment of this court. It is submitted that the order and judgment delivered by this court on 14th June, 2011 has not been stayed by the Supreme court. The judgment of this court was thus rightly followed by the CLB as the same is binding not only on the parties, CLB but also on single Judge of this Court. It is submitted that order passed by this Court on 14.6.2011 in Company Appeal (24 of 2010) operates in rem. The respondents also placed reliance upon the following paragraphs of the order and judgment delivered by this court on 14th June, 2011 in Company Appeal No. 24 of 2010 which reads thus :
78] Mr.Samdhani, learned counsel appearing for appellants submits that the impugned order is illegal and deserves to be set aside. The conclusions are unsustainable and are contrary to law. The CLB has failed to notice certain vital provisions and its conclusions are, therefore, vitiated.
79) He submits that there is no fixed statutory definition for "oppression". It can take various forms. Whether or not there is oppression is a question of fact. Actions that may be perfectly legal have also been held to be oppressive. Acts or omissions that are burdensome, harsh and wrongful are recognised to be "oppressive". Actions that are lacking in probity and fair dealing in the affairs of a company to the prejudice of some portions of the members are all held to be oppressive. Even a single act of oppression can be subject matter of a company petition as Sections 397 and 398 are a complete code in themselves. The Court has wide and unlimited powers and can pass orders to prevent oppression of the minority.
80] It is further submitted that GCL is a family company which has been incorporated and continued by the Kavasmaneck/Gharda families on the basis of the relations existing between them and on ::: Downloaded on - 09/06/2013 19:31:05 ::: hvn 86/195 COAPPL41.12 the basis of the mutual trust and confidence. There exists a special underlying obligation between the members where in the event one partner chooses to sell his share, the same should be first offered to the others so that any outsider cannot be permitted to enter the venture without the consent of the other partners. In fact, GCL is a glorified partnership and the principles of partnership would apply.
81] It is submitted that Articles of Association constitute a contract not only between the company and its members but also amongst the members inter se. The right of preemption contained in the Articles is a solemn contract not only between the shareholders and the company, but also between the members inter se. In fact, the right of preemption that has been enshrined in the articles is merely a reiteration of the earlier understanding whereby a stranger cannot be inducted in the partnership (which was taken over by GCL) without the consent of the other partners and forms the fundamental understanding on the basis on which the families got together to constitute and continue GCL.
82] It is further submitted that breach of Articles would be ultra vires and breach of the right of preemption constitutes an act of oppression. To that effect, taking away or cancelling a right of preemption will also amount to oppression and will be actionable.
What cannot be done directly cannot be permitted to be done indirectly. The right of preemption is a vested right of a shareholder and cannot be taken away or cancelled without his consent. The power to amend articles cannot be used to oppress the minority and or take away their vested rights.
83] Further it is submitted by Mr.Samdani that the notice and explanatory statement dated 16th October 2010 are misleading and are not in conformity with section 173 of the Companies Act, 1956.
The material facts of (i) the pendency of the Appeal No.24 of 2010,
(ii) the said appeal having been admitted, (iii) this Court having granted an injunction not to violate Article 57, (iv) the questions formulated have all been omitted-giving a totally misleading picture. It is further stated that compliance of section 173 is mandatory. A meeting convened on the basis of a notice which is not compliant with section 173 will be bad in law and so will the resolutions passed thereat.
84] He submits that the questions of law, therefore, as framed arise for determination and they can be broadly indicated thus:
::: Downloaded on - 09/06/2013 19:31:05 :::hvn 87/195 COAPPL41.12
(a) Whether the 2000 amendment is prospective which states that section 43A will not apply "on and after" its introduction is prospective and companies that had already acquired such status earlier would continue to retain such status?
(b) Assuming that the 2000 amendment is construed as a 'repeal' of section 43A, whether under section 6 of the General Clauses Act, such repeal would not disturb the status of companies that had already acquired the status of deemed public companies?
(c) If a company, which was incorporated as a private company prior to the 2000 amendment (a) does not alter its article by introducing clause (d) of section 3(1)(iii); (b) or by fiction of law is treated as a public company, it does not loose its character/fabric of a private company?
(d) Whether a deemed public company or an unlisted public company can validly provide for a right of preemption in its Articles?
(e) Section 111A is the only provision that talks of free transferability. In view of section 111A (1), read with section 111(14), the provisions of section 111A do not apply to a private company which had become a public company by virtue of section 43A. Accordingly, section 111A is not applicable to GCL. Thus, there is no provision that provides for free transferability of shares of GCL.
(f) Alternatively, there is nothing in the Companies Act that prohibits a 'public company' from providing any of the matters set out in sections (a) to (d) of Section 3(1)(iii). Thus, the Articles of a public company can contain a right of preemption.
(g) Section 82 of the Companies Act, 1956provides that the shares are movable property transferable in the manner provided in the Articles. The Articles of GCL continue to provide for preemption and Section 9 thereof has no applicability. Whether the attempt by the majority shareholders to sell the shares in breach of the right of preemption constitutes oppression; and
(h) whether taking away or cancelling a right of preemption by amending the Articles will also amount to oppression and will be actionable.
85] Mr.Samdani submits that if the judgement of the Company Law Board is perused carefully, it would be apparent that there is no finding rendered on sections 111A(1) read with section 111A(14), although a specific contention is raised by the appellants and which is recorded. The preemptive right is recognised. In these ::: Downloaded on - 09/06/2013 19:31:05 ::: hvn 88/195 COAPPL41.12 circumstances, the finding recorded is vitiated by non application of mind. The conclusion that there cannot be any reversal of Status from public limited to private limited company and, therefore, Article 57 must yield and give way to section 111A of the Companies Act is not accurate, because assuming that if GCL is a public limited company it is a unlisted public company. The shares are not listed on the stock exchange. Such a company can always have a right of preemption. Upon this vital issue and question, no finding is rendered by the Board. There is no finding on question of oppression as well. Mr.Samdani submits that it is also to be borne in mind that the dispute is between family members. The principles of partnership apply to a family concern/ company. It cannot also be forgotten that initial partnership and later on becoming a company is only an arrangement to take over business of partners. The initial partners are appointed as Founder Directors. Mr.Samdani submits that ground of oppression and mismanagement of minority and the background for filing the petition cannot be lost sight of by this Court. Mr.Samdani then contended that section 43A of the Companies Act, 1956 should have been properly construed and interpreted. He invites my attention to section 43A(2) and submits that this provision ceases to apply after 13th December 2000. Inviting my attention to section 82, 111(14) and 111A(1), he submits that these provisions have no application to a private company or to a company which has become public company. Section 111A(2) is also not applicable and in these circumstances, the impugned order is patently erroneous and unsustainable and should be set aside. Mr.Samdani has taken me through the paras of the company petition and he read out almost all affidavits and highlighted each of the Acts which are terms as mismanagement and oppression of minority. He emphasised the allegations of dividend squeezing and unjust enrichment. He also invited my attention to the allegations of diversion of funds by the majority to trusts and educational institutions controlled by Dr.Gharda. He also referred to some documents on record and particularly the report of Earnest Young and Arthur D'Little dated 9th November 2009. It is his contention that on the basis of available record, the company petition should not have been dismissed and therefore, this appeal deserves to be allowed.
86] On the other hand, Mr. V.A.Bobde, learned Senior Counsel appearing on behalf of respondent No.2 submits that the company petition filed before the Company Law Board alleged breach of preemptive rights, adoption of unfair dividend squeezing and ::: Downloaded on - 09/06/2013 19:31:06 ::: hvn 89/195 COAPPL41.12 respondent No.2 unjustly enriching himself. He submits that first two grounds relate to oppression and third is mismanagement. He submits that the presumption on which the allegations in the petition proceed is that the respondent No.1 is a glorified partnership and, therefore, the appellants continue to have preemptive rights under Article 57. Further, the company is not a public limited company under section 3(1)(iv) but a deemed public company under section 43A(1)(A) and, therefore, section 111A(2) is inapplicable. In other words, the shares are not easily transferrable.
87] Mr.Bobde submits that first two grounds and contentions based thereon are not available in view of the unconditional withdrawal of the appellants from the Company Petition No.77 of 1990. That company petition contained all these grounds and allegations and once the appellants have withdrawn from the same unconditionally, they cannot seek to raise them in the present proceedings and particularly when they filed a petition before CLB without any opportunity being granted by this Court. Mr.Bobde submits that even the effect of final judgement dated 14th November 2008 in Company Petition No.77 of 1990 will conclude this issue. In his submission, Company Petition No.77 of 1990 was pursued by remaining petitioners. The findings of the learned Single Judge in the judgement in Company Petition No.77 of 1990 bind the appellants. It is held by the learned Judge that the present appellant consciously acquiesced in the acts complained of and this can be inferred by their unconditional withdrawal from the proceedings on 8th September 2005. Their conscious acts relate back to the petition in relation to the grievances made by them. Further according to Mr.Bobde, even the act of unjust enrichment of respondent No.2 as alleged was taken up and raised in Amendment Application (CA 403 of 2005), which Company Application was moved in Company Petition No.77 of 1990 on 18th March 2005. Even that issue cannot be raised because of unconditional withdrawal of the appellants from the proceedings on 8th September 2005. Mr.Bobde invites my attention to Order XXIII of CPC and submits that this provision must be read into the Companies Act, 1956 and the Company Court Rules, 1959 and in that behalf relies upon Rules 6 and 88 of the said Rules. In these circumstances and when those petitioners who did not withdraw from proceedings gave up ground of mismanagement and confined their arguments to the ground of oppression alone, then all the more that issue now cannot be raised and agitated by the appellants. Mr.Bobde invites my attention to the findings of the learned Single Judge in the order dated 14th November 2008.
::: Downloaded on - 09/06/2013 19:31:06 :::hvn 90/195 COAPPL41.12 88] Mr.Bobde then submits that the main issue is about free transferability of shares. That issue, for being answered must necessarily require a finding and conclusion as to what is the Status of GCL i.e. Respondent No.1. Mr.Bobde submits that this Court has held that as a result of special resolution moved in EOGM dated 5 th May 2001 having been defeated, GCL has become a public limited company. Once it acquires that status the restriction on the right of transfer of shares applicable to a private limited company would not apply and it would be open to the present appellants to sell the shares to any outsider as per the price finalised with them inter se. Mr.Bobde submits that the effect of the judgement in the company petition must be considered. However, he submits that respondent No.2 is not running away from answering this issue and core question.
89] In this behalf, Mr.Bobde submits that the two events of vital importance occurred in 2001 which, taken even singly, made the company cease to be a private company as defined by Section 3(iii) and to become a public company as defined by section 3(1)(iv). The first event was that notice was given on 2nd April 2001 for a meeting on 5th May 2001 for the purpose of incorporating the requirements of clause (d) of section 3(1)(iii) which was added in 2000 and for changing the name to 'Private Ltd'. The Appellants and their supporters opposed the resolution and the same was defeated. They voted to make the company, which had been a deemed public company, into a public company. Thus, the EOGM of the company decided that the Articles shall not contain the provision required by clause (d) of Section 3(1)(iii). Thus, ipso facto and ipso jure, the company ceased to be 'private company' and became, by operation of law a public company. This factual and legal position is, in effect, admitted by the appellant No.2 in his letter dated 6.6.2001 wherein, in response to transfer notices issued as a result of transfer requests from Mr.Daruwalla and Mr.Gandhi, he refers to 'the recent turn of events' (i.e the defeat of resolution of 5.5.2001) and says he doesn't understand why transfer notices are being issued to members and that he would be ignoring such notices under Article 57. Thus, appellant No.2 who was chiefly instrumental in the defeat of the resolution of 5.5.2001, fully understood that the company was now a public company and Article 57 had become inoperative and void by reason of inconsistency between the Act and the Articles as provided in section 9 of the Companies Act, 1956.
::: Downloaded on - 09/06/2013 19:31:06 :::hvn 91/195 COAPPL41.12 90] It is further submitted by Mr.Bobde that in 2005 before the present appellants withdrew from C.P.No.77/1990, they filed an amendment application being C.A.No.403/2005. Therein, they proceeded on the basis that the company is a public company and averred, inter-alia that "the amendment to the terms of appointment of second respondent whereby the payment of remuneration is altered/enhanced is also illegal and violative of Section 268 of the Companies Act, 1956." It is clear that section 268 applies only to public companies. Hence, the appellants herein had, in effect, admitted that the company is a public company.
91] It is submitted that the second event was that appellant No.2 applied on 30.10.2001 for transfer of five shares held by him. The company registered the transfer on 31.12.2001 as a result of which the number of members became 54. Section 3(1)(iii)(b) requires that a private company cannot have more than 50 members. Hence, on 31.12.2001, yet another requirement of the law for being a private company disappeared.
92] He further submitted that in the light of the above indisputable factual and legal position that the company was no more a private company which became a deemed public company under section 43A, after 13.12.2000 and this position being reinforced and made permanent from 5.5.2001 when the resolution to make the company a private company was defeated, sections 3(1)
(iv) and 111-A (2) have operated with full force and made the shares of the respondent No.1 public company freely transferable.
109] Both sides also made a reference to section 9 to point out that the Companies Act, 1956 would over ride the memorandum and Articles of Association even if there is anything contrary contained in the same. Thus, the argument is that by sub-clause (b) of section 9 any provision contained in the memorandum/Articles/agreement or resolution to the extent to which it is repugnant to the provisions of this Act become void as the case may be.
110] Then comes section 43 and 43A which read thus: "43. Where the articles of a company include the provisions which, under clause (iii) of sub-section (1) of section 3 are required to be included in the Articles of a Company in order to constitute it a private company, but default is made in complying with any of those provisions, the company shall cease to be entitled to the privileges and exemptions conferred on private companies by or under this ::: Downloaded on - 09/06/2013 19:31:06 ::: hvn 92/195 COAPPL41.12 Act, and this Act shall apply to the company as if it were not a private company:"
Provided that the Central Government on being satisfied that the failure to comply with the conditions was accidental or due to inadvertence or to some other sufficient cause, or that on other grounds it is just and equitable to grant relief, may, on the application of the company or any other person interested and on such terms and conditions as seems to the Central Government just and expedient, order that the company be relieved from such consequences as aforesaid."
"43A. (1) Save as otherwise provided in this section, where not less than twenty five per cent of the paid up share capital of a private company having a share capital, is held by one or more bodies corporate, the private company shall -
(a) on and from the date on which the aforesaid percentage is first held by such body or bodies corporate, or
(b) where the aforesaid percentage has been first so held before the commencement of the Companies (Amendment) Act, 1960 on and from the expiry of the period of three months from the date of such commencement unless within that period the aforesaid percentage is reduced below twenty five percent of the paid up share capital of the private company, become by virtue of this section a public company," Provided that .....
Provided further that .....
(a) ....
(i) ...
(ii) ....
(iii) ....
(b) ....
(i) ...
(ii) ....
(iii) ....
Explanation:- .....
(1A) ......
Provided that .....
(1B) ......
(a) .....
(b) ......
Provided that ....
(1C) Where, after the commencement of the Companies ::: Downloaded on - 09/06/2013 19:31:06 ::: hvn 93/195 COAPPL41.12 (Amendment) Act, 1988 a private company accepts, after an invitation is made by an advertisement, or renews, deposits from the public, other than its members, directors or their relatives, such private company shall, on and from the date on which such acceptance or renewal as the case may be, is first made after such commencement, become a public company and thereupon all the provisions of this section shall apply thereto; Provided that even after the private company has so become a public company, its articles of association may include provisions relating to the matters specified in clause (iii) of sub-section (1) of section 3 and the number of its members may be, or may at any time be, reduced below seven;
(2) Within three months from the date on which a private company becomes a public company by virtue of this section, the company shall inform the Registrar that it has become a public company as aforesaid, and thereupon the Registrar shall delete the word "Private" before the word "Limited" in the name of the company upon the register and shall also make the necessary alterations in the certificate of incorporation issued to the company and in its memorandum of association.
(2A) Where a public company referred to in subsection (2) becomes a private company on or after the commencement of the Companies (Amendment) Act, 2000, such company shall inform the Registrar that it has become a private company and thereupon the Registrar shall substitute the word "private company" for the word "public company" in the name of the company upon the register and shall also make the necessary alterations in the certificate of incorporation issued to the company and in its memorandum of association within four weeks from the date of application made by the company"
(3) ....
(4) ....
(5) ....
(6)& (7) omitted by Act 31 of 1988 (8) ....
(a) ....
(b) .....
(c) .....
(d) .....
(9) .......
(a) ......
(i) .....
::: Downloaded on - 09/06/2013 19:31:06 :::hvn 94/195 COAPPL41.12
(ii) ......
(iii) .......
(b) ........
(c) ........
(10) .......
(11) Nothing contained in this section, except subsection (2A), shall apply on and after the commencement of the Companies (Amendment) Act, 2000."
111] A perusal of these sections would indicate that they deal with private companies and they appear in Part II of the Companies Act. Prior thereto is Sec.26 which appears below the sub-heading "Articles of Association." A perusal of Sec.26 would indicate that there may, in the case of a public company limited by shares, and there shall in the case of an unlimited company or a company limited by Guarantee or a private company limited by shares, be registered with the Memorandum,Articles of Association signed by the subscribers of the Memorandum, prescribing Regulations for the company. Thus, the registration of Articles of Association with the Memorandum of Association is mandatory for a private limited company by shares whereas there is no such mandate in the case of a public company limited by shares. After providing for Articles of Association and Membership of Company and their registration, sections 43 and 43A appear in the Statute book and it is clear from a reading of the same that whenever there is any provision which under clause (iii) of section 3(1) is required to be included in the Articles of Company in order to constitute it as a private company, then, that is a private company. However, in default of compliance with the same, the company would lose the privileges and exemption conferred on private companies by or under the Companies Act but the Act continues to apply to it and it will be then treated as if it is not a private company.
112] Section 43A provides for a private company to become public company in certain cases. This provision was inserted by Act 65 of 1960 with effect from 28th December 1960. Thereafter, there have been certain amendments inasmuch as by Act 91 of 1974 change was effected from 1st February 1975 and sub-section 1(A) was inserted in Section 43A. Thereafter, an explanation below subsection 1 of 43A came to be inserted and at the same time subsection 1A which was inserted in 1974 had to be amended.
113] By 1988 Act so also prior thereto by 1974 Act, sub-sections ::: Downloaded on - 09/06/2013 19:31:06 ::: hvn 95/195 COAPPL41.12 1B and 1C were inserted in section 43A and in 2000 by Act 53 of 2000, with effect from 13th December 2000 sub-section 2A was inserted. That dealt with the situation of a public company becoming a private company. In other words, this section permitted a private company to become a public company in certain cases and once the word private is deleted it becomes a public company. However, there was nothing which permitted such public company to again become private company and that is achieved by insertion of section 43(2A). Sub-section 43A(11) which also was inserted by Act 53 of 2000 from 13th December 2000, clarified that nothing contained in section 43A, save and except sub-section 2A shall apply on and after the commencement of Companies (Amendment) Act 2000. In other words, whole of section 43A except for one sub- section viz., subsection 2A ceases to apply after the commencement of Companies (Amendment) Act, 2000. The reason for this is obvious because the Parliamentary Standing Committee submitted a report which is known as 64th report on Companies Second Amendment Bill 1999. It recommended that entire section 43A must be deleted. The recommendation was that some part and particularly section 43A(4) may be retained so that deemed public companies may submit certificate of incorporation to Registrar of Companies for correction by adding the word "Private" before the word "Limited", in the name as indicated in the certificate of incorporation. However, when that bill became an Act, new sub- section 2A came to be inserted in the aforesaid terms. Thus, section 43A itself became inapplicable by virtue of sub-section 11. The effect of all this is that the concept of deemed public company under section 43A and introduced by the Companies (Amendment) Act has now been abolished based on the recommendation of the working group the Companies Act, 1956.
114] In my view, the legal consequences of the amendments, which have been termed as of far reaching importance and substantial by none other than Mr.A.Rammaiyya in his work "Guide to the Companies Act", cannot be ignored. If these amendments are placed in the forefront, then, there is much substance in the contentions of Mr.Bobde, learned Senior Counsel appearing on behalf of respondent No.2.
115] Mr.Bobde is right in his contention that after these amendments are noted only two broad categories of companies viz., public company and private company remain and there is no scope for introduction of any third type or category. The amendment was ::: Downloaded on - 09/06/2013 19:31:06 ::: hvn 96/195 COAPPL41.12 made with obvious purpose. If a private company is to become public company in certain cases, then, all attributes and characteristics of a public company get attached to it. Thereafter, there should be no scope left for it to revert back to the status of a private company. If while amending section 43A care was taken to introduce sub-clause (d) in section 3(1)(iii) of the Companies Act, 1956 and at the same time substitute section 3 (1)(iv)of the Companies Act, 1956, then, there is no warrant for creation of third category or permitting reversal of status from a public company to a private company. In other words if sub-clause (d) was inserted to provide for a prohibition against inviting or accepting deposits from persons other than the members of a private company, its Directors or their relatives in addition to the prohibition from inviting the public to subscribe for any shares or debentures of a private company, then, the demarcation and distinction ought to be clear and specific. If the broad definition of the term "public company" is that it means a company which is not a private company and further requires minimum paid up capital, but importantly the term "public company" also means a company which is a private company but is a subsidiary of company which is not a private company, then, this only shows that the Legislature wanted to include within the term "public company" a private company which is a subsidiary of a company which is not private. If the holding company is not a private company but its subsidiary is a private company such subsidiary also becomes a public company now. If all this is read together and seen as a whole, it becomes at once clear that the Legislature did not desire to continue any concept of deemed public company which was in force on account of the amendment made in the year 1974 to the Companies Act. The effect and implication of 1974 amendment is to be wiped out completely and that has been done by the 2000 Act to the extent it made the whole of section 43A except sub-section 2A inapplicable and from ineffective from 13th December 2000.
116] It is clear from the factual position that the attempt to amend the Memorandum and Articles of Association of the first respondent was unsuccessful. The said resolution proposed in the meeting held on 5th May 2001 was not carried but in fact defeated. Once it was defeated, then, the first respondent which had become a public company on 17th August 1988 continued with that status. It would be of relevance to note that the resolution was moved in the meeting held on 5th May 2001. That resolution was defeated on that day.
::: Downloaded on - 09/06/2013 19:31:06 :::hvn 97/195 COAPPL41.12 However, the Companies Amendment Act 2000 had come into effect already and to be precise from 13th December 2000. On 13th December 2000, GCL was not a deemed public company but a public company. Once it was a public company, then, the argument of the appellants that it continued to retain its fundamental and basic character as a private company cannot be accepted. The status is conferred by law. The status was sought to be changed or amended by moving an amendment to the Articles of Association.
Once that amendment to insert an additional clause (d) was defeated, then, there is no scope to alter the status of the respondent No.1 company by either terming it as a deemed public company or a public company retaining the fundamental and basic character of a private company. Both these concepts are unknown to law. Once they are contrary to the statutory mandate flowing from the terms as defined in the Companies Act, 1956, read together with section 43A and particularly sub-section 11 thereof, then, all the more the arguments of Mr.Samdani cannot be accepted. Mr.Samdani's attempt was to show that sub-section 11 of section 43A is not attracted in the facts of this case. Mr.Samdani argued that the principles of partnership which govern the administration and management of first respondent through out hold good in any event. His first contention was that section 43A(11) ceases to make section 43A inapplicable after 13th December 2000. Alternatively and even if the amendment is taken as a repeal, that repeal of section 43A will not affect the underlying character of the first respondent as a family concern or glorified partnership.
117] Mr.Samdani is not right on both counts. The amendment to Section 43A was brought into effect on 13th December 2000. The amendment to the Articles of Association was proposed and it was to be considered at a meeting held on 5th May 2001. That amendment was to alter the status of the company by insertion of sub-clause (d) in the Articles of Association. That amendment was not carried. Therefore, sub-section 11 of section 43A and the entire amendment of 2000 as far as section 43A is concerned, is operative and is applicable to respondent No.1. The appellants and others proposed the change in the status of GCL after the amendment had come into force. In such circumstances, emphasis on the words "on and after" as appearing in Section 43A(11) will not be of any assistance to the appellants.
118] In any event, as far as the principles of statutory interpretation are concerned, long back in a decision reported in ::: Downloaded on - 09/06/2013 19:31:06 ::: hvn 98/195 COAPPL41.12 A.I.R. 1988 S.C. 740 Bhagatram Sharma Vs. Union of India, the Supreme Court held that it is a matter of legislative practice to provide, while enacting and amending a law, that an existing provision would be deleted and a new provision substituted. Such deletion has effect of repeal of the existing provision. Such a law may also provide for introduction of new provision. There is no real distinction between "repeal" and "amendment". The Supreme Court holds that amendment is in fact a wider term and it includes abrogation or deletion of a provision in a existing statute. If the amendment of existing law is small the act professes to amend the Act. If it is wide, it repeals a law and re-enacts it. (see paras 16 to 18 pgs.745-746).
119] Therefore, in my view, once the first respondent is a public company as evidenced by the certificate referred to above, with effect from 17th August 1988, then, the amendment made in 2000 would be applicable and section 43A ceases to apply to it. That the words "On and After", are used makes no difference as far as present case is concerned. In the present case, the status of the first respondent as a public company remains and it is now academic to find out whether it was a deemed public company earlier as contended. Once the law makes only a broad categorisation as noticed above, then, it is not necessary to deal with this contention any more.
120] Once it is understood that GCL is public company, then, all that remains is to find out as to whether there is any restriction on the transfer of its shares. In this behalf, Part IV of the Companies Act, 1956 which contains section 82 clarifies that the shares or debentures, other interest of any member in a company shall be moveable property, transferable in the manner provided by the Articles of the Company. That they are moveable property and, therefore, transferable is amply clear in law. The Articles only provide for the manner in which the transfer has to be effected. In this behalf section 111 of the Companies Act 1956 was referred to by the Counsel. That provision reads thus:-
"111. Power to refuse registration and appeal against refusal --- (1) If a company refuses, whether in pursuance of any power of the company under its articles or otherwise, to register the transfer of, or the transmission by operation of law of the right to, any shares or interest of a member in, or debentures of, the company, it shall, within two months from the date on which the instrument of transfer, ::: Downloaded on - 09/06/2013 19:31:06 ::: hvn 99/195 COAPPL41.12 or the intimation of such transmission, as the case may be, was delivered to the company, send notice of the refusal to the transferee and the transferor or to the person giving intimation of such transmission, as the case may be giving reasons for such refusal.
(2) The transferer or transferee, or the person who gave intimation of the transmission by operation of law, as the case may be, may appeal to the Tribunal against any refusal of the company to register the transfer or transmission, or against any failure on its part within the period referred to in sub-section (1) either to register the transfer or transmission or to send notice of its refusal to register the same.
(3) An appeal under sub-section (2) shall be made within two months of the receipt of the notice of such refusal or where no notice has been sent by the company, within four months from the date on which the instrument of transfer, or the intimation of transmission as the case may be, was delivered to the company.
(4) If --
(a) the name of any person ----
(i) is, without sufficient cause, entered in the register of members of a company; or
(ii) after having been entered in the register, is, without sufficient cause, omitted therefrom; or
(b) default is made, or unnecessary delay takes place, in entering in the register the fact of any person having become, or ceased to be a member including a refusal under sub-section (1)"The person aggrieved, or any member of the company, or the company, may apply to the Tribunal for rectification of the register.
(5) The Tribunal while dealing with an appeal preferred under sub-section (2) or an application made under sub-section (4) may, after hearing the parties, either dismiss the appeal or reject the application, or by order ---
(a) direct that the transfer or transmission shall be registered by the company and the company shall comply with such order within ten days of the receipt of the order; or
(b) direct rectification of the register and also direct the company to pay damages, if any, sustained by any party aggrieved.
(6) The Tribunal, while acting under sub-section (5) may, at its discretion, make ----
(a) such interim orders, including any orders as to injunction or stay, as it may deem fit and just;
::: Downloaded on - 09/06/2013 19:31:06 :::hvn 100/195 COAPPL41.12
(b) such orders as to costs as it thinks fit;and
(c) incidental or consequential orders regarding payment of dividend or the allotment of bonus or rights shares.
(7) On any application under this section, the Tribunal ----
(a) may decide any question relating to the title of any person who is a party to the application to have his name entered in, or omitted from the register;
(b) generally, may decide any question which it is necessary or expedient to decide in connection with the application for rectification.
(8) The provisions of sub-sections (4) to (7) shall apply in relation to the rectification of the register of debenture holders as they apply in relation to the rectification of the register of members.
(9) If default is made in giving effect to the orders of the Tribunal under this section, the company and every officer of the company who is in default shall be punishable with fine which may extend to ten thousand rupees and with a further fine which may extend to one thousand rupees for every day after the first day after which the default continues.
(10) Every appeal or application to the Tribunal under sub- section (2) or sub-section (4) shall be made by a petition in writing and shall be accompanied by such fee as may be prescribed.
(11) In the case of a private company which is not a subsidiary of a public company where the right to any shares or interest of a member in or debentures of, the company is transmitted by a sale thereof held by a court or other public authority, the provisions of sub-sections (4) to (7) shall apply as if the company were a public company;
Provided that the tribunal may, in lieu of an order under sub-section (5) pass an order directing the company to register the transmission of the right unless any member or members of the company specified in the order acquire the right aforesaid within such time as may be allowed for the purpose by order, on payment to the purchaser of the price paid by him therefor or such other sum as the Tribunal may determine to be a reasonable compensation for the right in all the circumstances of the case (12) If default is made in complying with any of the provisions of this section, the company and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees for every day during which the default continues;
(13) Nothing in this section and section 108, 109 or 110 shall prejudice any power of a private company underits articles to enforce the restrictions contained therein against the right to ::: Downloaded on - 09/06/2013 19:31:06 ::: hvn 101/195 COAPPL41.12 transfer the shares of such company;
(14) In this section "company" means a private company and includes a private company which had become a public company by virtue of section 43A of this Act."
121) A bare perusal of the entire section would denote that by virtue of Act 22 of 1996 section 111(14) was inserted with effect from 20th September 1995. By insertion of this provision it has been clarified that section 111 applies to a company which is a private company and includes a private company which had become public company by virtue of section 43A of the Act. Once section 43A ceases to apply in the present case to GCL, then, there is substance in the argument of Mr.Bobde that Section 111 is inapplicable. In this behalf it must also be noted that sub-section 14 was added to section 111 by way of consequential amendment introduced by the Depositories Act, 1996. The effect of amendment is that in case of public companies to which Depositories Act would apply, instead of section 111, section 111A of the Companies Act, 1956 would apply which has also been introduced as consequential amendment by the Depositories Act, 1996.
122] Section 111A deals with rectification of Register of Transfer and sub-section 1 of this section states that the word "company", unless the context otherwise requires means a company other than a company referred to in sub-section 14 of section 111 of the Companies Act and immediately by sub-section 2 clarifies that subject to the provisions of section 111A the shares or debentures and any interest therein of a company shall be freely transferable.
123] To my mind once the statutory scheme is noticed, then, there is no difficulty in turning down the contentions of Mr.Samdani. There is no question, therefore, of any preemptive right being recognised. The articles of association that are referred to by Mr.Samdani are that of a company which was a private company. After 17th August 1988 and in any event after dated 13th December 2000, the position has undergone a change and Article 57 appearing in the Articles of Association would no longer be the governing article. It is not necessary to then consider the argument as to whether the said article is void or not. That article must give way to the statutory provision. If the shares of public company are freely transferable, then, the statutory provisions in that behalf will take such effect notwithstanding anything to the contrary contained in the Articles of Association of such company. The over-riding ::: Downloaded on - 09/06/2013 19:31:06 ::: hvn 102/195 COAPPL41.12 effect given to the Act by section 9 cannot be ignored and brushed aside as desired by the appellants. Their alternate argument that assuming that GCL is public company, its shares being non listed, there can be a right of preemption, is equally unsound and not tenable. There is no distinction made in the Act of this nature. That argument is canvassed only by relying on the definition of the term "listed public companies" appearing in section 2(23A). The definition itself clarifies that a public company which has any of its securities listed in any of the recognised stock exchange will be termed as listed public company. Nonetheless it remains a public company and merely because its shares are not listed in any recognised stock exchange does not mean that there is any restriction on their transfer. They are and continue to be freely transferable as they are shares of a public company. The broad distinction as noticed above, between the term 'Private" and "Public" company, is enough to turn down this alternate argument.
126) Mr.Bobde, learned senior counsel appearing for respondent No.2 and Mr.Sen appearing for respondent Nos. 1, 4 and 5 urge that any wider question or controversy need not be gone into because the essential difference between a preemptive and restrictive right conferred by Articles of Association and an agreement between members inter se or with third parties providing for a preemptive right must be borne in mind. The inter se agreement conferring such right is de hors the Articles of Association and is, therefore, not affected by the character of the company, whereas, what is impermissible by the Statute is that in case of a public limited company, the Articles, even if having any such right, the same stands over-ridden by the statutory provision and enactment and must, therefore, give way to the same. The Division Bench judgement does not indicate that such a preemptive right conferred by the Articles remains intact or not and yet proceeds to over-rule the Single Judge's judgement in WMDC Vs. Bajaj (supra). The Division Bench over-rules Single Judge's view to the extent of the preemptive right conferred by an agreement entered into inter se by members or by members with third parties. To my mind, the distinction as pointed out by Mr.Bobde and Mr.Sen will have some bearing but for the purpose of present case, it is not necessary to enter into any larger controversy. Any wider question is not required to be answered because once the statutory scheme is noticed by me and the character of the company in question being undisputed, then, the matter can be decided with the aid and assistance of the statutory provisions and applying them to the peculiar facts of this ::: Downloaded on - 09/06/2013 19:31:06 ::: hvn 103/195 COAPPL41.12 case. Therefore, the agreement between the members inter se or between members and third parties containing a preemptive clause or conferring a preemptive right and the ambit and scope thereof even in case of public limited company is a matter which can be gone into in an appropriate case. In the present case, it is not necessary to go into and deal with the question and issues raised. Therefore, reliance on the Division Bench decision by Mr.Samdani is of no assistance to the appellants and particularly when I am of the opinion that the conclusions of the CLB do not rest merely on the view taken by the learned Single Judge but also on the facts and circumstances peculiar to the case before me and brought to the notice of the learned Member, CLB.
127] Mr.Samdani, learned Senior Counsel has contended that even if GCL is a public company, still going by the definition of the term "private company" as appearing in the Companies Act, 1956, the character and nature of such a company is never lost upon itbecoming a public company or losing its status and identity as a private company. He has relied upon the requirements that are stipulated in the Articles of Association of a private company in this behalf.
128] On the other hand, Mr.Bobde, learned Senior Counsel has emphasised that there can be only two categories of companies, a public company and private company. I have in the foregoing paragraphs dealt with this aspect in great details and accepted Mr.Bobde's arguments that there cannot be any third category viz., "deemed public company". The arguments of Mr.Bobde are accepted because on noticing the amendments made to the Companies Act, 1956 and particularly in the year 2000, the third category as projected (deemed public company), cannot be carved out or if existing earlier, cannot be held to be continuing any further. The arguments of Mr.Samdani that despite this amendment, the character and fabric of GCL is not altered or changed and it remains a glorified partnership or a private company or a family concern, essentially revolves around the same category noted by me above. For the reasons that have persuaded me not to read into or add any third category other than a private company and public company, these arguments must also fail. Once again, it must be clarified that the categorisation that has been highlighted before me is in the context of the assertions of the appellants that GCL is a deemed public company. It must be clarified that I have not held that the Act does not envisage any company other than a private ::: Downloaded on - 09/06/2013 19:31:06 ::: hvn 104/195 COAPPL41.12 company or public company limited by shares. The act itself points out that there can be categories and sub-categories within the broad categorisation pointed out above. Further, a perusal of the section relating to kinds of share capital and voting rights would reveal that there can be a company limited by shares, unlimited company, a foreign company etc. Therefore, it should not be held that this distinction or categorisation has not been noted by me.
129] Once all these arguments and contentions are dealt with, then, other part of submissions of Mr.Samdani on oppression of minority also fail. They are raised on the basis that the preemptive right is defeated by respondent Nos. 2 to 5 by their several acts of omission and commission. Once the preemptive right itself is not in existence by virtue of the statutory provisions in the field, then, there is no act of oppression. As held above, the plea of mis-management has been given up and has not been pursued.
130] The other contentions that are raised to support the argument of oppression are that irrespective of the character of the company, the majority shareholders have by their acts oppressed the minority. Several instances of denial of dividend have been brought to my notice. The CLB in the impugned judgement has not commented on the same nor rendered any finding but since the contentions have been exclusively raised and argued, I have dealt with the same. In this behalf, it must be immediately noticed that the appellants were parties to Company Petition No.77 of 90. Some of the instances that have been highlighted before me were part of the pleadings in this company petition. Further, this company petition was extensively amended. The original as well as amended petition has been dealt with by the learned Single Judge of this Court by his judgement and order dated 14th November 2008. He proceeded to dismiss the same. While dealing with self same allegations, the learned Single Judge has observed thus:-
"49. On the other hand, the respondents have not only denied material grounds and would submit that proper compliance has been observed. In addition, the respondents would contend that the petitioners should be non-suited for having approached this Court with unclean hands. In that the fact that the petitioners have already entered into a memorandum of understanding with Godrej Soaps Ltd., to acquire shares in respondent No.1 company was kept a secret arrangement till it became known for the first time to ::: Downloaded on - 09/06/2013 19:31:07 ::: hvn 105/195 COAPPL41.12 the respondent in February 2005. It is common ground that even the present petitioners are signatories to the said memorandum of understanding. In fact, even the present petitioners have sold 27 and 66 shares respectively to Godrej Soaps Ltd., without following the regime of Article
57. On the one hand, the petitioners were questioning the intention of the 2nd respondent but at the same time, the petitioners were themselves indulging in act which was not only illegal but against the interests of the company. According to the respondents, the petitioners group was bent upon selling their shares to a person who happens to be the competitor of respondent company. Besides, it is the petitioners group who on the one hand were opposed to increase of authorised share capital resulting in respondent No.1 not being able to declare bonus shares; and on the other hand were acting against the interests of the company by committing themselves to sell their shares to person who happens to be the competitor of respondent company. According to the respondents the present petition is a speculative petition for which reason also the grievance made at the instance of petitioners with regard to meeting dated 15th February 1990 cannot be countenanced."
" 50. The fact that even the present petitioners were party to memorandum of understanding and have committed themselves to espouse the cause of the alleged competitor of the company and in fact transferred part of the shares to an outsider, have come to the notice of the respondents only in February 2005. Those material facts have been suppressed by the petitioners. For this reason alone, the petitioners deserve to be non-suited. It is well established that no indulgence can be shown to a litigant who approaches the court with unclean hands. In any case, as observed earlier, after the withdrawal of other petitioners from the present proceedings unconditionally, thereby giving up all the allegations and claim against the respondent company, the issue regarding validity of meeting dated 15th February 1990 survives only at the instance of present petitioners. They have less than 7% of share holding in the respondent company. At their instance, therefore, the question of overturning the decisions taken in the said General Meeting particularly having referred to their conduct does not arise. Even if the matter was to be ::: Downloaded on - 09/06/2013 19:31:07 ::: hvn 106/195 COAPPL41.12 examined on facts, on its own merits, the grievance of the petitioners in respect of each of the grounds will have to be stated to be rejected. By no standards, the decision to convene meeting to consider the eight items stated in the notice dated 16th January 1990 can be said to be oppression against minority shareholders. The necessity to increase borrowing powers was in the context of expansion plans in relation to which ample explanation has been offered by the respondent company. Insofar as changing of name from private limited company to one of public limited company was also out of necessity. Even the explanation offered by the respondent company to increase the authorised capital of the company can, by no standards, be said to be oppression against the minority shareholders. No tangible material has been produced to substantiate that position. Even the amendments suggested to the A.O.A. were not to favour only the majority shareholders but would apply across the board and every member would be benefited by the said amendment. The controversy regarding deletion of Article 123 as raised is also without any substance. Besides, it is common ground that the company has now become a public limited company. Even on account of this change, it has become redundant to entertain the grievance of the present petitioners in relation to the issues concerning extra ordinary general meeting dated 15th February 1990. More so, when the stand taken by the present petitioners at the time of arguments plainly suggests that they are interested in walking out of the company and sell their shares at a fair price."
131] In the earlier part of his judgement in para 47 the learned Judge has dealt with the argument regarding declaration of low dividend and found no substance in the allegation of oppression based on the same. My attention is also invited to the earlier paras of this judgement and in particular paras 35 to 37 wherein this charge of low dividend has been dealt with extensively.
132] The argument is that the appellants were not parties to this judgement and, therefore, it does not bind them. However, it is pertinent to note that the appellants were original petitioners. They withdrew from Company Petition No.77 of 1990. There is nothing on record to indicate that they withdrew with liberty to raise the pleas raised by them again. Once the learned Judge has found that ::: Downloaded on - 09/06/2013 19:31:07 ::: hvn 107/195 COAPPL41.12 the conduct of the remaining petitioners was entirely blameworthy and they could not substantiate the charge and/or allegation levelled of being oppressed as minority shareholders, then, I do not see how the present appellants can on the same material succeed in proving the said allegation. Apart from finding that they are raising the same issues based on the same allegations and identical arguments, I am of the opinion that the observations of the learned Single Judge would be applicable to the present appellants too. Any wider controversy, including about applicability of Order XXIII Rule 1 of CPC to a Company Petition need not be gone into and decided. Assuming that this provision and/or principles analogous thereto apply, apart from the appellants not seeking any liberty from the learned Single Judge while withdrawing themselves from Company Petition No.77 of 1990, I find that their arguments in the present appeal are identical to those raised by the remaining petitioners in Company Petition No.77 of 1990.
133] Mr.Samdani, learned Senior Counsel has relied upon a number of decisions and it is not necessary to refer to each one of them. In the first compilation of the Authorities and Rulings, the appellants have compiled judgements on the ambit and scope of section 397 and 398 of the Companies Act and the reliefs that can be sought and granted thereunder. In my view, each of these judgements need not be referred to. The principles are too well settled and I have decided this case by applying them. Therefore, each of the decisions whether of the Hon'ble Supreme Court, this Court, other High Courts or English Courts need not be referred to seriatim.
134] Part II of the compilation contains broad questions and propositions of law which I have already referred to and dealt with. Suffice it to note that in the latest decision of the Supreme Court in the case of V.S.Krishnan Vs. West Coast Hightech Hospital Ltd. & Ors., (reported in 2008 (3) SCC 363) the Supreme Court has held that whether an Act is oppressive or not is fundamentally and basically a question of fact. Its answer must depend upon circumstances in each case. However, the broad tests have been indicated by the Hon'ble Supreme Court and they have been summarised in para 14 of this decision.
135] After carefully perusing this paragraph and earlier authorities, I am of the view that the judgement rendered by the Hon'ble Single Judge, Justice A.M.Khanwilkar, J dated 14th ::: Downloaded on - 09/06/2013 19:31:07 ::: hvn 108/195 COAPPL41.12 November 2008 in Company Petition No.77 of 1990 applies to the appellants as well. I have indicated the reasons for this conclusion in the foregoing paragraphs. Therefore, it is not necessary for me to decide any wider controversy and particularly whether the judgement of the learned Single Judge (Khanwilkar, J) could be said to be a judgement in rem and or whether the Civil Procedure Code and particularly Order XXIII of the same applies to the present proceedings or not. The submission of Mr.Samdani is that this judgement cannot be a judgement in rem. Assuming it is not so, yet, it binds the appellants for the reasons indicated above. The appellants may have withdrawn from Company Petition No.77 of 1990 but in their independent proceedings before the CLB on which the impugned order has been passed, they relied on the same material and same circumstances as were set out in Company Petition No.77 of 1990. They relied upon the same amendments which were to Company Petition No.77 of 1990. There allegations are also the same viz., of low dividend and unjust enrichment so also diversion of funds by respondent No.2. These were the grounds raised in Company Petition No.77 of 1990. Having found no substance therein, for the reasons, which have been given by Hon'ble Mr. Justice Khanwilkar, and finding them to be fully applicable to the present facts as well, I see no justification for taking a different view. If the appellants had placed any material other than what has been referred to by Khanwilkar, J or had they pointed out even during the course of arguments before me by referring to the available record, anything in addition to what has been noted by the learned Single Judge, possibly, they could have urged that I should take a different view or that a further probe and investigation into the matter was called for. Having found that they placed no such material and that the available record does not furnish substantial proof of the allegations of oppression of the appellants, I am of the view that the judgement of Justice Khanwilkar in Company Petition No.77 of 1990 binds the appellants.
136] Once this view is taken, then, strictly it is not necessary to refer to the judgements cited by Mr.Samdani on the applicability of Order XXIII of the CPC and particularly Rule 1 thereof. Therefore, the judgements in compilation III on this point need not be referred in further details. Equally in the view that I have taken, it is not necessary to refer to the judgement of the Supreme Court reported in 2006(1) SCC 212 (S.Vijayarama Raju Vs. Immakka Jaya Raj & Ors.). Lastly, the reliance placed on the judgement of the Supreme ::: Downloaded on - 09/06/2013 19:31:07 ::: hvn 109/195 COAPPL41.12 Court and other courts on the right of preemption is misplaced in the view that I have taken. The nature of the right is not in dispute.
In the present case the question is of its availability. I have proceeded on the basis that the Articles of Association of respondent No.1 did contain a clause giving preferential or preemptive rights as claimed by the appellants. However, upon the status of the company, undergoing a change as noted above, this clause could not have been invoked.
137] It is in the light of this view that I have not entered into the controversy as to whether the view taken by the learned Single Judge in WMDC Vs. Bajaj (supra) is correct and whether the overruling of that view by the Division Bench was called for at all. I have carefully perused both judgements with the able assistance of Mr.Samdani and Mr.Bobde. In WMDC's case, the challenge was to an arbitration award rendered by a sole arbitrator. The arbitration covered a dispute between two public companies. The WMDC, a Government of Maharashtra undertaking held 27% of shares of Maharashtra Scooters Ltd. (MSL), a public limited company whereas the respondent - Bajaj Auto held 24% shares. The balance 49% is held by public. The dispute as noted by the learned Single Judge between the parties was whether clause 7 of the agreement could form a valid basis for the conclusion of the arbitrator or not.
The learned Judge held that the shares in question are of a public limited company. Those shares are freely transferable. The stipulation in clause 7, therefore, is inapplicable and reliance was placed on the provisions of the Companies Act in this behalf so also the judgements of the Supreme Court. The learned Judge concluded that section 111A applies to public companies and noticing the difference between private company and public company, he concluded that the effect of clause 7 is to create a right of preemption between the petitioner and respondent before me in the event either of them seeking to part with or transfer its shareholding in MSL. The learned Single Judge concluded that a clause of preemption is to impose restriction on free transferability of shares and that is impermissible because the provisions of the Companies Act have been given a over-riding effect. On such conclusion, he set aside the Award and allowed the petition.
138] This view of the learned Judge was noted by the Division Bench in Messers Holdings Vs. Shyam Madan Mohan Ruia. There the issue was whether the defendant No.2 which is a public limited company and having its shares listed on the stock exchange could ::: Downloaded on - 09/06/2013 19:31:07 ::: hvn 110/195 COAPPL41.12 resist a transfer of shares under share purchase agreement dated 23rd June 1997 between plaintiffs before Division Bench and the defendant No.1. A suit was filed being Suit No.2494 of 1999 by the plaintiffs for a declaration that the acquisition of the shares by defendant No.3 under an agreement dated 12th May 1995 is illegal, null and void ab initio and of legal effect. In other words, its 30,000 shares were the subject matter of the June 1997 Agreement between plaintiffs and defendant No.1 and the attempt by defendant Nos. 1 and 3 to defeat that by relying upon prior agreement is not permissible, was the issue. The Division Bench noted the arguments of both sides during the course of which its attention was invited to the view taken by the learned Single Judge in WMDC (Supra). The Division Bench concluded that the consensual agreements between particular shareholders relating to their shares can be enforced like any other agreements. It is not required to be embodied in the articles of association. In para 56 the Division Bench referred to the view taken by the learned Single Judge in WMDC and in the paras which I have reproduced above, the judgement of the learned Single Judge is over-ruled. A proper and complete reading of this para would reveal that the Division Bench proceeded to reverse the view taken by the learned Single Judge essentially because of the conclusion reached by it and noted above. Additionally, it reversed it because an agreement of preemption even if willingly and consensually entered into by a shareholder and third party or between shareholders, imposes a restriction on the free transferability of shares. Before me reliance is placed only on Article 57 of the Articles of Association of GCL when it was a private company and the wording thereof to urge that the respondent No.2 cannot transfer the shareholding to any third party and the shares must be first offered to the appellants in terms of this Article. Whether this article and the right of preemption recognised therein is itself applicable after the status of the company has been altered and changed is the only issue before me. Therefore, the controversy with regard to the judgement rendered by the learned Single Judge in WMDC and whether it is rightly over-ruled or not cannot be taken note of in the peculiar facts of this case. However, it must be immediately noted that the Agreement or a consensual arrangement relating to their own shares between shareholders would bind them or not or whether that is void as not surviving in the teeth of Section 9 or Section 111A of the Companies Act, 1956, was the core issue in Messer Holding (supra) (see paras 48 to 57).
139] Mr.Samdani is in error in urging that the CLB has ::: Downloaded on - 09/06/2013 19:31:07 ::: hvn 111/195 COAPPL41.12 based its conclusion in the present case only on the view taken by the learned Single Judge in WMDC's case. A complete reading of the judgement of the CLB would show that the conclusion is with regard to the status of GCL and merely to support it, that it referred to the judgement of the Single Judge. The view taken by CLB is, therefore, not founded only on the single Judge's judgement as erroneously urged by Mr.Samdani.
140] For the reasons that persuaded the learned Single Judge (A.M.Khanwilkar, J), I am also of the opinion that the appellants have failed to substantiate their charge of oppression of minority. In my view, these allegations being serious, the appellants ought to have brought adequate and substantial proof. On the basis of the materials produced, it cannot be held that there is any oppression of minority. The conduct of the appellants in withdrawing from the proceedings and settling their disputes with respondent No.2 is also a relevant factor in denying them any relief. Now, their argument is that the understanding and agreement between them has not been adhered to and breached by respondent No.2. However, when they talk of such breach and allege as such, they rely upon the very events which have been made subject matter of Company Petition No.77 of 1990 by the other petitioners therein. Therefore, there being no independent proof and considering that the broad principles enshrined in law and referred to by the learned Single Judge would prevent the parties from raising same pleas again and again, the arguments insofar as oppression of minority concerned, also fail.
141] Having dealt with the submissions of parties, as noted above and finding that the appellants have failed to make out any case for intervention by this Court on the questions of law formulated above, there is no alternative but to hold that the company Appeal fails.
Accordingly, it is dismissed but without any order as to costs.
142] At this stage, Mr.Samdani, learned Senior Counsel appearing on behalf of the appellants submits that there is an interim order which is made by this Court in Company Application No.25 of 2010 which has been in force from 11th December 2009. That order has been continued on 28th June 2010 by learned Single Judge of this Court. Therefore, the interim order in terms of prayer clause (iii) be continued till the appellants impugn this order in Appeal. His request is that the order may be continued for a reasonable period so as to enable the appellants to adopt ::: Downloaded on - 09/06/2013 19:31:07 ::: hvn 112/195 COAPPL41.12 appropriate proceedings.
143] This request is opposed by Mr.Sen who appears for respondent Nos. 1, 5 and 6 and Mr.Tulzapurkar and Mr.Subramanian, learned Senior Counsel appearing for respondent Nos.2 and 3.
144] After having heard the learned Counsel at some length on this issue, I am of the opinion that interest of justice will be served if this interim order in terms of prayer clause (iii), is continued for a period of six weeks from today, save and except, the bracketed portion. The grant and continuation of interim order is without prejudice to the rights and contentions of all parties. The prayer clause (iii) after deleting bracketing portion reads as under:-
"(iii) that pending the hearing and final disposal of the appeal, this Hon'ble Bench be pleased to restrain the 2nd/ 3rd respondents by themselves and/or through their servants and or agents from in any manner howsoever, directly or indirectly, from selling, transferring, alienating, pledging, encumbering or in any manner creating any third party rights in to over or upon or in respect of the shares held, directly or indirectly, by the 2nd/3rd respondents in the company."
95. The learned counsel appearing for the respondent No. 2 submits that by order dated 22nd July, 2011 and 27th July, 2011, the Supreme Court has issued notice and passed interim inunction against respondent nos. 2 and 3 and not against the company and has not admitted the Special Leave Petition so far.
The learned counsel submits that there is no effect of the proceedings in Company Application (73 of 2012) and Company Application (85 of 2012) in Company Petition (87 of 2010) on the proceedings pending in the Supreme court arising out of Company Petition No. 132 of 2009 or vice versa.
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96. It is submitted that the Company Petition No. 132/2009 was filed by the Appellants to restrain sale of shares held by Respondent Nos. 2 and 3 because of the apprehension, based on newspaper reports, that the sale was imminent.
The main question decided was whether the company is a public company or a private company which was deemed to be a public company under Section 43-
A. The answer of the CLB was that on and after 5.5.2001 the company became a public company and that Article 57 was void in view of Section 9 of the companies Act, 1956. This Court took the same view and held that Article 57 does not exist as it must give way to the law. The question before the Supreme Court is whether Article 57 has ceased to operate by reason of law or remained validly in the Articles even after 5.5.2001. The findings on law rendered in the said judgments therefore operate with full force. No injunction was sought to restrain the Company from deleting Article 57 in accordance with law. If sought, it is reasonable and respectful to assume that it would not have been granted by the Supreme Court. In any case, even if stay had been granted of the operation of the impugned orders, the stay would not prevent the company from holding duly requisitioned extraordinary general meeting and resolving to delete Article 57.
97. The submission of the respondents is that the result of the SLP before the Supreme Court will have no bearing on the present proceedings because if the Supreme Court allows the appeal of the present appellants, the only result ::: Downloaded on - 09/06/2013 19:31:07 ::: hvn 114/195 COAPPL41.12 would be that Article 57 continued to be in the Articles of Association until it was deleted in the EOGM of 22-5-2012. If the Supreme Court dismisses the SLP, the result will be that Article 57 ceased to be legally operative from 5-5-2001 but has been formally deleted in the EOGM of 22-5-2012. Thus either way the present proceedings do not touch or impinge upon the proceedings before the Supreme Court and the S.L.P. Is not rendered infructuous. The CLB was clearly right in holding after careful consideration, that the proceedings in the Supreme Court are not being pre-empted or interfered with. It is submitted that the finding that the company is a public company is clearly a judgment in rem and decides the status of the company, a juristic person, and binds everyone generally; it is 'conclusive against all the world". Similarly, the finding that the status of property viz. shares of the shareholders, is that they are freely transferable, is equally binding and conclusive. The effect of the judgment in rem is, firstly, to declare finally the status of the company as being a public company and make it binding on the Company, its members and all other generally, secondly, to declare the status of the property viz. shares in such company as being freely transferable, and thirdly, to preclude every member of the Company or any outsider, including a transferee of shares from re-agitating the same issues again. The judgment of this Hon'ble Court dated 14-11-2008 precludes all argument from anyone about the status of the company as a public company and the free transferability of shares.
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98. It is submitted that it is of no consequence that the Appellants herein had withdrawn from Company Petition NO. 77/90 before it was heard or that the judgment can be said to have proceeded on the basis of admission by the two petitioners who continued with the petition. The withdrawal by the Appellants herein precludes them from reagitating the questions raised in C.P. NO. 77/90, as already held by this Hon'ble Court in judgment dated 14-11-2008.
Moreover, the finding on Respondent No.1 being a public company with effect from 5-5-2001, even if it considered as being based on admission, operates as an estoppel by judgment. The learned counsel relied upon the views of the Privy Council in Hoystead's case as under :
"Very numerous authorities were referred to. In the opinion of their Lordships it is settled, first, that the admission of a fact fundamental to the decision arrived at cannot be withdrawn and a fresh litigation started with a view to obtaining another judgment upon a different assumption of fact; secondly, the same principle applies not only to an erroneous admission of a fundamental fact, but to an erroneous assumption as to the legal quality of that fact. Parties are not permitted to begin fresh litigation because of new view they may entertain of the law of the case, or new versions which they present as what should be a proper apprehension by the court of the legal result either of the construction of documents or the weight of certain circumstances. If this were permitted, litigation would have no end, except when legal ingenuity is exhausted...."
99. The learned counsel appearing for the respondent nos. 4 and 5 submits that the issues raised by the appellant in the present proceedings are governed ::: Downloaded on - 09/06/2013 19:31:07 ::: hvn 116/195 COAPPL41.12 by order dated 14th June, 2011 passed by this court i.e. whether company became public company in 2001 and whether Article 57 will certify transformation of the first respondent company into public company. It is submitted that the issue in Special Leave Petition is not larger than this. It can never decide that the respondent no. 1 company can never in future resolve to become a public company or amend its articles even if appellants were to succeed in SLP. It is submitted that as on the date, the judgment dated 14th June, 2011 passed by Shri Justice S.C. Dharmadhikari in Company Appeal (24 of 2010) holds the field and the first respondent company is declared to be public company and Article 57 is declared void in view of section 9 of the Companies Act, 1956. The said judgment also covers the issue in this appeal.
It is submitted that in the said order and judgment dated 14th June, 2011, it is submitted that the resolution being in consonance with the binding precedent can never be oppressive which foreclosed the primary issue in the petition itself. The learned counsel further submits that the findings recorded by this court in the order and judgment dated 14th November, 2008 in Company Petition (77 of 1990) are not based on concession. It is submitted that even if it is assumed that it is based on concession, respondent no. 1 company has invited the finding from this court on the basis that the first respondent company is a public company and are bound by it, first respondent will have to comply. The appellants have invited the findings from this court on the basis that the respondent company is a public company. The learned counsel ::: Downloaded on - 09/06/2013 19:31:07 ::: hvn 117/195 COAPPL41.12 submits that even in the said judgment this court has held that the appellants who withdrew from the said petition are also bound by the company's stand and that the decision is final. It is not open to the appellants to claim that they are not bound by the said order and judgment so long as the said judgment is not set aside or modified. It is submitted that 17% minorities view cannot prevail over the majority nor it can overrule the binding judgments. It is submitted that the present proceedings filed by the appellants are hindrances in functioning and abuse of process of court.
100. Mr.Kadam, the learned senior counsel appearing for respondent no.1 submits that first respondent company is bound by the judgments of this court delivered on 14th November, 2008 and 14th June, 2011 by which it has been held that Article 57 is void. The articles thus stood amended by virtue of section 404 and only formal compliance was required i.e. filing with the Registrar of Companies and the ministerial act of deletion. The learned counsel relied upon the judgment of this court in the case of Gurudas s/o.
Dhondba Dadmal Vs. Scheduled Tribe Caste Certificate Scrutiny Committee and others, 2005(3) Mh.L.J. 607 in support of the plea that since the judgment of this court delivered on 14th June, 2011 is not stayed by the Supreme Court, it is binding on parties as well as this court. Paragraphs 7 to 9 of the said judgment reads thus :
"7. Smt. S. W. Deshpande and Shri Charpe, the learned counsel ::: Downloaded on - 09/06/2013 19:31:07 ::: hvn 118/195 COAPPL41.12 appearing on behalf of respondents 1 and 2 respectively submit that the judgment of this Court cited supra is challenged before the Apex Court and the Apex Court is seized with the matter. Smt. Deshpande and Shri Charpe, therefore, requests that this matter should be adjourned until the Apex Court decides the issue.
8. We have enquired from the learned counsel for respondents 1 and 2 as to whether the judgment of this Court is stayed by the Apex Court or not. It is brought to our notice that only the matter is admitted and no stay is granted.
9. In that view of the matter, we find that the judgment of this court in the case of Mana Adim Jamat Mandal v. State of Maharashtra, cited supra holds the field. Once the person proves that he belongs to 'Mana Tribe', it is not necessary to prove that the said 'Mana' has an affinity with 'Gond Tribe'. In that view of the matter, the impugned order passed by the Scrutiny Committee dated 29 10-2001 is not sustainable in law and, therefore, will have to be quashed and set aside. Since the termination of the petitioner is a consequence of the order of the Scrutiny Committee, the termination order dated 24-1-2002 will also have to be quashed and set aside."
101. The learned counsel relied upon the Judgment reported in (2005) 11 SCC 723 para 23 to 27 in support of the plea that any action contrary to law is ultra vires.
102. The learned counsel for respondent no.2 submits that the order passed by this court on 14.11.2008 in Company Petition No. 77 of 1990 operates in rem and is binding also on the appellants, respondents, CLB and this court. The learned counsel placed reliance on the following paragraphs of the said order which read thus :
" 6. As aforesaid, the original Petitioner Nos.1, 2, 3, 6 and 7 have withdrawn from the present proceedings unconditionally. As per their request, they have been deleted from the array of ::: Downloaded on - 09/06/2013 19:31:07 ::: hvn 119/195 COAPPL41.12 Petitioners. The effect of unconditional withdrawal from the proceedings by the said Petitioners is that they have given up their challenge with regard to the alleged acts of oppression and mismanagement. In that, those Petitioners have consciously acquiesced in the acts complained of. It is further significant to note that during the arguments, the Counsel appearing for the present Petitioners, in all fairness, stated that although earlier the ground regarding mismanagement was given up, but has been once again introduced by way of amendment; nevertheless, the present Petitioners shall confine to the ground of oppression of minority. Indeed, learned Counsel had stated that the facts which are pressed into service in the context of ground of oppression of minority would, by itself, indicate mismanagement and be viewed accordingly.
7. The present Petitioners have filed elaborate written submissions besides making oral arguments through Counsel.
During the submissions, the thrust of reliefs pressed on behalf of the present Petitioners was that to meet the ends of justice, this Court should pass appropriate order under Section 402 directing the majority shareholders to buy out the shares held by them at such value as the Court may deem fit. In the alternative, the Court may consider granting relief in terms of prayer clauses (c) to (f),
(h) to (hhh) (v); (hhh) (xix); (xx); (xxii) and (xxiii) and prayers (i)-
(i) to (5). This position is restated even in the concluding part of the written submissions filed on behalf of the present Petitioners.
8. I would, therefore, think it apposite to consider the entire matter only in the context of reliefs pressed on behalf of the present Petitioners and in particular the grounds referred to in the written submissions, while dealing withindividual instances referred to in the Petition as amended.
9. Ordinarily, as the allegation is one of oppression of minority, the Court is bound to decide that aspect one way or the other on its own merits. Dependent on the finding reached on the said issue, the Court can proceed to pass appropriate order in equity or otherwise. Significantly, in the present case, the present Petitioners have made it more than clear that the principal relief pressed by them is to issue direction to the majority shareholders to buy out the shares held by the Petitioners at such valuation as the Court may determine. Even if this relief is to be granted to the Petitioners, in the first place, the same will have to be confined ::: Downloaded on - 09/06/2013 19:31:07 ::: hvn 120/195 COAPPL41.12 only to the present Petitioners (original Petitioners 4 and 5). For, the other Petitioners (original Petitioners 1,2,3,6 & 7) have consciously withdrawn from the proceedings unconditionally. Insofar as the present Petitioners are concerned,as a matter of fact they are free to deal with the shares held by them. In that, the shares are now freely transferable. Indeed, when the Petition was presented at the relevant time, the Respondent No.1 Company was a Private Limited Company. As a result, there was restriction in the transfer of shares. However, it is common ground that now the Respondent No.1 Company has become a Public Limited Company-as a result of Special Resolution moved in the Extra Ordinary General Meeting dated 5th May 2001 having been defeated. Having acquired the status of a Public Limited Company, the restriction on the right to transfer the shares which was applicable to Private Limited Company, would naturally get diluted. That however, does not mean that there would be no right in the Board of Directors to consider the transfer request on case to case basis on its own merit, keeping in mind the best interests of the Company so as to prevent any undesirable person becoming its member and if enrolment of such person as a member, is likely to be prejudicial to the Company. In other words, the Board of Directors would be justified in declining to register a given request for transfer of shares keeping in mind the paramount interests of the Company, if so required. The only other apprehension of the present Petitioners is that as has been cited in the past in respect of some of the transfer request that the maximum number of members provided in the A.O.A. (as 50 members) has already been exhausted. As a matter of fact, this restriction will have no relevance after the Respondent No.1 Company has admittedly become a Public Limited Company. For, restriction of maximum number of 50 members which may apply to a Private Limited Company, will be of no relevance any more.
Notably, even in respect of a Private Company which limits the number of its members to 50, as provided in the definition of "Private Company" in Section 3(1)(iii) of the Act, it would not include persons who are in the employment of the Company and persons who, having been formerly in the employment of the Company were members of the Company while in that employment and have continued to be member after the employment ceased. Indubitably, the Company will be bound to process the share transfer request of the present Petitioners keeping in mind the regulations on the subject applicable at the relevant time as and when occasion arises.
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10. Suffice it to observe that even if the present Petitioners were to succeed in establishing that it is a case of oppression and mismanagement, direction that could be issued against the majority of the members, is to buy out the shares held by the present Petitioners at a fair value, keeping in mind parameters provided in Article 57 (g) itself. At best, it could be further ordered that in the event, the majority shareholders were disinclined to buy out the shares held by the present Petitioners within a reasonable time after the offer is made by the present Petitioners in that behalf, it would be open to the present Petitioners to sell the said shares to any outsider as per the price finalised with them interse. Indeed, enrolment of the outsider transferee as member of the Respondent No.1 Company would be subject to scrutiny to be done by the Board of Directors in the best interests of the Company for preventing any undesirable person becoming a member of the Company. The Board of Directors will have to assign tangible and legally sustainable reason to reject the request to register the transfer of any share. In my opinion, the principal relief claimed by the present Petitioners would stand addressed with the above arrangement.
11. I shall now proceed to consider the alternative reliefs pressed during the course of arguments by the Counsel for the present Petitioners. Indeed, although the present Petitioners have submitted that the reliefs to be presently reproduced are alternative reliefs, the same in fact, are the substantive reliefs. I would straightaway refer to the said reliefs pressed by the present Petitioners, which read thus: "(c) That the 2nd Respondent be restrained by an order of permanent injunction from exercising any rights or receiving any dividends or any rights or bonus shares or any accretions in respect of the said 3000 share purportedly registered in the name of the 2nd Respondent and the 1st Respondent;
(d) For orders and directions directing Respondents 1 & 2 to offer the said 3000 equity shares of the face value of Rs.100/- each (together with all accretions thereto) to the Petitioners in accordance with Article 57 of the Articles of Association at the value determined in accordance therewith and directing the 1st Respondent to register the same in the name of the Petitioners and make consequential notings on the 1st Respondent's records;
(e) For a declaration that the purported Extra Ordinary General Meeting purportedly held on 15/10/1988 is null and void ::: Downloaded on - 09/06/2013 19:31:07 ::: hvn 122/195 COAPPL41.12 and of no effect.
(f) For a declaration that the purported Annual General Meeting purportedly held on 29/12/1989 is null and void and of no effect.
(h) Holding the Extra Ordinary General Meeting on 15-2-1990 and/or transacting any business thereat whether as set forth in the said notice dated 16-1-1990 (Ex.'S'hereto) or otherwise.
(hh):(i) that it may be ordered anddeclared that the purported transfer of the said 4 shares described in Exhibit Q-42 hereto from the name of Respondent Nos.11 & 12 to the name of Respondent No.13 is contrary to the Articles of Association of the 1st Respondent Company and therefore, illegal, null and void and is liable to be set aside;
(h):(ii) that the register of the members of the 1st Respondent Company be rectified by deleting the name of Respondent No.13 from the register of members in respect of the said 4 shares described in Exhibit Q-42 hereto and by restoring the names of Respondent Nos.11 and 12 in respect of the said 4 shares.
(h):(iii) that Respondent No.1 and Respondent Nos.11 and 12 be ordered and directed to take all such steps as may be necessary, including the execution of transfer forms etc. in order to transfer the said four shares from the names of Respondent Nos.11 and 12 to the name of the Petitioners or any of them.
(hhh)(i) This Hon'ble Court be pleased to declare that the petitioner No.2 was and in a willing member/share holder of the Company as per the Articles of Association of the Company in respect of the 22 shares offered by Respondent No.5 and 6 referred to in para 14(a)(vii) above;
(hhh)(ii) that Respondent Nos.1, 5 and 6 be ordered and directed to take all such steps as may be necessary including the execution of transfer forms etc. in order to transfer the said 22 shares from the names of Respondent Nos.5 and 6 to the name of original Petitioner No.2 and the Register of members of the Company be ordered to be rectified accordingly forthwith;
(hhh)(iii) that pending the hearing and final disposal of the Petition, Respondent No.1 be ordered and directed not to register ::: Downloaded on - 09/06/2013 19:31:07 ::: hvn 123/195 COAPPL41.12 the transfer of the said 22 shares from the name of Respondent No.5 and 7 to any outsider non-member of the company;
(hhh)(iv) that this Hon'ble Court be pleased to declare that the purported sale or transfer of shares from Respondent Nos.33 to 36 in favour of Respondent No.27 to 32 and the Respondent No.1 Company's registration of such transfers as per particulars set out in Exhibit-QQ20 hereto is void, invalid and illegal;
(hhh)(v) that this Hon'ble Court be pleased to order and declare that the purported sale or transfer of the said shares in favour of Respondent Nos.27 to 32 by Respondent Nos.33 to 36 and the registration of the transfer of the said shares in the Register of Members of the Respondent No.1 Company be cancelled and set aside and the Register of Members of Respondent No.1 Company be rectified accordingly;
(hhh)(xix) that it may be ordered and declared that the purported transfer of the said 5 shares referred to in paragraph 16(S)(1)
(xiii) hereto from the names of Respondent Nos.2 & 4 to the name of Respondent no.44 is contrary to the Articles of Association of the 1st Respondent Company and therefore illegal null and void and is liable to be set aside;
(hhh)(xx) that the Register of Members of the 1st Respondent Company be rectified by deleting the name of Respondent No.44 from the Register of members in respect of the said 5 shares and by restoring the names of Respondent Nos.2 & 4 in respect of the said 5 shares;
(hhh)(xxii) that it may be ordered and declared that the purported transfer of the said 5492 shares in favour of Respondent No.39 (Gharda Consultants Private Limited) is contrary to the Articles of Association of the 1st Respondent Company and contrary to the Companies Act, 1956 and is illegal null and void and is liable to be set aside;
(hhh)(xxiii) that the Register of Members of the 1st Respondent Company be rectified by deleting the name of Respondent No.39 (Gharda Consultants Private limited) from the Register of members in respect of the said 5492 shares and by restoring the names of the respective transferors in respect of the said 5492 shares; [the aforesaid numbering is given on the basis that the ::: Downloaded on - 09/06/2013 19:31:08 ::: hvn 124/195 COAPPL41.12 prayers proposed in Company application No.130 and as communicated vide letter dated 26th July, 1993 will be sanctioned.]
3. in the alternative to prayers (a) and (b) above(i) for appropriate orders and directions under sections 397, 398 and 402 of the Companies Act, 1956 including appointment of an Administrator or Special Officer of the 1st Respondent with all powers of the Board of Directors for a period of 5 years or for such other period as this Hon'ble Court may deem fit and proper for managing the affairs of the 1st Respondent and the Board of Directors of the 1st Respondent be displaced during such period;
(d) the 1st Respondent be ordered to issue and allot to the Petitioners such number of equity shares of the nominal value of Rs.100/- each in the capital of the 1st Respondent as is requisite to give to the petitioners a majority on the issued and paid up equity shares in the capital of the 1st Respondent as per value or at such premium as may be fixed by the Controller of Capital Issues, Government of India, or any other competent person as this Hon'ble Court deem fit and proper and to that intent the share capital of the Company be increased;
for orders and directions directing the Respondents 1 & 2 to offer the said 3000 equity shares of the face value of Rs.100/- each (together with all accretions thereto) to the Petitioners in accordance with Article 57 of the Articles of Association at the value determined in accordance therewith and directing the 1st Respondent to register the same in the name of the petitioners and make consequential notings on the 1st Respondent's records.
(ii)(1) that it may be ordered and declared by this Hon'ble Court that the Extra Ordinary General Meeting purported to have been held on 15th February, 1990 and the business conducted therein/resolutions purported to have been passed therein are all null and void and bad in law;
(2) that Respondent No.1 be restrained by an Order and Injunction of this Hon'ble Court from taking any steps or action on the basis or in pursuance of the resolutions purported to have been passed at the said meeting of 15th February, 1990 or from in any manner whatsoever giving effect thereto.
(3) that it may be ordered and declared that the purported transfer ::: Downloaded on - 09/06/2013 19:31:08 ::: hvn 125/195 COAPPL41.12 of 3,000 equity shares by Respondents No.5 in favour of 2nd Respondent is illegal, null and void;
(4) that this Hon'ble Court be pleased to rectify the register of members of the 1st Respondent by deleting the name of Respondent by deleting the name of Respondent No.2 and 4 in respect of 3000 equity shares standing in their name and substituting the name of Respondent No.5, (5) that Respondent No.2 be restrained by a permanent order and injunction of this Hon'ble Court from in any manner whatsoever exercising any rights of membership whatsoever including the voting rights in respect of 3000 equity shares standing their names."
60. What is intriguing is that the principal prayer of the present Petitioners during the argument was that direction be issued to the majority shareholders to buy out the shares held by the present Petitioners. On the one hand, the present Petitioners are keen to walk out of the Company by selling their shares to the majority shareholders at a price to be determined by this Court. I have already adverted to the provisions of the A.O.A. which govern the procedure for determining fair value of the shares, in the event, the shares were to be offered to the existing members. In my opinion, in the fact situation of the present case, there is no question of issuing direction to the majority members to buy out the shares of the present Petitioners. If the Petitioners are keen to walk out of the Respondent Company, it does not stand to reason as to why the Petitioners are questioning every singular transfer of share, especially between 1989 to 5th May 2001. After 5th May 2001, as the Company has become a Public Company, the issues raised on behalf of the Petitioners would become insignificant.
Assuming that the Petitioners were to succeed in their assertion, it is only the present Petitioners who would be entitled to claim prorata shares allocable to them (original Petitioners 4 and 5) and not to invalidate the transfer of 5492 shares in its entirety. However, as has been found earlier, since the transfer of said 5492 shares was between member-to-member, the same was legitimate and even consistent with the norms of Article 57. Accordingly, no relief in terms of prayer clauses under consideration can be granted to the present Petitioners.
61. The only other reliefs that need to be addressed are the ::: Downloaded on - 09/06/2013 19:31:08 ::: hvn 126/195 COAPPL41.12 alternative reliefs to prayer clauses (a) and (b) being prayer clause (I) and in particular clauses I(i) to (iii) and II(i) to (v). All these reliefs are also incidental to the reliefs pressed at the time of arguments which have already been dealt with in the earlier part of this decision. For that reason, it is not necessary to separately deal with the same.
62. Taking overall view of the matter, I have no hesitation in concluding that no case regarding oppression of minority shareholders has been established by the present Petitioners. Assuming I were to hold to the contrary, I would still be inclined to hold that no tangible grounds are made out to conclude that it is just and equitable to wind up the Respondent No.1 Company. For, on this finding as observed in the case of Jaladhar Chakraborty (supra), no further direction needs to be issued. However, insofar as the direction pressed by the present Petitioners against the majority shareholders to buy out the shares of the present Petitioners, I have already dealt with that aspect in the earlier part of this Judgment."
103. The learned senior counsel for respondent no. 2 submits that the order passed by this court on 14th November, 2008 in Company Petition No. 77 of 1990 was a judgment in rem and not in action in personam. It is submitted that the proceedings under Sections 397 and 398 are not personal actions for enforcing personal rights but are representative actions on behalf of the shareholders and the public at large since public interest is a factor for consideration under these sections. The learned counsel placed reliance on Section 399(3) of the Companies Act and submits that the said proceedings reinforces the view that they are representative actions on behalf of shareholders. It is thus submitted that the petition was thus as action "in rem"
and therefore the judgment dated 14th November, 2008 is a judgment in rem. It ::: Downloaded on - 09/06/2013 19:31:08 ::: hvn 127/195 COAPPL41.12 is submitted that the judgment in rem determines an issue of right, status or property in a way and thus binding persons generally. The learned counsel placed reliance on the Halsbury Laws of England 4th Edition, paragraphs 970 to 972 which read as under :-
970. Classification of judgments; in general. Final judgments which give rise to an estoppel are divided into two classes: judgments determining status, known as 'judgments in rem' and judgments determining the rights of parties, known as 'judgments in personam' or 'judgments inter partes'. The distinction is important because, as is discussed below, it affects the parties who will be bound by the judgment.
971. Importance of distinction between judgments in rem and judgments in personam or inter partes. The most important distinction between judgments in rem and judgments in personam or inter partes is that, whereas the latter are binding only between the parties to them and those who are privy to them, the judgment in rem of a court of competent jurisdiction is, as regards persons domiciled and property situated within the jurisdiction of the court pronouncing the judgment, conclusive against all the world in whatever it settles as to the status of the persons or property, or as to the right or title to the property, and as to whatever disposition it makes of the property itself, or of the proceeds of the sale. In other words, all persons, whether party to the proceedings or not, are estopped from averring that the status of persons or things, or the right or title to property, is other than the court has by such a judgment declared or made it to be. A judgment in rem can have no effect as such, however, beyond the limits of the state within which the court delivering the judgment exercises jurisdiction, unless the thing ::: Downloaded on - 09/06/2013 19:31:08 ::: hvn 128/195 COAPPL41.12 affected is situated or the person affected is domiciled within those limits.
972. Meaning of 'judgment in rem'. The term 'judgment in rem' has been judicially described as 'a specialised and somewhat misleading term of art limited to judgments concerned with status. A judgment in rem may be defined as the judgment of a court of competent jurisdiction determining the status of a person or thing, or the disposition of a thing, as distinct from the particular interest in it of a party to the litigation. Apart from the application of the term to persons, it must affect the subject matter of the proceedings in the way of condemnation, forfeiture, declaration of status or title, or order for sale or transfer.
104. Mr.Bobde, the Learned Senior Counsel appearing on behalf of the respondent no.2 distinguishes the judgment of this court in case of M/s.Holdings Ltd. vs. Shyam Madanmohan Ruia & Ors. Reported in 2010 Vol. 112 (9) Bom.L.R. 4005 on the ground that the said judgment has been considered and dealt with in the judgment and order dated 14th June, 2011 passed by this Court. It is submitted that ratio in the said case has no application to the facts of this case. He submits that the said judgment in case of M/s.Holdings Ltd. (supra) case reported only deals with a scenario where a restriction on transfer of shares by way of pre-emptive rights is included in a shareholders agreement i.e. an agreement inter se shareholders and effectively holds that such an agreement is an imposition of a restriction by the shareholders upon themselves and is in furtherance of the principle of free transferability of shares. The said judgment does not deal with a blanket ::: Downloaded on - 09/06/2013 19:31:08 ::: hvn 129/195 COAPPL41.12 restriction on the transferability of shares which is imposed upon a shareholder through a pre-emptive right contained in the articles of association of the company. It is submitted that in the present case there is no agreement inter se the appellants and the respondents and the blanket pre-emptive rights as contained in the articles of association are therefore found to be unenforceable and void.
105. The learned counsel appearing on behalf of the appellants submit that the 1st respondent was and is a private company by incorporation that became a deemed company under section 43A and at best, it would be unlisted public company. It is submitted that by defeat of resolution dated 5th May, 2001 and/or the amendment to the Companies Act, status of the 1st respondent does not change and it continue to remain what it was prior thereto. It is submitted that in any event, the issue is pending in the Supreme Court. It is submitted that the effect of Articles of Association of pre-existing private limited not having clause (d) is the question of law. By voting against such amendment, the appellants cannot be estopped. In so far as letter dated 6th June, 2001 addressed by the appellants is considered, it is submitted that said letter was in reply to the 1st respondent circulating notice under Article 57. It is submitted that the 1st respondent should be estopped from contending that Article 57 is invalid after 5th May, 2001. It is submitted that in any event, there can't be any estoppel against the statute. If in future, Article 57 can remain in the articles in ::: Downloaded on - 09/06/2013 19:31:08 ::: hvn 130/195 COAPPL41.12 the company, then any stand taken in letters cannot operate as an estoppel.
106. Mr.Samdhani, the learned senior counsel appearing for the appellants on the other hand made following submissions on these issues :-
(a) The judgment of Shri Justice A.M.Khanwilkar dated November 14, 2008 did not declare Article 57 as void. In the said Judgment, no order is passed under Section 402 of the Companies Act to delete Article 57. On the contrary, it is held that Article 57 is a complete code. Further, that judgement is based on a consensual arrangement between the Petitioners in CP 77 and the Respondents and as such it is a judgement by concession by parties. Relying upon the judgment of Supreme Court reported in AIR 2001 SC 1273 it is submitted that the judgment obtained by concession is not a binding precedent.
In the alternative it is submitted that it is a consensual judgment and therefore cannot bind persons who are not parties thereto. The Appellants names in the said Petition had been deleted. The appellants placed reliance on Halsbury laws of England, 3rd Edition, para 370 which reads thus :-
370 Consent judgment in rem. Although a judgment by consent may well create an estoppel between the parties (m), it is at least doubtful whether a judgment in rem obtained by consent of parties (o) can ever be conclusive against persons who were not and do not claim through the parties to it, except so far as may be necessary to protect the title of a person who ::: Downloaded on - 09/06/2013 19:31:08 ::: hvn 131/195 COAPPL41.12 purchases the res on the faith of the judgment.
It has been laid down that a judment by consent cannot effect a res judicata so as to bind the public or absent parties (p), and that a judgment by consent establishing a will in solemn form does not bind a party who, though served with a citation to see proceedings, has not appeared or been represented at the hearing, so as to prevent him from taking proceedings to revoke probate
(q).
(b) If Shri Justice A.M.Khanvilkar had already decided the issue as to whether Article 57 was invalid or void as is sought to be contended by the respondents then there was no requirement for Shri Justice Dharmadhikari to go into the said question and render a finding to that effect. It is significant that in CP 77 the parties were not at issue on the validity of Article 57. Neither were any arguments advanced nor recorded nor decided by Shri Justice A.M.Khanvilkar on that point.
(c) In law or under the Companies Act, there is no prohibition on a public company from having a right of pre-emption. This is more so in view of a company that has become a deemed public company under Section 43A of the Companies Act and equally so for a company that is an unlisted public company.
(d) Section 111A is the only provision shown by the respondents to ::: Downloaded on - 09/06/2013 19:31:08 ::: hvn 132/195 COAPPL41.12 submit that a public company cannot have a right of pre-emption is inapplicable to the 1st respondent. The said section does not apply to a company defined under Section 111(14). Section 111(14) of the Companies Act states as under:
"In this section company means a private company and includes a private company which had become a public company by virtue of section 43A of this Act."
It is submitted that admittedly, the 1st Respondent had become a public company by virtue of S. 43A, and thus the provisions of S. 111A would be inapplicable.
(e) The question whether the amendment to S. 3(1)(iii) is prospective, the question whether the abrogation of S. 43A of the Companies Act is prospective, the question whether the absence of article (d) in pre-existing private companies would denude them their status of a private company etc are all questions that are presently pending in the Supreme Court. The question whether a public company can validly provide a right of pre-emption is also pending in the Supreme Court.
(f) The Judgment of Shri Justice Dharmadhikari whilst holding Article 57 to be void does not order its deletion. The said Judgment also does not hold that Article 57 may be deleted without properly conducting an EOGM or in a manner contrary to S. 31 and S. 189 of the Companies Act, 1956.
(g) The grievance of the appellants against the attempt of the majority ::: Downloaded on - 09/06/2013 19:31:08 ::: hvn 133/195 COAPPL41.12 shareholders to remove Article 57 from the Articles of Association on the ground that it has been declared as void cannot amount to defiance of the Order of this Court when the correctness of the judgment is presently pending in the Supreme Court.
(h) It is true that the said Judgment dated 8th August, 2011 is not stayed. However, by Order dated August 8, 2011 Shri Justice Dharmadhikari, has given liberty to adopt appropriate proceedings to challenge a fresh EOGM if convened for the purpose of deleting Article 57. This order was passed after the learned Judge was informed of the fact that an SLP had been filed against his earlier Order dated June 14, 2011 in which the Supreme Court had issued notice and granted injunction. The learned Judge has also stated that the said fresh proceeding would be decided uninfluenced by "the earlier order".
Whether "earlier order" means the Order of CLB dated November 9, 2010 or the Order of High Court dated June 14, 2011 - the effect is the same - that the fresh proceedings should be decided uninfluenced by the earlier finding that Article 57 is void. It is submitted that the very issue itself is pending in the Supreme Court.
(i) The Judgment and Order dated November 14, 2008 does not hold that Article 57 is void. In that case, this issue was not even considered and in fact the parties proceeded on the basis of a concession that the 1st respondent has become a full fledged public company. In any event the Appellants were not parties to that judgment and the same cannot bind the Appellants.
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(j) This Court by its Order dated June 14, 2011 has held that the 1st respondent has become a full fledged public company and consequently Article 57 is void. The question of the status of the 1st Respondent and the validity of Article 57 is to be adjudicated by the Supreme Court.
(k) The Judgment and order dated 14th June, 2011 was challenged in Supreme Court and SLP against the said order is pending wherein not only the Supreme Court has issued notice but has also granted injunction restraining second and third respondent from transferring the shares directly or indirectly held by them so as to protect the appellant's pre-emptive right under Article 57. It is submitted that the conduct of EOGM dated 22nd May, 2012 by which the respondent contended that the resolution for deleting article 57 was allegedly passed is the subject matter of substantive challenge in Company Application No. 91 of 2012 which is still pending. The learned counsel submits that the submission of the respondents that even if the Supreme Court dismissed the SLP, Article 57 would be finally declared to be invalid and even if the Supreme Court allows Special leave Petition, Article 57 would be valid until 22nd May, 2012 and thereafter will cease to exist is self-defeating argument. It is submitted that the entire purpose of deleting Article 57 by the respondent is to interfere with the matter pending in Supreme Court and is an attempt to render it infructuous and academic. It is submitted that if Supreme Court holds that article 57 is valid, the said article would be valid for all time unless lawfully deleted. Even if the Supreme ::: Downloaded on - 09/06/2013 19:31:08 ::: hvn 135/195 COAPPL41.12 Court holds that article 57 is invalid, it will have to be deleted in accordance with law and at properly convened EOGM. It is submitted that if respondents are allowed to delete article 57 now and the Supreme Court subsequently holds that it was valid or if the appellant succeeds in their contention that the resolution was wrongfully passed on 22nd May, 2012, it would give rise to innumerable complications and multiplicity of proceedings to set the clock back. It is submitted that it would be impossible to set the clock back as several third party rights may have been created on the basis that there there is no right of pre-emption.
107. In my view the proceedings filed under section 397 and 398 are not personal action in personal rights but are representative actions on behalf of the shareholders and public at large in view of the fact that the public interest is the factor for consideration in these sections. In my view learned counsel Mr. Bobde is right in his submission that the petition filed under section 397 and 398 (Company Petition No. 77 of 1990) was an action in rem and therefore, the judgment dated 14th November, 2008 passed therein by this court is a judgment in rem. Shri Justice A.M. Khanwilkar in the said judgment has given categorical finding that respondent no. 1 company is a public limited company. The present appellants who are parties to the said petition filed under section 397 and 398 had not obtained any leave to file the proceedings again on the basis of the same cause of action in future. I am not ::: Downloaded on - 09/06/2013 19:31:08 ::: hvn 136/195 COAPPL41.12 inclined to accept the submissions made by Mr. Samdani, the learned senior counsel that the order dated 14th November, 2008 passed by this court in Company Petition No.77 of 1990 is based on concession and is not binding on the appellants. In my view, in the said judgment dated 14th November, 2008 this court has decided after considering all the facts that the first respondent company is a public limited company. This court has thus decided the status of the company which is juristic person and thus in my view, the said judgment has attained finality not having been challenged by the petitioners and thus operates in rem and binds every one generally inclusive of the appellants.
In my view the said judgment is also biding on the single judge of this court.
The finding of this court rendered in the said judgment that the shares of the first respondent company are freely transferable is also in my view equally biding and conclusive not only on the parties thereto but also this court.
108. The learned author says that the judgment in rem may be defined as judgment of the court of competent jurisdiction determining the status of the persons or thing or disposition of the thing as distinct from the particular interest in it of the party to the litigation. Apart from the application of the term to persons it must affect the subject matter of the proceedings in the way by condemnation, forfeiture, declaration of status or title. In my view, such declaration rendered by this court in the said judgment that the first respondent company is a public limited company and its shares are freely ::: Downloaded on - 09/06/2013 19:31:08 ::: hvn 137/195 COAPPL41.12 transferable declares the status and purport of the first respondent company and thus in my view the said judgment operates in rem and is binding on all the parties. In my view these appellants are estopped from challenging the status of the first respondent company as public limited company and also the finding that the shares of the first respondent company are freely transferable.
In my view CLB in the impugned order in Para 13 has rightly followed the judgment of this court in Company Petition No.77 of 1990 by holding that the said decision is binding on the petitioners who had unconditionally withdrawn from the said petition filed under section 397 an 398 of the Act. It is further held that the decision is also binding on CLB. In my view the said decision of this court has been rightly followed by CLB. There is no substance in the submission made by Mr. Samdani that if this court had already decided the issue as to whether Article 57 was invalid or void, there was no requirement for this court to decide the said judgment again and render finding to that effect. Shri Justice S.C. Dharmadhikari has followed the judgment of this court delivered by Shri Justice A.M. Khanwilkar.
109. I shall now decide as to whether the judgment dated 14 th June, 2011 passed by this court in Company Appeal No. 24 of 2010 was binding on the CLB and also this court, not having been stayed by the Supreme Court and as to whether the appellant can agitate the issues which are already decided by this court in order dated 14th June, 2011 in the present proceedings.
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110. Apart from the fact that in the present proceedings, I have already taken a view after considering the pleadings documents and arguments advanced by the parties that respondent no.1 company is a public limited company and shares are freely transferable and that the resolution passed by the first respondent company in its EOGM held on 22.5.2001 can not be construed as the act of oppression but shall consider whether the order and judgment delivered by Shri Justice S.C. Dharmadhikari is binding on this court in the absence of stay to the said judgment by the Supreme Court.
111. On perusal of the order and judgment dated 14th June, 2011 it is clear that the issue as to whether respondent no. 1 company has become public limited company, whether shares are freely transferable or not, whether article 57 has become void or not, amongst several other issues were subject matter of the said appeal decided by this court. The appellants had canvassed proposition that the breach of articles would be ultra vires and breach of right of pre-emption constitutes act of oppression. It was submitted by the appellants that the power to amend the articles could not be used to oppress minority and take away their vested rights. In the said judgment various questions of law formulated by the appellants were summarized in para 84 of the judgment. Para H reads as under :
::: Downloaded on - 09/06/2013 19:31:08 :::hvn 139/195 COAPPL41.12 "(h) whether taking away or cancelling a right of preemption by amending the Articles will also amount to oppression and will be actionable."
112. On these issues this court has rendered finding that on 13th December, 2000 the first respondent became the public limited company but the public company and the argument of the appellant that it continued to retain its fundamental and basic character as private company was negatived. This court has also considered the fact that the amendment to insert additional clause (d) was defeated by the appellants. This court has held that once preemption alleged itself not in existence by virtue of statutory provisions then there is no act of oppression. In so far issue as to whether the order passed by Shri Justice A.M.Khanwilkar in Company Petition No. 77 of 1990 would operate in rem is concerned, this court considered the same and has rendered finding that the arguments in the proceedings in C.P. No. 132 of 2009 and the arguments in Company Petition No. 77 of 1990 were identical. This court held that the observations made by this court in the order passed in Company Petition No. 77 of 1990 would be applicable to the appellants also. This court also observed that once this court in the said proceedings had found that the conduct of the remaining petitioners was entirely blameworthy and they cannot substitute the charge and/or allegations leveled of having oppression, the minority shareholders other than present appellant can not on the same ::: Downloaded on - 09/06/2013 19:31:09 ::: hvn 140/195 COAPPL41.12 material succeed in pursuing the said allegations. This court also observed that the appellants were raising the same issues based on the same allegations and identical arguments. This court after considering the arguments of the parties and the order and judgment delivered by Shri Justice A.M. Khanwilkar in Company Petition No. 77 of 1990 held that the finding rendered in the said judgment were fully applicable to the facts in the said Company Appeal No. 24 of 2010 and there was no justification for taking a different view. This court rendered a finding that the appellants had failed to substantiate their charge of oppression of minority and the allegations being serious, the appellants ought to have brought adequate and substantial proof which the appellants had failed. This court took a view that on the basis of the material produced it could not be held that there was any oppression of minority. This court also took into consideration the conduct of the appellants in withdrawing from the proceedings of Company Petition No. 77 of 1990 and settling their disputes with respondent no. 2 while denying any relief in their favour in Company Appeal No. 24 of 2010.
113. The orders passed by the Supreme Court in the pending SLP, filed by the appellants, indicate that the judgment delivered by this court has not been stayed. From the perusal of the record, it is clear that the appellants have not even applied for stay of the judgment delivered by Shri Justice S.C.
::: Downloaded on - 09/06/2013 19:31:09 :::hvn 141/195 COAPPL41.12 Dharmadhikari. In my view, since the said judgment has not been stayed admittedly by the Supreme Court, I am bound by the view taken by this court in the said judgment delivered in Company Appeal No. 24 of 2010. Even otherwise, from the facts examined independently, I am of the view that no case is made out for taking a different view than that has been already taken by Shri Justice S.C. Dharmadhikari.
114. Shri Justice S.C. Dharmadhikari in the said judgment has also considered the judgment of this court in the case of Western Maharashtra Development Corporation Ltd. Vs. Bajaj... (2010) 154 Company Cases 593 and the judgment of the division Bench rendered on 1st September, 2010 in the case of M/s. Holdings Vs. Shyam Madanmohan Ruia (2010), 159 Company Cases 29. After considering the judgment of the Division Bench, this court has already rendered finding that the shares of the first respondent company are freely transferable. In my view, the facts before the Supreme Court in the case of Vodaphone Vs. Union of India are clearly distinguishable and the ratio in the said judgment does not apply to the facts of this case. The Supreme Court was not dealing with the similar clause. The issue in the said judgment was totally different. The validity of article 57 in my view has been already decided by this court in the judgment of Shri Justice A.M. Khanwilkar and Shri Justice S.C. Dharmadhikari and thus these two judgments relied upon by ::: Downloaded on - 09/06/2013 19:31:09 ::: hvn 142/195 COAPPL41.12 the respondents in my view are binding on this court in the present proceedings.
115. In my view, there is no merit in the submission of Mr.Samdhani, that there is prohibition on a public limited company from having a right of preemption. In the order and judgment delivered by Shri Justice S.C.Dharmadhikari, this court has already decided that in view of the 1st respondent company being a public limited company, Article 57 has become redundant.
116. In so far as submission of Mr.Samdhani, the learned senior counsel that this court shall not consider the finding rendered by Shri Justice S.C.Dharmadhikari in view of the pendency of special leave petition is concerned, it is common ground that the said judgment has not been stayed by the Supreme Court so far. The appellants are not even able to show that the appellants had prayed for stay of the said judgment before the Supreme Court.
The CLB in para 30 of the impugned order has dealt with the interim order passed by the Supreme Court in the Special Leave Petition arising out of the order dated 14th June, 2011 passed by this court. The CLB has held that the Supreme Court has denied the modified relief sought by the appellants and the special leave petition has not been admitted as yet. The CLB has also rendered a finding in para 33 of the impugned order and has held that the petitioners ::: Downloaded on - 09/06/2013 19:31:09 ::: hvn 143/195 COAPPL41.12 were not claiming that any of the action of the respondents amounted to the breach of the order of the Supreme Court or that it gave rise to any matter in the nature of contempt of any court and on the contrary the petitioners elected to approach CLB impugning EOGM as none of the legal issues raised in the special leave petition transgraced to the corporate democracy and shareholders' right to take corporate action including amendment of articles in accordance with the provisions of the Act. In my view, there is no infirmity in this view taken by the CLB and thus decision of the CLB permitting the 1st respondent to implement the resolution to delete Article 57 on the ground that it was invalid during the pendency of special leave petition cannot be faulted. In my view, there is no question of law arising in this appeal as formulated by the appellants and setout in para 2J of this order.
117. In my view, it is far too obvious that if the Supreme Court sets aside the order of this court or takes some different view, the parties shall be bound by the law declared by the Supreme Court. It is, therefore, neither necessary nor desirable to say anything more on this issue.
118. This court has already decided in para 123 of the judgment in Company Appeal No. 24 of 2010 that merely because its shares are not listed in any recognised stock exchange, does not mean that there is any restriction on transfer. Such shares are freely transferable as they are shares of the public ::: Downloaded on - 09/06/2013 19:31:09 ::: hvn 144/195 COAPPL41.12 company. In my view, appellants are not allowed to agitate the same issue again in the present proceedings. Similarly the appellants cannot be permitted to agitate the issue that the provisions of section 111A would be in applicable to the 1st respondent company. In my view, there is no merit in the submission of the appellant that in the order passed on 14th June, 2011 by Shri Justice S.C.Dharmadhikari there is no specific direction to delete Article 57 and thus conducting an EOGM was contrary to Sections 31 and 189 of the Companies Act, 1956. In my view, even if no such directions are given in the said judgment dated 8th August, 2011, once this court having declared that the said article became redundant, 1st respondent company was fully justified in passing a resolution to delete such redundant and void Article 57 so as to make it in conformity with the provisions of Companies Act, 1956. There is no merit in the submission made by the appellants that the company law board or this court cannot consider the findings rendered by this court in the order dated 8 th August, 2011 in view of the liberty granted in the said order to the appellants to adopt appropriate proceedings to challenge fresh EOGM in continuity for the purpose of deleting article 57 and in observing that the fresh proceedings would be decided influenced by the earlier order. In my view, the record produced by the parties in the present proceedings read with order dated 8th August, 2011 passed by this court makes it clear that this court was referring to the earlier order passed by CLB dated 9th November, 2010 which was impugned therein and not the order passed by this court. In view of the fact ::: Downloaded on - 09/06/2013 19:31:09 ::: hvn 145/195 COAPPL41.12 that the judgment delivered by this court is not stayed. I am bound by the decision of this court unless I take a different view and refer the matter to larger bench which I don't propose to do.
119. The CLB has in para 30 of the impugned order has followed the judgment of this court in Company Appeal No. 24 of 2010 on the issue that the 1st respondent company is the public company and once it is held to be a public company, then its shares are freely transferable and article would not hold good as they are contrary to the status. In my view, the order and judgment dated 14th June, 2011 passed by Shri Justice S.C.Dharmadhikari not having been stayed by the Supreme Court is binding on the CLB as well as on single judge of this court. The CLB has thus rightly followed the said judgment and has allowed the application filed by respondent nos. 1 and 2 for vacating and/or modifying the order dated 21st May, 2012. In my view, the order passed by Shri Justice S.C.Dharmadhikari operates in rem and is binding on the parties to the present proceedings. In my view, the appellants are estopped from re-agitating the issues which are already decided by this court in Company Petition No. 77 of 1990 and in Company Appeal No. 24 of 2010 in the present proceedings.
120. In so far as the question E and F formulated by the appellants as setout in para 2 are concerned, it is common ground that by an order dated 21st May, 2012, the CLB had permitted the 1st respondent to hold EOGM on 22nd May, ::: Downloaded on - 09/06/2013 19:31:09 ::: hvn 146/195 COAPPL41.12 2012 and had kept the matter pending. It is also not in dispute that on 22nd May, 2012, a resolution came to be passed in the said EOGM resolving to delete Article 57. It is thus clear that CLB was fully conscious of the fact that the resolution would be passed in the meeting allowed to be held on 22nd May, 2012. It is common ground that the appellants did not challenge the said order dated 21st May, 2012 passed by CLB allowing 1st respondent to hold meeting on 22nd May, 2012. The CLB could not have granted any injunction against the 1st respondent from requisitioning or holding EOGM as the same was requisition in accordance with law.
121. In so far as contention of the appellants that the CLB could not have permitted the 1st respondent to implement the resolution in view of the order passed by CLB itself having allowed the appellant to amend the company petition questioning the conduct at the impugned EOGM and that the said conduct was under serious dispute is concerned, in my view, this submission does not survive in view of the fact the appellants having argued the issue raised by the appellants in Company Application No. 91 of 2012 and 73 of 2012 in the present proceedings. In my view, the CLB was fully justified in considering the effect of resolution passed in the meeting permitted to be hold by order dated 21st May, 2012 in the impugned order. In my view, no question of law arises as formulated and setout by the appellants in para 2E and F of the judgment.
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122. In so far as question formulated by the appellants in paragraphs 2G and 2H are concerned, in view of this court having taken a view that the 1st respondent company being a public limited company and its shares are freely transferable, in my view the question of exercise of right of preemption in such situation does not arise. The resolution thus passed by the 1st respondent company in deleting Article 57 with a view to give effect to the said position in accordance with law does not amount to an act of oppression. The CLB in para (40) of its order has rendered finding that passing of resolution by the share holders of the company in exercise of their democratic rights in extra ordinary general meeting requisitioned by the shareholders of the company does not in any manner amount to oppression and mismanagement and cannot form a subject matter of the petition under sections 397 and 398 of the Companies Act and there is no reason to interfere with the internal democracy of the company. The CLB has also rendered a finding that keeping in view the rights of the shareholders the principles of corporate democracy in the absence of prima facie case shareholders' decision is prejudicial to the public interest or at large CLB has no justification in restraining the first respondent company from implementation of the special resolution passed and from filing of the requisite forms with R.O.C. in that regard. In my view, the findings rendered by CLB is correct and does not require any interference.
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123. In my view, there is no abuse of the majority rights in passing a resoluton to delete Article 57 as the same in my view is not oppressive to the minority shareholders. In my view, no such question of law as formulated by the appellants in para 2G and 2H thus arise in the present appeal.
124. Both parties have addressed this court at length on the issue whether order passed by Shri Justice A.M.Khanwilkar on 14th November, 2008 in Company Petition No. 77 of 1990 operates in rem or not and is binding also on the appellant or not.
125. Company Petition No. 77 of 1990 was filed by the appellants and also few other parties under sections 397 and 398 of the Companies Act against the 1st respondent company. The appellant who were parties to the said petition sought liberty to withdraw from the said proceedings unconditionally and requested this court to delete their names from the array of the petitioners.
This court granted leave to the appellant herein who were petitioners alongwith other parties to withdraw from the said proceedings unconditionally and allowed their names to be deleted from the array of the petitioners. While granting that liberty, this court observed that appellants herein and their names have been deleted form the arrays of the petitioners. The effect of unconditional withdrawal from the proceedings by the said Petitioners is that they have given up their challenge with regard to the alleged acts of oppression ::: Downloaded on - 09/06/2013 19:31:09 ::: hvn 149/195 COAPPL41.12 and mismanagement. In that, those Petitioners have consciously acquiesced in the acts complained of. This court also recorded that the appellant herein had consciously withdrawn from the proceedings unconditionally. After recording these facts, Shri Justice A.M.Khanwilkar considered the matter on merits which was pursued by remaining two petitioners therein and held that there was no case regarding oppression of minority. This court also held that the 1st respondent company had become public limited company as a result of special resolution moved in the Extra Ordinary General Meeting dated 5th May, 2001 having been defeated. It is held that first respondent having status of public limited company, a restriction on the right to transfer the shares which was applicable to the private limited company would naturally get diluted. It is held that restriction under Article 57 shall have no relevance after the 1st respondent company had admittedly become public limited company. It is held that minimum of 50 members may apply to the private limited company will have no relevance any more.
126. It is common ground that the order passed by Shri Justice A.M.Khanwilkar in the said Company Petition No. 77 of 1990 was not challenged by any of the parties. It is also not in dispute that the present appellant did not obtain leave while seeking liberty to their withdrawal from the said proceedings unconditionally and for deleting their names from the array of the petitioner. In the order passed by this court, it has been clearly ::: Downloaded on - 09/06/2013 19:31:09 ::: hvn 150/195 COAPPL41.12 recorded that the appellant herein have consciously withdrawn from the proceedings unconditionally and have given up their challenge with regard to the alleged act of oppression and mismanagement. Thus in my view the said judgment delivered by Shri Justice A.M.Khanwilkar is binding on the appellants and other parties to the said proceedings, CLB and this Court and also operates in rem.
127. The next submission of Mr.Samdhani, the learned senior counsel for the appellants is that without prejudice to the rights of the appellants that the 1 st respondent company is not the public limited company and the order passed by this court in Company Petition No. 77 of 1990 and Company Appeal No.24 of 2010 are not orders in rem and are not binding on the appellants on the submissions already made and respondent company thus could not pass any resolution so as to delete Article 57, it is submitted that majority shareholders had grossly misconducted in requisitioning EOGM and in passing resolution therein and the same is totally contrary to the provisions of the Companies Act and Articles of Association. It is submitted that the procedure followed in conducting the meeting by the chairman was totally illegal and against the interest of minority shareholders. The learned counsel submits that though these allegations were forming part of Company Application No. 91 of 2012 filed by the appellants and is pending before the CLB, this court shall consider the same in the present proceedings as the said issue could not be kept pending ::: Downloaded on - 09/06/2013 19:31:09 ::: hvn 151/195 COAPPL41.12 by CLB while deciding the challenge to the validity of convening of the meeting and passing a resolution therein by first respondent. The learned counsel submits that both proceedings ought to have been decided by CLB and thus by granting adjournment of the Company Application Nos. 91 of 2012 and 73 of 2012 pending before CLB and only proceeding with and deciding the Company Application No. 85 of 2012 filed by the 1st and 2nd respondents, the pending proceedings filed by the appellants have become infructuous. At the request of the appellants and in view of the fact that the parties have addressed this court on all such issues which were pending before the CLB in Company Application Nos. 73 of 2012 and 91 of 2012, pertaining to the procedure followed by the respondent no.1 and majority shareholders in requisitioning the meeting and passing a resolution therein. I shall now deal with the issue as to whether there was any illegality in requisitioning the meeting and as to whether procedure followed by the majority shareholders in the said meeting held on 22nd May, 2012 was illegal or any of such acts amounted to any misconduct.
128. I shall first decide as to whether the 1st respondent company was justified and was right in convening EOGM and also as to whether such meeting could be held though one of the requisitionist had alleged to have withdrawn her consent before such meeting came to be held on 22nd May, 2012. It is not in dispute that respondent nos. 6 to 8 collectively holding ::: Downloaded on - 09/06/2013 19:31:09 ::: hvn 152/195 COAPPL41.12 12.5% of the paid up share capital issued by the 1st respondent company issued a notice on 31st March, 2012 under section 169 of the Companies Act read with Article 76 of the Articles of Association to convene EOGM of the members of the company to transact the business by special resolution "amendment of Articles of Association of the company for deletion of Article 57 of the Articles of Association of company". It is not in dispute that the said notice issued by respondent nos. 6 to 8 was received by the 1st respondent company on 20th April, 2012. It is also not in dispute that when the said notice was received by the 1st respondent company to requisition a meeting, the notice was issued by such members having not less than 1/10th of paid up capital of the 1st respondent company and had right of voting in that regard to the matter.
Pursuant to the receipt of such notice under section 169 of the Companies Act read with Article 76 of the Articles of Association, the 1st respondent company issued a notice on 25th April, 2012 proposing to hold EOGM on 22nd May, 2012 at 11.00 a.m. to pass a resolution pursuant to section 31 of the Companies Act, 1956 and other applicable provisions by deleting then existing Article 57 of the Articles of Association. It was made clear that a member entitled to attend and vote in the meeting was entitled to appoint a proxy to attend and vote instead of himself and the proxy need not be a member.
129. On 19th May 2012, one of the requisitionist Ms Mahrukh Oomrigar respondent No.6 herein holding 6% shares addressed a letter to her Advocates and Solicitors instructing to support the C.A.(73 of 2012) filed by the ::: Downloaded on - 09/06/2013 19:31:09 ::: hvn 153/195 COAPPL41.12 appellants and to concede to the injunction prayed for in the said application.
The sixth respondent instructed her advocate that she did not propose to move or support the proposed resolution for deletion of Art.57. Based on this letter, the submission of the appellants is that no such meeting could be requisitioned by the 1st respondent company at all as the judgment delivered by Shri Justice S.C.Dharmadhikari was impugned in the Supreme Court, one of the requisitionist holding 6% shares had already withdrawn her consent and thus there was no requisite number of members as per Section 169(4) available out of the members who had requisitioned meeting on the date of the EOGM.
130. On conjoint reading of Section 169 and Article 76 of the Articles of Association, it is clear that Extra Ordinary General Meeting has to be conveyed by a company if it is requisitioned by the members of the company of having not less than 1/10th of the paid up capital of the company and had right of voting in that regard to that matter.
131. The company is under obligation and it is mandatory for a company to convene the meeting on receipt of such notice issued by such number of members. Section 169(6) of the Act provides that if within 21 days from the date of deposit of valid requisition, if the company does not proceed or call a meeting for consideration of these matters on a day not later than 45 days from the date of deposit of requisition, the meeting may be called by the ::: Downloaded on - 09/06/2013 19:31:09 ::: hvn 154/195 COAPPL41.12 requisitionist themselves. It is thus clear that there was no option available to the 1st respondent company but to call EOGM in compliance with the provisions of law. Perusal of the letter dated 9th May, 2012 addressed by Ms. Mahrukh Oomrgar, respondent no.6 holding 6% shares to her advocates and solicitors instructing to support the Company Application (73 of 2012) filed by the appellants and to concede to the injunction prayed for in the said application, in my view does not amount to withdrawal of consent by the 6th respondent in holding EOGM. In any event, once a valid requisition was received by the company from its members having requisite numbers in accordance with section 169 read with Article 76 of the Articles of Association, even if any of the requisitionist withdraws his consent or such member ceased to be the member, in my view, the board of directors have no option but are obliged to call such EOGM. In my view, once required number of members have requisitioned the meeting in accordance with section 169(4) of the Act read with Article 76 of the Articles of Association and such notice for convening EOGM is received by the company, subsequent withdrawal of consent or that any member ceased to be a member subsequently does not give any discretion to the board of directors not to call a meeting due to such change. Mr.A.Ramaiya in his work "Guide to the Companies Act, 1956" Part II 17th Edition has commented upon the powers of the board of directors on similar situation. In my view, the respondents are right in placing reliance upon the said comment of the learned author on this issue. In my view, ::: Downloaded on - 09/06/2013 19:31:09 ::: hvn 155/195 COAPPL41.12 requisition of a meeting should be by requisite number of members under Section 169 (a) and such mandatory strength is required on the date when such notice is received by the company. Subsequent reduction in number after receipt of such notice by the company, cannot prevent the company from convening such a EOGM.
132. Without prejudice to the aforesaid submissions, it is submitted by Mr.Samdhani that irrespective of the nature of the resolution, the impugned EOGM has been grossly mis-conducted and procedure followed in conducting EOGM was totally illegal which has vitiated the entire resolution. The minority shareholders are entitled to independently challenge the said illegal procedure.
133. Mr.Samdhani, the learned senior counsel appearing on behalf of the appellants made following submissions on the issue as to whether conduct of the EOGM by the Chairman was illegal or not :-
(a) That impugned EOGM held on 22nd May, 2012 had been illegally and improperly conducted with a view to ensure that the resolution deleting Article 57 is shown as having been passed. The 1st respondent company delayed and denied inspection of proxies, proxy register, inward register etc. so as to enable the 1st respondent to manipulate the lodgment of proxies. The chairman of the meeting, who owes allegiance to Dr.Gharda and who himself is a director of ::: Downloaded on - 09/06/2013 19:31:09 ::: hvn 156/195 COAPPL41.12 the 1st respondent company mis-conducted himself by mala fide disallowing the 1st appellant from voting on 1710 equity shares belonging to her and permitted Godrej to exercise votes on the said shares.
(b) The mala fides and the illegality of permitting Godrej to cast votes in respect of 1710 equity shares is demonstrable from the following events:-
(i) Rajiv Bakshi could not vote as the 1st Appellant's power of attorney holder under the loan cum pledge power of attorney.
(ii) The loan cum pledge power of attorney was not executed in favour of Rajiv Bakshi, but was executed in favour of Godrej Industries Limited. Godrej Industries Ltd. being a body corporate could have in turn sub-delegated its rights in favour of Rajiv Bakshi (a) either by passing a board resolution or (b) by executing a power of attorney. In the present case neither has been done.
(iii) The loan cum pledge power of attorney could never have been accepted by the 1st respondent Company as the same had already rejected these powers of attorney (Vol VII page 1363) in the past and had filed a suit for cancellation thereof.::: Downloaded on - 09/06/2013 19:31:09 :::
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(iv) These powers of attorney are admittedly not registered with 1st respondent and it does not recognize/accept power of attorney that are not registered.
(v) The record indicates that these Powers of Attorney are also not lodged 48 hours before the commencement of impugned EOGM and the entire exercise of introducing the Godrej documents was ante dated.
(vi) On May 16, 2012 Godrej Industries Ltd. writes to the minority shareholders to vote for the resolution. This letter presupposes that Godrej would not be attending the meeting.
(vii) On May 17, 2012 Maharukh Oomrigar - one of the requisitionists addresses a letter dated May 16, 2012 indicating that she will oppose the resolution. This would result in Dr.Gharda's not having the adequate 3/4th majority to carry the resolution.
(viii) all letters lodging a proxy contain the time of receipt and the inward number. Alleged letter dated May 19, 2012 neither bears the inward number nor the time of receipt.
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(c) Rajiv Bakshi could not have exercised rights under the power of attorney dated March 9, 2012.
i. The power of attorney dated March 9, 2012 is not issued in respect of the shares belonging to the 1st Appellant in particular 1710 shares.
ii.
This power of attorney is not even lodged with GCL but was produced at the meeting by Mr.Rajiv Bakshi when his authority to attend and vote on behalf of Godrej Industries Ltd. was questioned.
(d) Rajiv Bakshi could not have exercised rights as a proxy :
i. By an alleged letter dated May 19, 2012, one Mr.Clement Pinto is stated to have issued a letter of authorization in favour of Mr.Rajiv Bakshi. The authorization of the said Clement Pinto is however not available. There is no Board Resolution accompanying the same.
ii. This purported authorization does not entitle ::: Downloaded on - 09/06/2013 19:31:10 ::: hvn 159/195 COAPPL41.12 Rajiv Bakshi to sign a proxy.
iii. Yet, Mr.Bakshi purports to sign a proxy in his favour and this is accepted by the Company.
(e) The impugned EOGM was wholly stage managed and reduced to a farcical paper meeting with the end result already pre-planned. The 1st Appellant hold 2961 shares. The voting slips were pre typed voting slips and the 1st Appellant's proxy Mr.Hegde was handed over a pre typed polling slip for 1251 shares (2961 - 1710) as if the Company knew the Chairman's ruling in advance.
(f) By a pre meditated exercise the 1st Appellant was wrongly denied the right to vote on 1710 shares and instead Godrej was wrongfully permitted to vote on these shares. If Godrej was not permitted to vote on these shares and the 1st Appellant was permitted to vote, the resolution would not have passed as the total votes against the resolution would have been thus :
Name No. of shares % Darius Kavasmaneck 7555 12 Jer Kavasmaneck 2961 5 Maharukh Oomrigar 3814 6 Colin Rebello 2640 4 ::: Downloaded on - 09/06/2013 19:31:10 ::: hvn 160/195 COAPPL41.12 Total 16970 27
(g) The Chairman wrongly and illegally did not permit the 1st Appellant's proxy Mr.Hegde to vote in respect of her 1710 shares and permitted and Godrej to vote on the said shares. This action was mala fide and a part of the fraudulent oppressive stratagem of Dr.Gharda. By such conduct, the EOGM and its proceedings stand vitiated and the resolution stated to have been passed is thus required to be set aside as illegal and bad.
(h) The conduct of the chairman, Dr.Gharda in conducting the EOGM was totally illegal. It is submitted that the chairman of the meeting holds an important position and he is responsible for the proper conduct of the meeting.
The chairman must exercise his powers bona fide. It is submitted that where it is shown that the chairman has acted mala fide or that the chairman has acted in a manner contrary to law, the affected shareholders are entitled to question the decision of the chairman. The appellants placed reliance on the judgment reported in (1943) 2 All ER 567 and judgment of Kolkata High Court reported in AIR 1937 Cal. 645 and unreported judgment of this court dated 7th April, 1995 in case of Kavasmaneck vs. Gharda.
134. The learned counsel appearing on behalf of the respondent no.2 on the ::: Downloaded on - 09/06/2013 19:31:10 ::: hvn 161/195 COAPPL41.12 other hand submits on these issues as under :
(a) Godrej lodged 11 powers of attorney that Appellant No.1 has issued in favour of Godrej. Each of these powers of attorney issued in favour of Godrej permit Godrej to attend and vote at meetings in respect of an aggregate of 1710 shares. Each of these powers of attorney are irrevocable ig and are coupled with consideration/interest and shall take precedence over another power of attorney issued by Appellant No.1.
The 11 powers of attorney by themselves operate as a proxy entitling Godrej to vote at a meeting and are duly stamped. Since Godrej being a company cannot itself attend the meeting it was essential to authorise a person to attend the meeting as its representative. The letter dated May 19, 2012 was merely such an authorisation letter for which no format or requirements are prescribed under the statute and for which no further stamping is required. The provisions of section 187 of the Companies Act do not apply as Godrej is not a corporation/company which is a member/shareholder, but is a company which is a power of attorney ::: Downloaded on - 09/06/2013 19:31:10 ::: hvn 162/195 COAPPL41.12 holder/proxy of a shareholder.
(b) The Judgment cited i.e. AIR 1928 Bom 80 therefore has no application in the present case.
(c) In view of the powers of attorney issued in favour of Godrej, no further proxies were required to be issued in favour of Godrej or its representatives and Mr.Bakshi was entitled to attend the meeting only on the basis of the powers of attorney read with the authority letter dated May 19, 2012.
(d) In addition to the authority that Godrej had to attend and vote at the meeting under the 11 PoAs lodged with Respondent No.1 company, the PoA's also entitled godrej additionally to also appoint a proxy on behalf of Appellant No.1 to attend and vote at the meeting.
Though no further proxies were required to be issued in favour of Mr.Bakshi, Godrej as constituted attorney of Appellant No.1, also issued proxies in favour of Mr.Bakshi in addition to and independent of the letter of authority dated May 19, 2012. Once the letter of ::: Downloaded on - 09/06/2013 19:31:10 ::: hvn 163/195 COAPPL41.12 authority dated May 19, 2012 read with the 11 PoAs are considered to be sufficient authority to Mr.Bakshi to attend and vote at the EOGM on 22.05.2012, the existence of the proxies lose significance. Whether Mr.Bakshi had the authority to execute the proxies or not as a representative of Godrej (which is the constituted attorney of Appellant No.1 is irrelevant and an internal matter of Godrej governed by the principles of indoor management. In any event, admittedly Godrej has not challenged the authority of Mr.Bakshi to execute the proxies. Whether the letter dated 19.05.2012 was the source of the authority of Mr.Bakshi to execute the proxies or not is also therefore irrelevant.
(e) Appellant No.1 had issued multiple powers of attorney/proxies. With respect to the 1710 shares, the chairman pursuant to the powers conferred by the Articles of Association, has permitted Appellant No.1 to vote through one such power of attorney holder of Appellant No.1. The said act cannot be construed as denial of the right to vote, since votes were in fact cast in relation to the 1710 shares. Similarly the votes in ::: Downloaded on - 09/06/2013 19:31:10 ::: hvn 164/195 COAPPL41.12 respect of the balance shares of Appellant No.1 other than the aforementioned 1710 shares have also been allowed to be cast by Mr.Hegde and have been allowed.
The challenge therefore is not in relation to a denial of a right to vote of Appellant No.1 since the votes have been allowed as opposed to rejected.
(f) The letter dated 16.03.2005 did not relate to any of the 11 powers of attorney issued by Appellant No.1 to Godrej, but related to the power of attorney issued by Maharukh Oomrigar (Respondent No. 6 to the present appeal) and hence the same is irrelevant. Furthermore the rejection of the power of attorney was in a completely different context, i.e. with regard to a request for splitting of shares and hence is irrelevant for the purposes of the issue at hand.
(g) The mere filing of the suit bearing No. 1170 of 2005 is of non consequence especially when no orders have been passed in the said suit declaring the said documents to be void. The facts and circumstances in which Suit NO. 1170 of 2005 was filed are not relevant ::: Downloaded on - 09/06/2013 19:31:10 ::: hvn 165/195 COAPPL41.12 for the purposes of the present appeal and in any event that same are not a part of the record in the present proceedings in which only the prayers in the suit have been reproduced.
(h) In view of article 107 of the Articles of Association of the Company Godrej was entitled to lodge the PoAs with Respondent No.1 Company 48 hours prior to the meeting, which it did, and the Company bound by its articles of association would have to accept the same for the purposes of voting. The mere facts of the existence of the suit No. 1170 of 2005 does not alter that position.
(i) The Power of Attorney dated 09/03/2012 is entirely irrelevant to the question of voting by Godrej.
This Power of Attorney was submitted by Mr. Rajiv Bakshi though it was unnecessary to do so as it has nothing to do with voting in respect of 1710 shares of Appellant No.1. It is the 11 (eleven) Powers of Attorney executed under the MOU dated 03/06/1992 which entitle Godrej to vote in respect of the 1710 shares of Appellant ::: Downloaded on - 09/06/2013 19:31:10 ::: hvn 166/195 COAPPL41.12 No.1. These Powers of Attorney had been submitted to/lodged with the Company more than 48 hours prior to the EOGM.
(j) Godrej is not a "member" of the Company and hence, Section 187 of the Companies Act and Article 104 have no application. It was therefore unnecessary for Godrej to authorize Mr Rajiv Bakshi by a Resolution of the Board of Directors nor was it necessary for Mr. Pinto to be authorized by a Resolution of Board of Directors. The letter dated 19/05/2012 is sufficient and clear authority from Godrej in favour of Mr Rajiv Bakshi to attend, participate in and vote at the EOGM.
It is noteworthy that filling and signing Proxy Form is for the purpose of voting itself so that an authority to vote would carry with it the incidental authority to fill and sign a proxy form and vote. The circumstance that on 16/05/2012 Godrej wrote to the Appellants to vote in favour of the Resolution pursuant to its right under the MOU of 1992 does not prevent Godrej from deciding to attend the meeting and vote through Mr. Rajiv Bakshi pursuant to the 11 (eleven) powers of attorney. Godrej ::: Downloaded on - 09/06/2013 19:31:10 ::: hvn 167/195 COAPPL41.12 may not have been confident that the Appellants would vote as directed by it and hence it may have decided to attend and vote. It may be noted that disputes between Godrej and the Appellants arose in March 2012. In these circumstances, Godrej took the aforesaid steps. It is the Appellants own case that prior to the year 2012 the Appellants and Godrej had a common interest and that seems to be the reason why Godrej may not have attended earlier meetings or excercised their right to do so under the powers of attorney. The fact that Godrej did not attend any earlier meeting is of no consequence.
The allegation that there is not time of receipt or inward number etc., on the letter is of no consequence since the letter is on record and Godrej stands by it. The date of receipt of the letter and the two proxies are clearly noted as 19/05/2012 and the time does not matter because even midnight of 19/05/2012 is more than 48 hours before the EOGM. Mere suspicion cannot be the basis for doubting the existence and authenticity of the said letter.
There is no averment of material to establish that these documents are inserted later or that there is any wrongdoing on the part of a named person. The ::: Downloaded on - 09/06/2013 19:31:10 ::: hvn 168/195 COAPPL41.12 Company in its affidavit in rejoinder dated June 2012 in Company Application No.85 of 2012 in Vol.VI pages 1187-1190 has fully explained the position with regard to the filling of the inward register and stamping of date and time on documents that are received by the Company. In any case, such an enquiry is impermissible since the Chairman is the sole judge of validity of votes.
A question of this nature cannot be the subject of proceedings under Section 397 and 398 and much less under Section 10F which is limited to appeal on a question of law, not fact.
(k) The proxy form under Schedule IX was apparently filed by way of abundant caution more than 48 hours before the EOGM even though it was unnecessary in view of the authorization in letter dated 19/05/2012 by Godrej. In any case, since Appellant No. 1 had, by Powers of Attorney, authorized Godrej to vote at meeting and Godrej in turn authorized its representative Mr Bakshi to vote at the EOGM, Mr Rajiv Bakshi was fully entitled to act on behalf of Appellant No.1 through Godrej and sign the proxy form.
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(l) Section 176(1) empowers a member to appoint another as his proxy. This was done by the 11 (eleven) Powers of Attorney by Appellant No.1 in favour of Godrej. Section 176(5) provides that the instrument of proxy shall be in writing and signed by the appointer.
The Powers of Attorney satisfy this provision. Section 176(6) provides that instruments that are in the Form in Schedule IX shall not be questioned on the ground that they fail to comply with Articles. Thus filling a proxy form is an alternative to any other instrument appointing a proxy. In the present case, both were done. Hence when Godrej was empowered by Appellant No.1 to vote, which it did by letter dated 19/05/2012. Issuance of authority by a company to vote at a meeting when a company holds a power of attorney entitling it to vote is not prohibited either by the Act or by the Articles of the company.
135. Mr.Kadam, the learned senior counsel appearing for the 1st respondent company on this issue submits as under :-
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(a) Power of Attorney itself amounts to proxy agent. The learned counsel placed reliance upon the judgment in case of Gharda Chemicals vs. Jer Kavasmaneck reported in (2005) 5 BCR 611 and more particularly paragraphs 21, 29 and 30 which reads thus :-
21. As stated earlier, the question before us is, whether the power of attorneys executed by the first holder in respect of the shares held jointly are valid and whether the power of attorney is a proxy.
29. It is true that the issue as to whether the power of attorney can be treated as a proxy was not considered by the Chairman of the company while deciding the validity of the votes cast by the power of attorney holder. That issue was raised by the applicants for the first time before the learned Company Judge. As we have held that the votes cast under both the power of attorneys are valid, it is not necessary to consider the issue as to whether the power of attorney is a proxy or not. However, the above issue being raised and decided by the Company Judge and the counsel on both sides have also canvassed respective arguments before us, we deem it proper to deal with the said issue as well.
30. In our opinion, a shareholder may execute an instrument of power of attorney or an instrument of proxy empowering a specified person to vote on his behalf at the meeting of the company. If the instrument, is in conformity with the proxy form set out in the Schedule IX of the Act, then the company would register it and issue voting slip to such authorised person. Thus, a person authorised to vote under a validly executed power of attorney under The Powers of Attorney Act, 1882 may not be entitled to vote if the instrument of power of attorney is not in conformity with the proxy form set out in Schedule IX of the Act. In other words, ::: Downloaded on - 09/06/2013 19:31:10 ::: hvn 171/195 COAPPL41.12 only such an instrument of power of attorney which is in conformity with the proxy form set out in Schedule IX of the Act will entitle the authorised person to vote.
(b) This court cannot sit appeal over the reasons given by the chairman to conduct the meeting. The chairman has considered all the documents including power of attorney and provisions of law in his ruling. The power of attorney given by the Godrej to Mr.Bakshi to sale shares is not relevant.
Eleven power of attorneys were already on record of the 1st respondent company which gave power to vote. It is submitted that other than 11 power of attorneys on record referred by the chairman in his ruling is thus insignificant. This surplussage does not detract from the merits of the conclusion. The learned senior counsel placed reliance on the affidavit filed by the 1st respondent company and more particularly paragraphs 13 to 17 to demonstrate how the inward register was maintained and when proxies were received. It is submitted that even letter from Dr.Gharda does not refer to proxy which was received on 17th May, 2012. There was no inward number.
The documents received from Godrej by the 1st respondent bears the same initial which was on the data received from Gharda Foundation. The appellants does not make any grievance in respect of the proxy submitted by Gharda Foundation.
136. Mr Dhond, the learned senior counsel appearing for M/s. Godrej ::: Downloaded on - 09/06/2013 19:31:10 ::: hvn 172/195 COAPPL41.12 Industries Limited allowed to be intervened by a separate order passed by this court, made the following submissions :
(a) It is admitted that Godrej is the valid POA holder for Jer Kavasmaneck. Consequently, Jer Kavasmaneck has voted through Godrej. Therefore, the member of the company, through its POA holder, Godrej had voted at the EOGM held on May 22, 2012.
(b) Dispute is between the rights of Mr. Hegde and Godrej, both are not members of the company and their rights cannot be decided in 397/398 petition. Darius Kavasmaneck did not seek to vote and Mr. Hegde has not complained at all at the meeting or initiated any proceedings. Mr. Hegde is also not party nor has he filed any affidavit in the proceedings. Darius Kavasmaneck cannot substitute himself for Mr. Hegde or raise any grievance on behalf of a non- member in 397/398 petition. Mr Bakshi has voted as per the authority given to him by Godrej which is valid.
(c) Without prejudice to the foregoing, Godrej is a valid POA holder for Jer. Mr. Bakshi validly represented Godrej in respect of the Jer Kavasmaneck PAO. Mr. Bakshi is in the employment of Godrej and all his acts are ratifyble ex post facto. Without prejudice, Godrej hereby confirms Mr. Bakshi's authority to represent Godrej and if necessary even ratify all the acts of Mr. Bakshi pursuant to the Authority given to him by Godrej and recorded in the letter dated May 19, 2012. The authority given by Godrej to Mr. Bakshi reads as follows :
" The powers of attorney expressly authorise GIL to attend, vote and otherwise take part in all meetings held in connection with the Company in relation to the shares and to sign proxies for the purposes of voting thereat or for any other purposes connected therewith as freely as the said shareholder could themselves do. Pursuant to the said power contained in the irrevocable powers of attorney, GIL hereby authorise Mr. Rajiv Bakshi, Executive Vice President - Legal to attend, participate in and to vote at the extraordinary general meeting of the Company to be held on May 22, 2012 or at any adjournment thereof. The specimen signature of Mr Bakshi is appended below."
(d) The authority given to Mr. Bakshi included right to vote on behalf of Godrej and all contentions made by the Appellants in ::: Downloaded on - 09/06/2013 19:31:10 ::: hvn 173/195 COAPPL41.12 relation to the same are untenable. The allegations made against Godrej and/or Mr. Bakshi and grounds taken in the present Appeal on the basis of the same are frivolous because Godrej has never disputed the authority of Mr Bakshi. It is submitted that all the necessary documents were deposited with the company 48 hours prior to the meeting. The MOU dated 3rd June 1992 executed by Darius Kavasmaneck and Jer Kavasmaneck in favour of Godrej is valid and subsisting Darius Kavasmaneck has obtained relief against Godrej on the basis of the same. Jer Kavasmaneck and Darius Kavasmaneck had pledged the shares with Godrej and had executed irrevocable POAs and binding on Darius Kavasmaneck and Jer Kavasmaneck. Therefore, all acts of Godrej pursuant to the said POA and loan cum pledge agreements are valid and Jer and Darius Kavasmaneck are contractually bound by the same.
137. The learned counsel for respondent nos. 4 and 5 submits that admittedly the first appellant gave power of attorney to different persons in which voting powers were concurrently given to all. All of them have turned up at the meeting and two out of them sought to vote on the same shares. It is submitted that the appellant no. 1 herself created the situation and should therefore be estopped from now blaming the Chairman for taking the decision in the circumstances where problem itself was created by the appellants. The decision of the Chairman is a fair decision. The learned counsel submits that the Chairman had disallowed Godrej Industries Limited on the voting on bulk of the shares. It is submitted that the decision of the Chairman was with regard to the right of two contesting constituted attorneys, neither of whom were members and neither of whom could maintain the petition under section 397 and 398 of the Companies Act, 1956.
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138. In rejoinder, Mr. Samdhani, the learned senior counsel appearing on behalf of the appellants submit as under :-
(a) The Appellants have challenged the conduct of the EOGM dated May 22, 2012. Thus even assuming whilst denying that the convening of the EOGM was valid, its conduct being illegal and oppressive, the CLB ought to have adjudicated upon the validity of the conduct of the EOGM before allowing the resolution to be implemented. The challange to the conduct is not moonshine or illusory - but substantial questions have been raised by the Appellants particularly regarding the denial of the 1st Appellant's right to vote on 1710 equity shares. If the 1st Appellant was permitted to vote on the said 1710 shares, the resolution would not have been passed.
(b) In the impugned Order in paragraphs 28 and 29 it is recorded that CA 91 of 2012 is pending. CA 91 of 2012 contains the specific challenge to the conduct of the impugned EOGM dated May 22, 2012.::: Downloaded on - 09/06/2013 19:31:10 :::
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(c) The CLB in paragraphs 37 and 38 of the impugned Judgment has rendered findings on the correctness and conduct of the impugned EOGM.
What is stated in the said paragraphs are matters concerning CA 91 of 2012 which was not even adjudicated upon. In any event the said statements are factually incorrect.
(d) The Chairman at the meeting held that Mr. Bakshi is entitled to vote (on behalf of Godrej) on the basis of power of attorney dated March 9, 2012. This is also what is recorded in the purported Minutes and admitted by Godrej. Before the arguments commenced in this matter, Godrej's contention was also the same i.e. the power of attorney used to vote at the meeting was the power of attorney dated March 9, 2012.
(e) Though the respondents through their learned counsel admitted that reliance by the Chairman of the meeting to the power of attorney dated March 9, 2012 is a 'mistake' argued that what mattered was the alleged letter of authority dated May 19, 2012 signed ::: Downloaded on - 09/06/2013 19:31:10 ::: hvn 176/195 COAPPL41.12 by Mr. Pinto in favour of Mr. Bakshi. As such, the Respondents now say that the power of attorney dated March 9, 2012 is not relevant as the basis to vote at the meeting. In view of the above, the Chairman's decision is, on the face of it, wrong on the arguments of the Respondents themselves.
(f) The Chairman did not rely on the letter of May 19, 2012 to permit Mr. Bakshi to vote. Nor did the Chairman rely on the purported proxy signed by Mr. Bakshi in his own favour to allow him to vote at the said EOGM. The submission on the basis that the letter of Mr. Pinto (page 1356, Volume 7) to the 1st Respondent is by itself a proxy since proxy requires no particular form is not correct for the following reasons:
the said letter was not intended by Godrej to be a proxy. If it was so intended, then reliance would have been placed only on that letter and Mr. Bakshi would not have signed an alleged proxy separately. In law a proxy is required to be stamped. The letter signed by Mr. Pinto is unstamped. Reliance is placed on AIR 1928 Bom 80. Headnote (l) which ::: Downloaded on - 09/06/2013 19:31:10 ::: hvn 177/195 COAPPL41.12 reads thus :-
I would only add that those proxies which are unstamped, or upon which the stamps have not been cancelled must be excluded. Any votes recorded on the authority of such proxies go out.
(g) Since the 1st Respondent had refused to furnish a copy of the power of attorney dated March 9, 2012, the 2nd Appellant wrote a letter to Godrej asking for the power of attorney on the basis of which Mr. Bakshi had voted. Mr. Bakshi himself answered the said letter and furnished the copy of power of attorney dated March 9, 2012. Therefore according to Mr. Bakshi also he derived the authority to vote on the basis of this power of attorney dated March 9, 2012. Admittedly, the power of attorney dated March 9, 2012 neither gives a power to attend or vote nor does it relate to the 1710 shares.
(h) It is the specific case of the Appellants that the 1st Appellant was denied her right to vote in respect of 1710 equity shares. As such, by allowing Mr. Bakshi to vote on shares which belongs to the 1st Petitioner, she was denied the right to vote.
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139. Section 175 of the Companies Act provides that unless articles of the company otherwise provide members personally present at the meeting shall elect one of themselves to be the chairman thereof on a show of hands. (The chairman has prima facie authority to decide all questions which arise at the meeting which require decision at the time, member by submitting his ruling and voting upon a resolution which the Chairman allows to be put is not precluded from maintaining by litigation that he was wrong). Section 176 provides that any member of the company entitled to attend and vote at the meeting of the company shall be entitled to appoint another person whether member or not as his proxy to attend the vote instead of himself but proxy so appointed shall not have any right to speak at the meeting. Section 176(5) provides that the instrument appointing proxy shall be in writing and shall be signed by the appointer or his attorney duly authorised in writing or if the appointer is a body corporate, be under its seal or be signed by an officer or an attorney duly authorized by it. Section 176(6) provides that the instrument appointing the proxy, if in any forms set out in Schedule IX, shall not be questioned on the ground that it fails to comply with any special requirements specified for such instrument by the articles. Article 94 of the Articles of Association provides that the Chairman of any meeting shall be the sole Judge of the validity of every vote tendered at such meeting. The Chairman at the conducting of the poll shall be the sole judge of the validity of any vote ::: Downloaded on - 09/06/2013 19:31:11 ::: hvn 179/195 COAPPL41.12 tendered at such poll. Article 97 provides as to how the voting rights are computed. Article 104 provides for voting by proxy. Article 104 to 109 and 113 reads thus :
"104. Subject to the provisions of these Articles votes may given either personally or by proxy but no Company which is, a member of this company shall vote by proxy so long as a resolution of its Board under Section 187 of the Act authorising any of its officials or any other person to act as its representatives at any meeting of this company shall be in force.
105. The instrument appointing proxy shall be in writing under the hand of the appointer or of his attorney duly authorised in writing or if such appointer is a corporation, under its common seal or under the hand of an officer or attorney so authorised. Members not resident in India may revoke proxies by cable.
106. An instrument of proxy may appoint a proxy either for the purposes of a particular meeting specified in the instrument and any adjournment thereof or it may appoint a proxy for the purpose of every meeting of the Company and every adjournment of any such meeting.
107. The instrument appointing a proxy and the power of attorney or other authority (if any), under which it is signed or a notarially certified copy of that power or authority shall be deposited at the office not less than forty eight hours before the time for holding the meeting or adjourned meeting as the case may be at which the person named in such instrument proposes to vote or, in the case of a poll, not less than twenty four hours before the time appointed for the taking of the poll and in default the instrument of proxy shall not be treated as valid.
108. A vote given in accordance with the terms of an instrument appointing a proxy shall be valid notwithstanding the previous death or insanity of the principal or the revocation of the proxy or of the authority under which the proxy was executed or of the transfer of the shares in respect of which the proxy is given, provided no intimation in writing of such death, insanity revocation or transfer shall have been received ::: Downloaded on - 09/06/2013 19:31:11 ::: hvn 180/195 COAPPL41.12 by Company at its officer for the commencement of the meeting or adjourned meeting at which the proxy is used.
109. The instrument of proxy shall be as near as practicable in the form set out in schedule IX of the Act.
113. No objection shall be made to the validity, if any, except at the meeting or poll at which such vote shall be cast and every vote whether given personally or by proxy not disallowed at such meeting or poll shall be deemed valid for all purposes of such meeting or poll whatsoever."
140. The appellants through their learned senior counsel emphasized that the power of attorney referred by the Chairman to the meeting while permitting Mr. Rajiv Bakshi to vote was not in respect of 1710 equity shares of the appellant. The counsel led emphasis on the issue that the appellant was not permitted to vote in respect of 1710 shares and Mr. Bakshi was allowed to vote illegally and if the appellants would have allowed to vote in respect of 1710 shares, the resolution that was passed in the EOGM held on 22.5.2012 would not have passed with requisite majority. The learned counsel was at pains to point out that Mr. Bakshi and or Mr.Clemant Pinto did not have authority to sign any proxy and it was not stamped. Much emphasis was led on the issue that no instrument of proxy was submitted by Godrej Industries Ltd. within time prescribed with first respondent before EOGM was held. The counsel laid emphasis that pages of the proxies submitted to the company by Godrej Industries Ltd. were undated, some of the proxies provided did not indicate any date of receipt and or stamp of the company. It is submitted that there was no inward number in some of such proxies and thus considering ::: Downloaded on - 09/06/2013 19:31:11 ::: hvn 181/195 COAPPL41.12 this material record, this court therefore shall hold that the Chairman had acted mala fide in allowing Mr. Bakshi to vote and to deprive the appellants of voting in respect of 1710 shares.
141. On perusal of the documents submitted by the parties which were on record in Company Application No. 73 of 2012 and 91 of 2012 before CLB and filed in the present proceeding indicates that 11 power of attorneys were executed by the appellants in favour of Godrej Industries Limited. The power of attorneys permits Godrej Industries Ltd. to attend and vote at the meeting in respect of aggregate 1710 shares, all such power of attorneys are irrevocable and are coupled with consideration. The record also indicates that all such documents were lodged with the company prior to 48 hours of the said EOGM came to be held. The first respondent company has given inspection of the documents to the appellants. It is not in dispute that the Chairman had considered the power of attorney dated 9th March, 2012 which was not in respect of the shares belonging to the first appellant and in particular 1710 shares. The question that arises for consideration of this court is whether on the basis of all the material produced on record by both the parties, whether it can be concluded that Mr. Rajiv Bakshi was authorised to vote on behalf of the appellants and in particular 1710 shares.
142. It is not in dispute that M/s. Godrej Industries Ltd. was not a member of ::: Downloaded on - 09/06/2013 19:31:11 ::: hvn 182/195 COAPPL41.12 first respondent company. It is also not in dispute that the said power of attorneys given by the appellants in favour of Godrej Industries Ltd. were in force on the date of EOGM,. Since Godrej Industries Limited being a company could not itself attend the meeting, it was entitled to authorize a person to attend the said meeting as its representative. The said company accordingly by its letter dated 19th May, 2012 authorised Mr.Rajiv Bakshi to vote in the EOGM proposed to be held on 22nd May, 2012 to appoint representative on power of attorneys and the said authority letter dated 19th May, 2012 it is clear that Mr. Bakshi was appointed to attend the meeting and to vote in respect of the 1710 shares on behalf of the first appellant duly authorised by Godrej Industries Limited which was authorised by the first appellant. It is not in dispute that the said authority letter dated 19th May, 2012 was also filed with first respondent company by Godrej Industries Limited. On the basis of such power of attorneys and such authority letter dated 19th May, 2012, Mr. Bakshi exercised his powers on behalf of the appellants to sign the proxy in favour of himself to vote. In my view, since the relevant power of attorney authorised Godrej to vote and the authority letter dated 19th May, 2012 inturn authorised Mr. Bakshi to vote, whether the proxy was stamped or not losses its significance. Similarly whether the proxies in the proper format were lodged or not also looses significance.
143. The appellants could not point out any prohibitory order in the suit filed ::: Downloaded on - 09/06/2013 19:31:11 ::: hvn 183/195 COAPPL41.12 by Godrej Industries Limited against the appellants and the first respondent (suit bearing No. 1170 of 2005) restraining the parties from exercising rights under the power of attorneys executed by the appellants in favour of Godrej Industries Limited. In my view there is no merit in the submission of Mr. Samdani that in view of the pendency of the said suit filed by Godrej itself the first respondent could not have permitted the representative of Godrej to vote in the meeting exercising its powers under the said power of attorneys. The record indicates that the authority letter and two proxies were received by the first respondent company on 19th May, 2012 which was prior to more than 48 hours before the EOGM came to be held on 22nd May, 2012. The appellants could not demonstrate that any of these documents were inserted later or the said documents were fabricated by Godrej or by respondent no. 1 or the Chairman. In my view there is no merit in the submission of Mr. Samdani that the documents filed by Godrej with the first respondent company allowing Mr. Bakshi to vote did not carry proper acknowledgment, inward number or the date thereon.
144. The Division Bench of this court in the case of Gharda Chemicals Limited and Others Vs. Jer Rutton Kavasmaneck @ Jer Jawahar Thadani and Ors. Reported in 2005(5) Bom C.R. 611 has considered section 176 of the Companies Act, 1956 and has held that the shareholder may execute the instrument of power of attorney or instrument of proxy empowering the ::: Downloaded on - 09/06/2013 19:31:11 ::: hvn 184/195 COAPPL41.12 specified person to vote on his behalf at the meeting of the company.
Paragraphs 21 to 26, 31 and 32 of the said judgment are relevant for this matter and reads thus :
"21. As stated earlier, the question before us is, whether the power of attorneys executed by the first holder in respect of the shares held jointly are valid and whether the power of attorney is a proxy.
22. The words "power of attorney" and "proxy" are not defined under the Companies Act, 1956. Even the articles of association of the company do not define these words.
23. Section 1A of The Powers of Attorney Act, 1882 defines the word 'power of attorney' to include any instrument empowering a specific person to act for and in the name of the person executing it.
24. Section 176 of the Companies Act, 1956 provides that a member of the company entitled to vote at the meeting of the company can appoint any other person (whether a member or not) as a proxy to attend and vote instead of himself.
25. Article 114 of the Articles of Association framed by the appellant No. 1 company reads as under:
"114. On a poll taken at a meeting of the Company, a member entitled to more than one vote, or his proxy or other person entitled to vote for him as the case may be, need not, if he votes, use all his votes or cast in the same way all the votes he uses."
[Emphasis supplied]
26. On perusal of the aforesaid provisions of Companies Act and the articles of association of the company, it is seen that at the meeting of the company not only the shareholder and the proxy holder but some other duly authorised person is also entitled to vote. In other words, at the meeting of the company the vote can be cast by the shareholder and in his absence his proxy or other person entitled to vote for him. As rightly contended by the learned Counsel for the applicants, it is not the nomenclature but it is a substance of the document which ::: Downloaded on - 09/06/2013 19:31:11 ::: hvn 185/195 COAPPL41.12 is relevant. In the absence of the member, a person seeking to attend and vote at the meeting of the company must be duly authorised to do so by a valid document. Such a document may not be in the proxy form set out in Schedule IX of the Act, but shall meet the requirement of the company law i.e. the document contains all necessary particulars set out in form in Schedule IX of the Act. In the present case, both the power of attorneys have been found to be substantially complying with the requirement and contain necessary details and particulars and the appellant No. 1 company after duly registering the said power of attorneys has issued voting slips to the power of attorney holder. In fact, the voting slips issued by the company specifically provides that the power of attorney holder is entitled to vote at the 28th Annual General Meeting of the company. Even at the meeting all the parties proceeded on the footing that the power of attorney holder is entitled to vote at the meeting and the dispute raised was regarding the validity of the power of attorneys executed by the first holder instead of all the joint holders. Therefore, the question to be considered is, whether the first holder alone could execute a power of attorney in respect of shares held jointly ?
31. Section 176 of the Companies Act provides that any member of a company entitled to attend and vote at a meeting of the company shall be entitled to appoint any person (where a member of not) as his proxy to attend and vote instead of himself. Although, Schedule IX of the Companies Act sets out the general form of proxy, Article 62 of the Schedule 1 to the Companies Act provides as follows:
"62. An instrument appointing a proxy shall be in either of the forms in Schedule IX to the Act or a form as near thereto as circumstances admit."
Similarly, Article 109 of the Articles of Association of the applicant No. 1 company reads as under: "109. The instrument of proxy shall be as near as practicable in the form set out in the Schedule IX of the Act."
Therefore, even though Schedule IX of the Act sets ::: Downloaded on - 09/06/2013 19:31:11 ::: hvn 186/195 COAPPL41.12 out the form of proxy, it may be varied if the circumstances so require. In other words, the proxy form as set out in Schedule IX is not mandatory. So long as any instrument contains all the requisite particulars set out in the form in Schedule IX it can be treated as a proxy. If an instrument like power of attorney contains all the requisite particulars, such as the name of the company, the name of the person executing the instrument, the name of the person empowered to vote as a proxy, etc. as set out in the form in Schedule IX to the Companies Act then such an instrument can be treated as a proxy. As stated earlier, the instrument of proxy is executed to empower a third person to vote at the meeting of the company for and on behalf of the person executing the instrument of proxy. Proxy is one acting for another. It is an authority or power to do a certain thing. A proxy is a lawfully constituted agent. A power of attorney is an authority given by a formal instrument whereby one person, who is called the donor or principal, authorises another person, who is called the donee, attorney or agent, to act on his behalf. In the absence of any specific bar, a power of attorney that substantially complies with the requirement of Schedule IX can be considered as proxy. In the present case, it is not dispute that the power of attorney executed by the applicant Nos. 4 and 5 contains all the particulars set out in the form in Schedule IX and on being satisfied, the company has issued the voting slips in favour of the power of attorney holder. The fact that Clause 2 of the power of attorney empowers the power of attorney holder to vote himself or appoint a proxy, it does not mean that the power of attorney holder cannot vote without executing a deed of proxy in his own favour. Where the power of attorney holder himself decides to vote, then he has to forward the deed of power to attorney to the company and if the same is in conformity with the proxy form set out in Schedule DC, then the company would register it and issue voting slip to the power of attorney holder. In the present case, on registration of power of attorney, voting slips have been issued by the company to the power of attorney ::: Downloaded on - 09/06/2013 19:31:11 ::: hvn 187/195 COAPPL41.12 holder. Therefore, in the facts of the present case, the learned Company Judge was justified in holding that the power of attorney constituted a proxy.
32.The contention of the appellants that the words 'power of attorney' and 'proxy' being different, the power of attorney cannot be considered as proxy is without any merit because, as stated earlier, the object of both the instrument of power of attorney as well as the instrument of proxy is to empower a third person to act for and on behalf of the person executing such instrument. So long as a document is in conformity with the form in Schedule IX of the Act, there is no impediment to consider that document as proxy. Similarly, the fact that the instrument itself does not purport to be a proxy and the same is not registered as proxy makes no difference because admittedly the voting slips issued by the company empowers both the power of attorney holder as well as the proxy holder to vote at the meeting of the company. In this view of the matter, we are of the opinion that in the facts of the present case, no fault can be found with the findings of the learned Company Judge that the power of attorney is a proxy."
145. In my view what is relevant is an authority or power to do certain things. The power of attorney is an authority given by a formal instrument whereby one person who is called donor or principal authorizes another person who is called donee, attorney or agent to act on his behalf. Perusal of the power of attorney executed by the appellants in favour of Godrej Industries Limited clearly indicate that it contains all the particulars set out in schedule IX including power to vote on behalf of the appellants. In my view, the Chairman was right in issuing voting slips in favour of Mr. Rajiv Bakshi to vote in respect of 1710 shares and such decision cannot be faulted with.
The Division Bench of this court has already held that the proxy form as set ::: Downloaded on - 09/06/2013 19:31:11 ::: hvn 188/195 COAPPL41.12 out in schedule IX is not mandatory. So long as any instrument contains all the requisite particulars set out in the form in schedule IX, it can be treated as proxy. In my view separate proxy itself was not required in view of the fact that he power of attorney itself authorized Godrej Industries Limited to vote and the said company in turn and rightly authorized Mr. Bakshi to exercise the votes on behalf of the appellants. In my view, the entire ruling of the Chairman has to be considered as a whole and not few sentences in isolation.
Considering the entire ruling of the Chairman and the minutes of the meeting held on 22nd May, 2012, it is clear that Chairman was right in permitting Mr. Bakshi to cast vote on behalf of the appellants as duly authorised. I am bound by the view taken by the Division Bench of this court in the case of Gharda Chemicals Limited (supra).
146. Mr. Samdani, the leaned senior counsel appearing for the appellants placed reliance on the judgment of this court in the case of Jar Ratan Kavasmaneck alias Jer Jawahar Thadani and Ors. Versus Gharda Chemicals Limited dated 7th April, 1995 delivered by Shri Justice A.P. Shah as he then was, in Company Application No. 127 of 1995. The learned counsel submits that where the voting has been disallowed by the chairman, shareholder has got right to challenge the decision of the Chairman in the court. It has been held that normally the court will be slow to interfere with the Chairman's ruling but when the ruling is shown to be erroneous on the point of law, ::: Downloaded on - 09/06/2013 19:31:11 ::: hvn 189/195 COAPPL41.12 interference can be warranted in the facts and circumstances of the case.
This court has held that if it is brought to the notice of the court that the Chairman's ruling is erroneous in law, recourse to certain provisions of the articles are not brought to the Chairman's notice, it will be open for the court to correct the said mistakes. This court took a view that the ruling of the Chairman has resulted in causing serious prejudice to the minority shareholders, as they are precluded from voting on the resolutions which are of considerable importance. This court in the said matter has set aside the ruling of the Chairman rejecting the votes cast on behalf of the applicants.
147. Mr. Bobde, the learned senior counsel appearing on behalf of the respondent No. 2 invited my attention to para 15 of the said judgment and submits that it has been held that where the voting has been disallowed by the Chairman, shareholder has got right to challenge the decision of the Chairman in the court and when such ruling is erroneous on the point of law. The learned senior counsel submits that in this case the shareholders were not disallowed by the Chairman to vote but were allowed to vote through constituted attorney. The learned senior counsel submits that the ruling of the Chairman is not erroneous on any point of law. The learned Chairman has considered all the documents on record and was satisfied that Mr. Bakshi was rightly authorised to cast vote and has then permitted to exercise such rights on behalf of the appellant. The learned counsel submits that the ruling of the ::: Downloaded on - 09/06/2013 19:31:11 ::: hvn 190/195 COAPPL41.12 Chairman is final. It is submitted that the Article 109 provides that the instrument of proxy shall be as far as possible in the format set out in schedule IX. This instrument of power of attorney read with letter of authority satisfies all the conditions required to treat the said document as instrument of proxy. The learned counsel rightly placed heavy reliance on article 19 of the Articles of Association which provides that the Chairman of any meeting shall be sole Judge of the validity of every vote tendered at such meeting and shall be sole judge of validity of any vote tendered at such poll.
148. In my view, Mr. Bobde, the learned senior counsel is right in his submission that the Chairman was right in permitting Mr. Bakshi to cast vote in respect of 1710 shares. In my view, all the documents which were on record of the company before voting including power of attorneys and letter of authority were required to be considered by the Chairman to find out whether it satisfies the requirement of proxy. In my view, the appellants had failed to show that the ruling given by the Chairman is erroneous on any point of law. The appellants had failed to show that any serious prejudice is caused to the minority shareholders by virtue of the Chairman permitting Mr. Bakshi to cast vote. It is not in dispute that the power of attorney was executed by one of the appellant authorising Godrej Industries Limited to vote on their behalf in the meeting of the first respondent in respect of 1710 shares.
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149. In my view, the person who could raise objection in respect of the exercise of voting by Mr. Bakshi was none other than M/s. Godrej Industries Limited itself. Mr. Dhond the learned senior counsel appearing for Godrej Industries Limited, in my view has rightly submitted that 11 power of attorneys were executed by the appellants in favour of Godrej Industries Limited which entitled Godrej Industries Limited to vote in respect of 1710 shares of the appellant no. 1 and these power of attorneys had been submitted with first respondent company more than 48 hours prior to EOGM. The learned counsel pointed out that it was unnecessary for Godrej Industries Limited to authorise Mr. Bakshi by the resolution of Board of Directors nor was it necessary for Mr. Pinto to be authorised by resolution of the Board of Directors. It is submitted that issuance of letter dated 19th May, 2012 was internal mater of Godrej Industries Limited and is covered by the affairs of indoor management. The learned counsel submits that M/s.Godrej Industries Limited had no prejudice at any point of time in Mr. Rajiv Bakshi exercising vote in respect of 1710 shares and his action in any event are ratified by Godrej Industries Limited.
150. In my view, on conjoint reading of section 176(1) with articles 104 to 109 and 113 it is clear that filling of the proxy form was alternate to the power of attorney and authority letter already filed by the Godrej Industries Limited 48 hours prior to the date of EOGM. It is not in dispute that Mr. ::: Downloaded on - 09/06/2013 19:31:11 ::: hvn 192/195 COAPPL41.12 Bakshi is in the employment of Godrej Industries Limited. M/s. Godrej Industries Limited in its submissions made before this court has confirmed that Mr. Rajhiv Bakshi was authorized to represent M/s.Godrej Industries Limited and if necessary have been ratified all the acts of Mr. Rajiv Bakshi, pursuant to the authority given to him by M/s. Godrej Industries Limited and recorded in the letter dated 19th May, 2012. The said authority letter clearly indicates that Mr. Bakshi was authorised to attend, participate in and to vote at the EOGM held on 22nd May, 2012 or on any adjourned date thereof. In my view since M/s. Godrej Industries Limited has not disputed the authority of Mr. Rajiv Bakshi to vote and in view of the fact that Godrej Industries Limited was authorised by 11 power of attorneys to vote on behalf of the appellants, in my view no illegality is committed by the Chairman in permitting Mr. Rajiv Bakshi to vote on behalf of the first appellant. I am therefore, of the view that there is no merit in any of the submissions made by Mr. Samdani, the learned senior counsel appearing for the appellant that the procedure followed by the Chairman in conducting the EOGM was illegal. In my view the ruling of the Chairman is final unless the same is erroneous on question of law.
151. The CLB in paragraph 37 and 38 of the impugned order has considered even the issue arising out of the power of attorneys, letter of authority and proxies and has rendered finding of fact that the petitioners themselves were guilty of issuing multiple power of attorneys which were in force at the same ::: Downloaded on - 09/06/2013 19:31:11 ::: hvn 193/195 COAPPL41.12 time, causing confusion and forcing the Chairman to take the decision, which he did in the bona fide manner. It is recorded that the petitioners by having issued multiple power of attorneys being irrevocable power of attorneys coupled with interest in favour of M/s. Godrej Industries Limited which permitted them to attend and vote at the meeting of the company were responsible for the presence as well as participation of Mr. Rajiv Bakshi at the meeting. It has been further held that the articles of association of the company as well as provisions of the Companies Act, mandate that the Chairman shall be the sole judge of the validity of all votes cast at the meeting and that the decision of the Chairman in that regard shall be conclusive. In my view, CLB was right in rendering such finding of fact based on the documents produced by both the parties and such finding in my view cannot be faulted with. In my view no prejudice is caused to the appellants by ruling of the chairman or the impugned resolution passed by the first respondent.
152. The first respondent invited my attention to the affidavit in reply filed by it which indicates that after passing of the impugned order by CLB on 13 th August, 2012, the first respondent has filed/uploaded form No. 23 after intimation of the resolution with the registrar of companies along with copy of the resolution with the copy of the amended articles of association of first respondent. The first respondent has also filed/uploaded form 21 after notice ::: Downloaded on - 09/06/2013 19:31:11 ::: hvn 194/195 COAPPL41.12 of order dated 21st May, 2012 and 13th August, 2012 passed by CLB in Company Application No. 73 and 85 of 2012. The shareholders are already informed by the first respondent company about the amendment to the articles of association. Form No. 23 has been re-submitted by the first respondent with the Registrar of Companies and has been approved. The first respondent company has also approved the transfer of shares received from Manoj C.
Gandhi, Mr. Malte and Mrs. Hajvane to Protegenia Advisors Pvt.Ltd. and the said transfers have been approved by the first respondent in the meeting held on 20th August, 2012. The said transferee of the shares are shareholders/members of the first respondent company. From the perusal of the documents annexed to the affidavit in reply dated 4th August 2012 it is clear that the first respondent has already implemented the resolution passed by it in EOGM held on 22nd May, 2012. Article 57 has already been deleted. In my view, there is no case made out by the appellants under Section 10F of the Companies Act for interference with the order passed by CLB.
153. In my view, the appellants have failed to prove that the conduct of the chairman in conducting impugned EOGM as well as ruling given by the chairman is illegal or that he acted malafide or the same was part of any alleged pro-conceived, deliberate, oppressive desire. The appellants have not proved that affair of the 1st respondent company were conducted in the manner prejudicial to public interest or in the manner oppressive to the appellants. It is ::: Downloaded on - 09/06/2013 19:31:11 ::: hvn 195/195 COAPPL41.12 also not proved that the facts exist which would justify making of order for winding up of respondent no.1 on the ground that it is just and equitable to do so but to wind up the company would unfairly prejudice to the appellants.
154. Thus in my view, the company law board was right and justified in vacating and/or modifying its earlier order dated 21st May, 2012 and not restraining the 1st respondent from implementing the resolution passed in the EOGM held on 22nd May, 2012. No interference is thus warranted by this Court under Section 10F of the Companies Act, 1956.
155. I, therefore, pass the following order :-
(a) Company Appeal (L) No. 41 of 2012 is dismissed.
(b) There shall be no order as to costs.
(c) In view of the dismissal of the Company Appeal (L) No. 41 of
2012, all pending Company Applications filed in the present appeal also disposed of accordingly.
(R.D. DHANUKA, J.) At this stage, learned counsel appearing for the appellants seek continuation of ad-interim order dated 30th August, 2012. Learned counsel for the respondents strongly opposes continuation of the ad-interim order.
Application for continuation of stay is rejected.
(R.D. DHANUKA, J.) ::: Downloaded on - 09/06/2013 19:31:11 :::