Bombay High Court
M/S.Gharda Chemicals Limited vs Jer Rutton Kavasmanek Alias on 20 December, 2012
Bench: R.D. Dhanuka
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
COMPANY APPEAL (L) NO. 45 OF 2012
IN
CLB COMPANY APPLICATION NO. 73 OF 2012
IN
CLB COMPANY PETITION NO. 87 OF 2010
1. M/s.Gharda Chemicals Limited )
A company incorporated under the )
Companies Act, 1956 and having its )
registered address at Gharda House, )
Mumbai - 400 050
48, Hill Road, Bandra (West), )
)
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 ) ..... Appellants
Versus
1. Jer Rutton Kavasmanek 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 )
3. Maharukh Murad Oomrigar, )
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having her address at T/176, AA Palm )
Beach, Juhu Tara Road, Juhu, )
Mumbai 400 049 )
4. Percy Rutton Kavasmaneck )
residing at 134, Olivera Way, Palm Beach)
Garden 33418, Florida, USA )
5. Aban Percy Kavasmaneck residing)
at 134, Olivera Way, Palm Beach )
Garden 33418, Florida, USA )
6.
Almitra H.Patel, of Mumbai Indian)
Inhabitant, having his address at Gharda )
House, 48, Hill Road, Bandra (West), )
Mumbai - 400 050 )
7. D.T.Desai of Mumbai Indian )
Inhabitant, having his address at )
Gharda House, 48, Hill Road, Bandra )
(West), Mumbai - 400 050 )
Jer Mansion, 10, W.P.Warde Marg, )
Bandra (West), Mumbai - 400 050 ) ..... Respondents
Mr. T.N. Subramanian (Senior Advocate), Mr. Ravi Kadam, Senior Advocate,
Mr. Vinod Bobde, Senior Advocate along with Mr. Sunip Sen, Mr. Suhas
Tulzapurkar, Mr. Nishad Nadkarni, Mr. Vineet Shrivastava, Mr. Abhishek
Adke, Mr. Aashutosh Sampat i/by M/s. Legasis Partners for the appellants.
Mr. Pravin Samdani, Sr. counsel with Mr. Shriraj Dhru, Mr. Snehal Shah, Ms.
Khyati Ghevaria and Mr. Manish Acharya i/by M/s. Dhru & Co. for respondent
Nos. 1 and 2.
Dr. Birendra Saraf along with Ms. Ankita Singhania i/by M/s.D.H. Law
Associates for respondent nos. 4 and 5.
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CORAM : R.D. DHANUKA, J.
RESERVED ON : 16th OCTOBER, 2012
PRONOUNCED ON : 20th DECEMBER,2012
ORAL JUDGMENT :
1. Admit.
2. By consent of the parties, the present appeal was heard finally at the
admission stage and is disposed of finally by this judgment.
3.
This appeal filed under Section 10F of the Companies Act, 1956 is
directed against the order dated 13th August, 2012 passed by the Company Law
Board, Western Region Bench, Mumbai in Company Application No. 73 of
2012 in Company Petition No. 87 of 2010 which was filed by respondent nos.
1 and 2 for seeking amendment to CLB Company Petition No. 87 of 2010. By
the said impugned order, the Company Law Board (hereinafter referred to as
CLB) allowed the amendment application filed by respondent nos. 1 and 2.
4. The appellants have formulated following questions of law in the
Memorandum of Appeal which arise for consideration of this Court :-
1. Whether a company petition under section
397/398 of the Companies Act, 1956 which has
become infructuous/does not survive/is dead, since
the only alleged act complained of has come to an
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end, can be amended to introduce a completely
new and fresh alleged cause of action ?
2. Whether a company petition under section
397/398 of the Companies Act, 1956 can be
amended to introduce a completely new and fresh
alleged cause of action ?
3. Whether after holding that the events sought
to be introduced by an amendment are not
subsequent events, but constitute a fresh cause of
action, an amendment to a company petition
under section 397/398 can be allowed to introduce
such events ?
4. Where a company petition is instituted
under section 397/398 of the Companies Act, 1956
on the premise that the board of directors of the
company have convened an EOGM, whether an
EOGM requisitioned by shareholders under
section 169 of the Companies Act, 1956 would
constitute a subsequent event in continuation of
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the earlier alleged cause of action which can be
introduced as an amendment to the company
petition ?
5. Whether an extraordinary general meeting
convened pursuant to a valid requisition by
shareholders under section 169 of the Companies
Act, 1956 constitutes a cause of action for an
action under section 397/398 of the Companies
Act, 1956 against the shareholders who have not
requisitioned the meeting ?
6. Whether an extraordinary general meeting
convened pursuant to a valid requisition by
shareholders under section 169 of the Companies
Act, 1956 to consider an amendment to the articles
of association of the company constitutes a cause
of action for an action under section 397/398 of
the Companies Act, 1956 against the shareholders
who have not requisitioned the meeting ?
7. Whether an extraordinary general meeting
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convened by a company to consider an amendment
to the articles of association of the company
constitutes a cause of action for an action under
section 397/398 of the Companies Act, 1956 ?
8. Whether the provisions of Order I Rule 10
of the Code of Civil Procedure, 1908 or principles
analogous thereto are in any manner applicable to
proceedings before the Company Law Board
initiated under section 397/398 of the Companies
Act, 1956 ?
9. Whether the provisions of Order VI Rule 17
of the Code of Civil Procedure, 1908 or principles
analogous thereof are in any manner applicable to
proceedings before the Company Law Board
initiated under section 397/398 of the Companies
Act, 1956 ?
5. Some of the facts emerge from the Memorandum of Appeal filed by the
appellants are summarised as under :-
6. On or about 7th March, 1967, the 1st appellant was incorporated as a
private limited company under the provisions of Companies Act, 1956.
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7. On 17th August, 1988, the 1st appellant became a deemed public limited
company under the provisions of Companies Act, 1956.
8. According to appellants, on 13th February, 1990, respondent nos. 1 to 5
were part of a minority group of seven shareholders collectively referred as
Kavasmaneck/Rebello Group who filed a Company Petition NO. 77 of 1990 in
this Court inter alia alleging Oppression and mismanagement, on several
grounds set out in the said petition and reproduced in the Company Petition
No. 87 of 2010 seeking orders and direction under sections 397, 398, 402, 403
and 433(1) of the Companies Act, 1956.
9. According to the appellants, on or about 5th May, 2001,
Kavasmaneck/Rebello Group including respondent nos. 1 to 5 voted against a
resolution inter alia resolving to revert to appellant no.1's original status i.e.
private limited company, due to certain amendments in the Companies Act,
1956. As a result of the resolution having been defeated, appellant no.1
acquired the status of a public limited company and continues to remain a
public limited company.
10. On or about 8th September, 2008 the respondent nos. 1 and 2
unconditionally withdrew the said Company Petition 77 of 1990 and
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Respondent no. 7 and 8 herein continued the said petition.
11. On 14th November, 2008 the Company Petition No. 77 of 1990 was
dismissed by a judgment and order of this Court. The said order remains
unchallenged and has become final and binding and conclusively holds that
Appellant no. 1 is a public company and its shares are freely transferable. The
said order and judgment not only binds Respondent no. 4 and 5, but also binds
the Appellant and Respondent No. 1 and 2 herein.
12. On 9th December, 2009, respondent no.1 and 2 on the basis of certain
newspaper reports which stated that Appellant no. 2 was selling his shares in
Appellant no. 1 filed another company petition bearing No. 132 of 2009 before
the CLB setting out the same allegations as set out in Company Petition No. 77
of 1990 along with allegations arising out of such news paper reports.
13. On 14th May, 2010, the Company Petition NO.132 of 2009 was
dismissed by the CLB by an order dated 14th May, 2010 holding that no case of
oppression of mismanagement was made out, appellant no.1 is a public
company and that Article 57 of the Articles of Association thereof is void and
unenforceable.
14. On 26th May, 2010, respondent nos. 1 and 2 preferred an appeal against
the said order dated 14th May, 2010 before this Court bearing Company Appeal
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No.24 of 2010.
15. On 16th October, 2010 during the pendency of Company Appeal No. 24
of 2010, the appellant no.1 company issued a notice dated 16th October, 2010
convening an Extra Ordinary General Meeting to be held on 12 th November,
2010. One of the purpose of the said meeting was considering the deletion of
Article 57 of the Articles of Association of appellant no.1.
16. In the year 2010, respondent nos. 1 and 2 filed Company Petition No. 87
of 2010 before CLB seeking to restrain the appellants and respondent nos. 6
and 7 from convening the said EOGM or any other EOGM for the said
purpose and applied for an ad-interim injunction for the same.
17. On 3rd November, 2010, the appellant no.2 filed his affidavit in reply to
the said petition and inter alia contended that no petition under Sections
397/398 was maintainable in relation to the holding of the EOGM dated 12 th
November, 2010.
18. On 9th November, 2010, the CLB rejected ad-interim reliefs by a
reasoned order and merely gave directions to the parties to file their
replies/rejoinders and directed that the matter be listed for final hearing
thereafter.
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19. In the year 2010, the respondent nos. 1 and 2 thereafter filed Company
Appeal No.2 of 2011 against the said order dated 9th November, 2010 before
this Court.
20. On 10th November, 2010, this Court permitted appellant no.1 to hold the
proposed EOGM on 18th November, 2010 but ordered that the resolution
passed thereat shall not be implemented till 18 th November, 2010 and directed
the appeal to be listed on 15th November, 2010.
21. On 12th November, 2010, the EOGM of appellant no.1 was held on 12 th
November, 2010 but was adjourned to 10th December, 2010 in view of the
pending appeal No.2 of 2011.
22. On 9th December, 2011, the appellant no.1 thereafter also issued a
circular dated 9th December, 2010 and intimated its shareholders that the said
EOGM was being adjourned in view of the pending proceeding in relation to
the same (i.e. Company Appeal No.2 of 2011) and would be held within a
period of 2 months for which fresh notice would be issued.
23. Thereafter the Company Appeal No.2 of 2011 was tagged along with
Company Appeal No. 24 of 2010 for hearing and was heard together.
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24. On 14th June, 2011 this Court by its judgment and order dated 14 th June,
2011 dismissed the said Company Appeal No. 24 of 2010 and held inter alia
that appellant no.1 is a public company and that Article 57 of the Articles of
Association is unenforceable. The said order however continued an injunction
granted at an ad-interim stage of the appeal with certain modification whereby
appellant nos. 2 and 3 are restrained from selling, transferring, alienating,
pleading, encumbering or in any manner creating any third party rights in
shares of appellant no.1 directly or indirectly held by them. Though the
Company Appeal No.24 of 2010 was dismissed on 14 th June, 2011, no order
was passed in Company Appeal No. 2 of 2011 whilst dismissing Company
Appeal No. 24 of 2010.
25. Thereafter respondent nos. 1 and 2 preferred SLP bearing No. 16994 of
2011 before the Supreme Court of India against the said order dated 14 th June,
2011.
26. On 22nd and 27th July, 2011, the said SLP has not yet been admitted. The
Supreme Court of India by its orders dated 22 nd July, 2011 and 27th July, 2011
in SLP (Civil) No. 16994 of 2011, has continued the order of injunction which
was continued by this Court in its order dated 14 th June, 2011. The SLP is
pending. The Supreme Court has not granted a stay of the order dated 14 th
June, 2011.
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27. On 8th August, 2011, the Company Appeal No.2 of 2011 was sought to
be withdrawn by respondent nos.1 and 2 in view of the fact that the EOGM
dated 12th November, 2010 was never reconvened within the aforementioned
period of two months stated in the circular dated 9th December, 2012. By an
order dated 8th August, 2011, the said Company Appeal No. 2 of 2011 was
permitted to be withdrawn with liberty to the appellants to adopt appropriate
proceedings in case a fresh Extraordinary General Meeting is convened. It was
also observed that in the event the fresh EOGM is convened, the same would
mean a fresh cause of action, the CLB or any other appropriate authority will
decide the same independent of the observations made in its earlier order dated
9th November, 2010 and all contentions including the maintainability of the
said proceedings if initiated were kept open.
28. On 22nd April, 2012, appellant no.1 received a requisition dated 31st
March, 2012 under section 169 of the Companies Act from respondent nos.3 to
5, for convening an EOGM for the purpose of considering and thought fit
passing a resolution for deletion of Article 57 of Articles of Association of
appellant no.1.
29. In May 2012, respondent nos. 1 and 2 filed Company Application No. 73
of 2012 in Company Petition No. 87 of 2010 with a view to amend Company
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Petition No. 87 of 2010. Respondent nos. 1 and 2 also sought an ad-interim
injunction staying the notice dated 25 th April, 2012 and also restraining
respondents in the said Company Application No. 73 of 2012 from holding the
said EOGM dated 22nd May, 2012 or any subsequent date for considering the
resolutions mentioned in the notice dated 25th April, 2012.
30. On 21st May, 2012, the CLB by its ad-interim order dated 21 st May, 2012
permitted the appellants to hold the EOGM on 22 nd May, 2012 but restrained
the respondents from implementing the resolution, if passed till further orders
in the said Company Application.
31. On 22nd May, 2012, the EOGM was conducted on 22 nd May, 2012 and
the resolution for the deletion of Article 57 from the Articles of Association of
the appellant no.1 was passed.
32. In the year 2012, the appellant no.1 thereafter filed a Company
Application No. 85 of 2012 in Company Petition No. 87 of 2010 for seeking a
vacation/modification of the ad-interim order dated 21st May, 2012.
33. In June 2012, the respondent nos. 1 and 2 filed a further Company
Application No. 91 of 2012 to further amend Company Petition No. 87 of 2010
with a view to introduce inter alia a challenge to the conduct of the EOGM
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dated 22nd May, 2012 and to seek an injunction against the appellants
restraining them from implementing the resolution dated 22 nd May, 2012,
deleting article 57 from the Articles of Association of appellant no.1.
34. On 10th July, 2012, Company Application Nos. 73 of 2012, 85 of 2012
and 91 of 2012 were being heard together and Company Application Nos. 73
of 2012 and 85 of 2012 were part heard on 10th July, 2012 and adjourned to 24th
July, 2012.
35. On 24th July, 2012, Company Application Nos. 73 of 2012, 85 of 2012
and 91 of 2012 were listed but at the request of respondent nos. 1 and 2, they
were adjourned to 10th August, 2012.
36. On 9th August, 2012, the advocates for respondent nos. 1 and 2 issued a
letter to the advocates for the appellants and stated that they would be seeking
another short adjournment on 10th August, 2012 due to the unavailability of
counsel since he was held up in another matter before this Court. Under the
instructions from the appellants, the advocates for the appellants intimated the
advocates for respondent nos. 1 and 2 by two letters dated 9th August, 2012 that
they had instructions to oppose any further adjournments and that the request
for an adjournment would be opposed.
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37. On 10th August, 2012, the matter was listed on 10th August, 2012. The
CLB did not allow the request for an adjournment since only Company
Application Nos. 73 of 2012, 85 of 2012 and 91 of 2012 were specifically
listed on board with a view to conclude the hearing. The hearing in respect of
Company Application No. 73 of 2012 and Company Application No. 85 of
2012 was concluded and orders reserved. However, the hearing of Company
Application No. 91 of 2012 was adjourned to 6 th September, 2012 at the
request of the advocates for respondent nos. 1 and 2.
38. On 13th August, 2012, the CLB by a common order disposed off the
Company Application No. 73 of 2012 and Company Application No. 83 of
2012 allowing both the applications.
39. In August, 2012, respondent nos. 1 and 2 filed Company Appeal (L) No.
41 of 2012 against the said order to the extent it allows Company Application
No. 85 of 2012 which is being disposed off by a separate order.
40. On 6th September, 2012, the CLB adjourned the hearing of the Company
Application No. 91 of 2012 to 3rd October, 2012 and the same is pending.
41. The appellants have impugned the order dated 13 th August, 2012 passed
by the CLB in this appeal.
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42. By the said order, the CLB has permitted impleadment of respondent
nos. 7 and 8 as party respondents to the Company Petition No. 87 of 2010 and
has permitted the respondent nos. 1 and 2 to amend the Company Petition No.
87 of 2010 by introducing certain averments.
43. Mr.Subramanian, the learned senior counsel appearing for the appellants
made the following submissions :-
(a) Company Petition (87 of 2010) filed by the
respondent no.2 under sections 397 and 398 of the
Companies Act, 1956 itself became infructuous.
The said petition was filed to prevent holding of
EOGM on 12th November, 2010 called by notice
dated 16th October, 2010 by the appellants under
Article 76 of the Articles of Association read with
Section 28 and in compliance with the provisions
of sections 171 to 173 of the Companies Act, 1956.
This court in Company Appeal (2 of 2011) passed
an order dated 10th November, 2010 that the
resolution passed at the EOGM shall not be
implemented. The appellant adjourned the meeting
and informed the shareholders that fresh notice
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would be given if the EOGM was to be held later.
The appellants did not hold any EOGM called by
the company by notice issued on 16th October,
2010. This court passed an order dated 8th August,
2011 allowing the prayers of respondent nos. 1 and
2 to withdraw the Company Appeal (2 of 2011) in
view of appellants' adjourning the meeting. This
court observed that respondent nos. 1 and 2 may
adopt proceedings in an appropriate forum on a
fresh cause of action keeping all the questions
including maintainability of the appeal open.
(b) Company Petition (87 of 2010) filed by the
2nd respondent thus become infructuous as the
cause of action had ceased to exist and this Court
granted liberty to adopt fresh proceedings in a
appropriate forum on a fresh cause of action.
(c) Notice for EOGM dated 22nd May, 2012
constituted a new and different cause of action.
Notice dated 25th April, 2012 for holding EOGM
on 22nd May, 2012 was issued upon a requisition
by three shareholders made on 31st March, 2012
and received by the appellants on 20th April, 2012
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under section 169. The requisition of meeting
thus constituted an entirely new and different cause
of action and could have been questioned only by
an appropriate new proceeding in an appropriate
forum which would not be the CLB under section
397.
(d)
The CLB by its order dated 21st May, 2012
refused to restrain the holding of the EOGM and
directed that the resolution passed therein to be
kept in abeyance "till further orders". The CLB
thereafter vacated its ad-interim order dated 21 st
May, 2012 upon the appellants filing Company
Application (85 of 2012) and adjourned the
hearing of the Company Application (91 of 2012)
and for further amendment of Company Petition
No. 87 of 2010. No amendment could have been
considered or allowed in Company Petition No. 87
of 2010 under the garb of "subsequent events".
Meeting convened pursuant to a requisition under
Section 169 does not constitute a cause of action
under sections 397 and 398 of the Companies Act,
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1956. In the alternative, it furnished a new and
different cause of action. The allegation of
collusion and other allegations regarding
undermining the jurisdiction of Supreme Court and
the invalidity of the resolution dated 22nd May,
2012 raised an entirely new case and new grounds
and would require entirely new and different
evidence and submissions and thus could not have
been introduced by way of amendment in the
company petition which had become infructuous.
44. Mr.Subramanian, the learned senior counsel stated that the petition
containing a single act of complaint is not maintainable in as much as this
court has already held that Article 57 was invalid. The learned senior counsel
placed reliance upon portion of the judgment of this court in case of Sitaram
Krishna Padhye vs. Chimandas Fathechand1 which reads thus :-
"........... We have, now been asked at this late stage
to allow an amendment which would have the
effect of introducing not only the evidence which
has been already given,which in my judgment; for
the reasons already given by me was wholly
inadmissible,but which might also allow the
amending party to introduce other evidence
hereafter if a new trial were granted. In my opinion
such an amendment would raise a cause of action
entirely different from the cause of action arising
1 1928 (30) Bombay Law Reporter 1300
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upon the hundis sued upon in the present suit,
Accordingly it seems to me that in such
circumstances an amendment ought to be refused,
even upon the terms of the party asking for the
amendment paying the whole of the costs thrown
away. In a case where an entirely different cause of
action is raised, I think that the proper course is to
leave the party to bring a fresh suit ab initio, if so
advised."
45. Dr.Saraf, the learned counsel appearing for respondent nos. 7 and 8
supported the appellants in impugning the order passed by the CLB allowing
the amendment thereby impleading respondent nos. 7 and 8 as party to the
Company Petition. It is submitted that collusion between the appellants and
respondent nos. 7 and 8 has not been proved. The learned counsel placed
reliance upon the findings of fact recorded by CLB in paragraphs 13 and 39 of
the impugned order and submits that once such finding of no collusion is
recorded by the CLB, respondent nos. 7 and 8 could not have been impleaded
as party respondents. It is submitted that the order allowing impleadment of
respondent nos. 7 and 8 after recording such finding shows inconsistency in the
impugned order.
46. Mr.Samdhani, the learned senior counsel appearing on behalf of
respondent nos. 1 and 2 on the other hand submits as under :-
(a) Company Petition No. 87 of 2010 filed by
the second respondent before the CLB is not
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infructuous. The challenge in the said petition was
not confined only to the EOGM dated 10 th
November, 2010. The second respondent has
impugned in the said petition an attempt of the
appellants to take away right of pre-emption per se.
The second respondent has sought relief not only
against the EOGM of 10th November, 2010 but also
against the EOGM in future that might be held for
the same or similar purpose.
(b) The learned counsel placed reliance on the
prayers in Company Petition No. 87 of 2010. It is
submitted that the Company Petition was filed in
November, 2010 , i.e. much before the order of
S.C.Dharmadhikari, J. When Company Petition
No. 87 of 2010 was filed, the appeal against the
CLB order dated 14th May, 2010 was already
admitted. The purpose/issues were at large and the
matter was subjudice.
(c) The convening of the requisitioned EOGM
was a further act of oppression for the same earlier
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purpose viz. to take away right of the pre-emption.
It is submitted that such act was subsequent and
was in continuation of oppressive action and thus
CLB was right in amendment of the Company
Petition No. 87 of 2010 thereby to include the
challenge to the convening of EOGM.
47.
Mr.Samdhani, the learned senior counsel placed reliance on the
judgment of this court in case of Khimji M.Shah & Ors. vs. Ratilal D.Modi &
Ors.2
It is next contended on behalf of the respondent
that in a company petition of this nature, only the
grievance of the petitioners as shareholders can be
enquired into; if they have any grievance as
directors of a company, such grievance cannot
form the subject-matter of a petition under section
397 and/or section 398 of the Companies Act. It is
undoubtedly correct that petitions under section
397 deal with applications by members of a
company who complain that the affairs of th
company are being conducted in a manner
prejudicial to public interest or in a manner
oppressive to any member or members. Similarly,
section 398 deals with applications by members of
the company who complain that the affairs of the
company are being conducted in a manner
prejudicial to public interest or in a manner
prejudicial to the interest of the company or that a
material change has taken place in the
management or control of the company and by
2 (1990) 67 Company Cases 185
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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 interest of the company. These
are all applications by members. In the case of
Lundie Brothers Ltd., In re , a petitioner, who was
one of three directors and shareholders in a private
company, presented a petition for relief under
section 210 of the English Companies Act, 1948,
which is equivalent to section 397 of the
Companies Act. The petitioner was ousted from
the control of the company and was removed as a
working director of the company. It was held that
no element of lack or probity or fair dealing to the
petitioner in his capacity as shareholder in the
company had been established, for, his having
been ousted as a working director related to his
status as director and not as shareholder. It was
held that the petitioner was not entitled to relief
under section 210 of the Companies Act. In the
present case, however, the amendments do not
deal merely with removal of directors of the fifth
respondent-company. The acts complained of
relate to requisition various shareholders of the
fifth respondent company, as a result of which an
extraordinary general meeting is purported to have
been held and certain new directors appointed. At
this meeting, the chairman and managing director
was also sought to be removed. The petitioners
contend that some of the directors so appointed are
involved in charges of criminal conspiracy and if
they are appointed as directors of the company, the
affairs of the company ;will be so conducted as to
be oppressive to the shareholder especially the
petitioners' grievances as directors of the
company. The acts complained of affect them as
shareholders also. In any case, this is a matter
which can be looked into in depth at the hearing of
the petition. The amendments cannot be rejected
on this ground.
In the premises, the judge's summons is made
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absolute in terms of prayer (a). Amendments to be
carried out within one week. Liberty to
respondents Nos. 1 to 4 to file an additional
affidavit-in-reply in Company Petition No. 573 of
1984 confined to the amendments.
Newly added respondents Nos. 6 to 9 to file their
affidavit-in- reply within three weeks from being
joined as respondents and served.
48. The learned senior counsel also relied upon a portion of the judgment of
this court in case of Jer Kavasmaneck vs. Gharda Chemicals3 which reads
thus :-
15. I have considered the arguments put forward
by the learned Counsel for the parties. The position
with regard to amendment of the pleadings is no
longer res integra. The law has been clearly set out
in the case of Khimji M. Shah v. Ratilal D. Modi
and others, 1988 Mh.L.J. 38 and . In that case it is
clearly held as follows:
"6. Mr. Chinoy who appeared for respondents
Nos. 1, 2 and 4 to oppose the amendments,
stated that he had no objection to respondents
Nos. 6, 7 and 8 being added as party-
of 1984. He, however, submitted that rest of
the amendments should not be allowed
because, according to him, these amendments
deal with the events subsequent to the filing
of Company Petition No. 573 of 1984. It is
his contention that such subsequent events
cannot be gone into in deciding a Company
petition under sections 397 and 398 of the
3 2000 (2) BCR 56
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Companies Act. In support he relied upon a
decision in the case of Rajamundry Electric
Supply Corporation Ltd. v. A.Nageshwara
Rao, reported in A.I.R. 1956 S.C. 213. In this
case the applicants had obtained the consent
of not less than 1/10th of the members of the
Company while filing a petition under
sections 397 and 398 of the Companies Act.
After the petition was presented some of the
shareholders withdrew their consent. The
Court held that this subsequent withdrawal of
consent is not relevant if the petition had the
support of the requisite number of members
at the time when the petition was presented.
This case does not support the contention of
Mr. Chinoy. The judgment merely states that
if a petition is validly filed and complies with
all the requirements of sections 397 and 398
of the Companies Act at the date when it is
filed, any subsequent withdrawal of consent
by some of the shareholders would not
invalidate the petition. The decision does not
set out that subsequent events cannot be
looked into in deciding a petition under
sections 397 and 398 on merits.
7. The second case relied upon by Mr.
Chinoy was that of Shanti Prasad Jain v.
Kalinga Tubes Ltd., reported in . The Court
there held that it is necessary in a petition
under sections 397 and 398 of the
Companies Act to show that the conduct of
the majority shareholders was oppressive to
the minority as members. Also, the events
had to be considered not in isolation but as a
part of a consecutive story. It said "There
must be continuous acts on the part of the
majority shareholders, continuing up to the
date of petition, showing that the affairs of
the company were being conducted in a
manner oppressive to some part of the
members". Mr. Chinoy emphasised the
words "up to the date of petition" and
hvn
COAPPL45.12
submitted that only conduct up to the date of
the petition can be looked at in such a
petition. I am unable to agree. The judgment
points out that there should be a course of
conduct which could be considered as
oppressive to some of the members,
burdensome, harsh and wrongful and such
conduct should continue till the date of the
petition. Stray acts which may amount to
such burdensome conduct cannot be enough.
There should be continuous course of
conduct upto the date of petition. The
judgment does not deal with any subsequent
conduct after the date of filing of the
petition. It merely says that if there is no
such conduct continuing till the date of the
petition, the petition would fail. From this a
conclusion cannot be drawn that if there are
any subsequent acts of oppression or
mismanagement after the date of the filing of
the petition, those cannot be incorporated in
a petition by way of amendment.
8. Under Rule 6 of the Companies (Court)
Rules, 1859 the provisions of the Code of
Civil Procedure, so far as applicable shall
apply to all proceedings under the
Companies Act. The provisions relating to
amendment of pleadings would, therefore,
apply to amendment of pleadings under the
Companies Act. There is no bar to an
amendment which incorporates subsequent
events if the amendment is otherwise
necessary for proper determination of issues
between the parties. In the case of Promode
Kumar Mittal v. Southern Steel Ltd.,
reported in the Calcutta High Court observed
in a petition under sections 397 and 398 of
the Companies Act that the Court can take
notice of all subsequent events to grant
reliefs finally after trial in a company matter
and the interim orders passed from time to
time by the Court in all applications, the
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COAPPL45.12
meetings held under the Chairman appointed
by the Court, and the resolutions passed by
majority shareholders and directors present
therein are all relevant. In the case of Inder
Kumar Jain v. Osra Bottling Co. (P.) Ltd.,
reported in the Delhi High Court has held
that on an analogy of Order VI, Rule 17 of
the Code of Civil Procedure, the High Court
has power to grant leave to amend a
pleading in a petition under section 397 or
398 of the Companies Act, 1956 for relief
against mismanagement or oppression in the
affairs of a Company. In the case of Bastar
Transport and Trading Co. v. Court of
Wards, reported in the Court has held that
the provisions of the Code of Civil
Procedure, so far as applicable, would
govern proceedings under the Companies
Act also. There is thus no provision under
the Companies Act which prohibits a Court
from looking at subsequent events in a
petition under sections 397 and 398 of the
Companies Act."
Thus, it becomes evident that it is permissible to
bring on record by amendment not only the facts
pertaining to the events upto the filing of the
petition but also subsequent events. Mr. Manohar
had, however, submitted that this judgment does
not take note of the law laid down by the Supreme
Court in the case of Shanti Prasad Jain v. Kalinga
Tubes Ltd., A.I.R. 1965 S.C. 1535. In paragraph 35
of the judgment, the Supreme Court observed as
follows:
"35. Nor is there any ground for holding that
because of the change which took place in
the management after July, 1958 it was
likely that the affairs of the Company would
be conducted in a manner prejudicial to its
interests. The change that took place after
July, 1958 was that the appellant no longer
remained the Chairman of the Company and
the. Patnaik and Loganathan groups
hvn
COAPPL45.12
practically managed the company without
the appellant. But as the High Court has
pointed out there were no facts before the
Court to come to the conclusion that the
change in management was likely to result in
the affairs of the Company being conducted
in a manner prejudicial to its interests. In this
connection reliance is placed on certain
matters which transpired after the
application was filed on September 14,
1960. These matters however cannot be
taken into account for the application has to
be decided on the basis of the facts as they
were when the application was made.
Besides as the High Court has pointed out, it
has not been shown that in view of certain
actions taken by the new management
without consulting the appellant, the
Company was landed in any difficulty and
loss of profit which would show
mismanagement of its affairs."
I am of the considered opinion that the
judgment in Khimji M. Shah [supra] has correctly
interpreted the law laid down by the Supreme
Court. Even the Supreme Court in Kalinga has
held that facts and events leading upto the filing of
the petition are relevant. Keeping the aforesaid
proposition of law in view, the Court is now
required to see as to whether sufficient facts have
been pleaded to make out an arguable case of
oppression as well as mismanagement. It is a
settled proposition of law that whilst exercising
powers under Order 7, Rule 11 the courts act with
utmost caution. Dismissal of a petition at the
threshold leads to very serious consequences. The
courts in India as well as in England have been
very reluctant to reject the plaint at the threshold.
Order VII, Rule 11 (a) of the C.P.C. provides that
the Court may reject the plaint/petition if it
discloses no cause of action. Similar provision
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COAPPL45.12
occurring in Rules of Supreme Court Order 18,
Rule 19 in England was considered in the case of
(Drummond-Jackson v. British Medical
Association and others), 1970 All.E.R. 1094
wherein Lord Pearson observes as follows:
"Over a long period of years it has been
firmly established by many authorities that
the power to strike out a statement of claim
as disclosing no reasonable cause of action
is a summary power which should be
exercised only in plain and obvious
cases........"
Similar views expressed by other Judges are also
noticed in that judgment which are as follows.
"In Nagle v. Feilden, 1966(1) All.E.R. at
page 695 Danckwerts, L.J., observes:
"The summary remedy which has been
applied to this action is one which is only
to be applied in plain and obvious cases,
when the action is one which cannot
succeed or is in some way an abuse of the
process of the Court."
Salmon, L.J., at page 697 observes:
"It is well settled that a statement of claim
should not be struck out and the plaintiff
driven from the judgment seat unless the
case is unarguable."
Thus the Rule appears to be that the plaint can be
rejected in plain and obvious cases when the
action is one which cannot succeed or is in some
way an abuse of the process of the Court. The
plaint should not be struck out unless the case is
unarguable. In the same judgment Sir Gordon
Willmer at page 1105 observed as follows:
"The question whether a point is plain and
obvious does not depend on the length of
lime it takes to argue. Rather the question is
whether when the point has been argued, it
has become plain and obvious that there
can be but one result."
hvn
COAPPL45.12
Thus it becomes clear that the petition could be
struck out only if the case put forward is
unarguable. In my view, the petition has raised a
number of substantial questions of law. Mr.
Chinoy has referred to a large number of
authorities, English as well as American, which
seem to propound a view that dividend squeeze
can be accepted in principle as indicative of
oppression. On the other hand, Mr. Manohar had
cited a number of cases to show that declaration of
dividends is purely a commercial matter. It has to
be decided by the management as to how much
dividend has to be paid. Mr. Manohar has also
highligthed that the dividend is usually related to
the face value of the shares. In fact, Mr. Manohar
had handed over a chart to show that the quantum
of amount received by way of dividend by the
petitioners has in fact increased. He had also made
a pointed reference to the fact that the petitioners
are not actively participating in the management
of the Company. They can, therefore, hardly
complain about the increase in the emoluments of
respondent No. 2. He had submitted that keeping
these facts and circumstances in view, no material
had been placed on the record by the petitioners
which would lead this Court to the conclusion that
the minority has been oppressed.
16. There are two diametrically opposed
propositions given on the interpretation of Article
57 of the Articles of Association. As noticed
earlier, it is the claims of the respondents that
Articles 57 does not apply to intra member
transfers. On the other hand it has been pleaded as
well as argued that the shares have to be sold only
to the members in order to maintain the principle
of proportionality which was the underlying idea
of the incorporation of the Company.
17. Keeping the aforesaid facts and
circumstances in view, it would not be possible for
this Court to hold that the petition is demurrable.
Once the petition is held to be maintainable, the
hvn
COAPPL45.12
petitioners are entitled to bring on record all
matters which are germane to decide the issue of
oppression. The Orissa High Court in the case of
M/s. Kalinga Tubes Ltd. and others v. Shanti
Prasad Jain and others, framed various issues in
paragraph 7 of the judgment. Issue No. 1 was as
follows:
"(i) Is the petition demurrable and liable to
dismissal in limine?"
The Division Bench noticed the submissions in
paragraph 8 of the judgment made by the learned
Attorney-General to the effect that the petition
does not make out a case under sections 397 and
398 of the Act and the petitioner could not be
permitted to supplement the allegation by
subsequent affidavits filed. It is noted by the
Division Bench that the petition was filed on 14th
September, 1960. The Company filed its counter
affidavit on 19th September, 1960. Respondent
No. 2 filed his rejoinder on 2nd December, 1960.
The Court had earlier ordered that by 15th
February, 1961 all rejoinders should be filed. The
petitioner filed all rejoinders on 8th February,
1961. On 17th March, 1961 respondent No. 2 filed
another affidavit without the leave of the Court
and on 13th April, 1961 the petitioner filed a
counter affidavit in reply to this affidavit without
leave of the Court. The learned Attorney-General
contended that the subsequent affidavits filed by
the petitioner should not be taken into
consideration to supplement the averments made
in the petition and that the petition is demurrable.
The ratio of the judgment is in paragraph 10 which
is as follows:
"10. On a summary of the legal position, it
is sufficiently clear that in a petition under
sections 397 and 398 of the Act, all
material facts must be pleaded. If the facts
transpiring on the date of the petition and
alleged in the petition are not sufficient to
make out a case for winding up on just and
equitable ground, then facts arising
hvn
COAPPL45.12
subsequent to the filing of the application
cannot be resorted to for the purpose, and
the absence of allegations on the pleadings
cannot be substituted by further evidence
either by affidavits or oral and
documentary evidence."
From a perusal of the judgment, it becomes
abundantly clear that the Orissa High Court was
not dealing with a case of amendment of the
petition. It was dealing with two affidavits which
had been filed pertaining to the facts which had
already been pleaded. This is apparent from
paragraph 11 of the judgment which is as under:
"11. In this case the entire question is
academic. We called upon the learned
Attorney-General to give us a list of new
facts which were not alleged in the criminal
petition but were introduced by subsequent
affidavits. Mr. Choudhury furnished us a
list and on examination we find that
essentially the subsequent affidavits filed
by the petitioner either repeat the material
facts already pleaded in different forms or
supply some fresh materials in reply to the
materials given in the counter affidavit of
the contesting respondents. It is, therefore,
not necessary to examine in detail as to in
what manner the departure has been made
in the pleading as essentially, in our view,
there has been no departure in material
facts. The subsequent affidavits are more or
less pieces of evidence in support of the
averments of material facts pleaded in the
petition. Respondent 2 also filed a
subsequent affidavit, as already stated, even
without permission of the Court. Most of
the subsequent affidavits merely place facts
already pleaded by both parties. The
subsequent affidavits would, therefore, be
taken into consideration, but facts
transpiring subsequent to the petition
would be excluded from consideration."
hvn
COAPPL45.12
Thus the two affidavits were treated as pieces of
evidence in support of the averments of material
facts pleaded in the petition. The two affidavits
were, therefore, taken into consideration excepting
the facts transpiring subsequent to the petition but
the subsequent events were excluded only for the
purpose of deciding the question of whether the
petition is demurrable. I am of the opinion that
once the Court comes to the conclusion that the
petition is maintainable then subsequent events
can also be considered in order to do complete
justice between the parties and to make
appropriate orders for removing the oppression.
18. The aforesaid judgment of the Division
Bench was taken to the Supreme Court by way of
appeal. The judgment of the Supreme Court in
Shanti Prasad Jain v. Kalinga Tubes Ltd., is . A
perusal of this judgment shows that the Supreme
Court was not dealing with a case of amendment.
Mr. Manohar had submitted that the issue was
squarely raised in paragraphs 8 and 9 of the
judgment and it was answered in paragraph 35 in
the negative. I am unable to accept this
proposition. The Supreme Court was not
considering a case of amendment. It was only
considering as to whether subsequent facts can be
looked into on the basis of affidavits filed by the
parties. The Single Judge of the Orissa High Court
had allowed the petition. The appeals were
allowed by the Division Bench. The Supreme
Court dismissed the appeals against the judgment
of the Division Bench. In paragraphs 8 and 9 of
the judgment of the Supreme Court, there is no
mention of the additional affidavit which had been
filed in the Orissa High Court. The observations
made in paragraph 35 relate to the relevance of the
facts as on the date of the filing of the petition for
deciding as to whether or not the petition is
demurrable. These observations are of no avail to
the respondents in the present case as I have come
hvn
COAPPL45.12
to the conclusion that there are sufficient pleadings
to make out an arguable case and that the petition
is not a demurrable. The judgment of the High
Court in Khimji (supra) has also been considered
by the Gujarat High Court. Similar issue arose in
the Gujarat High Court in Company Applications
Nos. 3 of 1993 and 755 of 1993 in Company
Petition No. 62 of 1986. A learned Single Judge of
the Gujarat High Court took notice of the fact that
the Company petition has been subsequently
amended as per order dated 23-1-1992 in
Company Application No. 50 of 1987. Thereafter
certain litigation was pending between the parties
in the City Civil Court, Bombay which was
decided by a consent order dated 1-12-1992.
Certain matters were also pending in the Gujarat
High Court. In the meantime the petitioner
preferred Company Application No. 3 of 1993 in
the Company Petition No. 62 of 1986 for
incorporating paragraphs 17.9 to 17.28 and also
for adding certain prayer clauses to the effect that
the resolution of the Company dated 10-11-1992
be set aside. Another application being Company
Application No. 755 of 1993 in Company Petition
No. 62 of 1986 was filed. Judge's Summons were
also taken out for permitting the petitioner to
amend the Petition No. 62 of 1986 on 3rd
September, 1993. The proposed amendment was
for challenging Resolution dated 10th November,
1992 and the issue of prospectus dated 24th
August, 1993. This was clearly a case of bringing
subsequent events on the record in order to
establish the facts already pleaded in the petition.
19. The learned Single Judge of the Gujarat
High Court noticed the judgment of the Madras
High Court in the case of S. Narayanan and others
v. Century Flour Mills Ltd. and others, 1987(1)
Com.L.J. 25. In that case section 397 of the Act
was being considered by the Madras High Court.
Certain transactions had taken place subsequent to
the filing of the petition which was sought to be
hvn
COAPPL45.12
brought on record by amendment. It was
submitted that the subsequent allegations cannot
be looked into nor are the applicants entitled to
rely upon them. While repelling the said
submissions, the Court observed as follows:-
"Section 397 provides that any member of
a company who complains 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 may apply to the Court for an
order under that provision, if the Court is
of opinion that the Company's affairs are
being conducted prejudicially to public
interest or in a manner oppressive to any
member or members and that to wind up
the company would unfairly prejudice such
member or members; but that otherwise
the facts would justify the making of
winding up order on the ground that it was
just and equitable that the company should
be wound up, the Court may, with a view
to bringing to an end the matters
complained of, make such order as it
thinks fit. It is useful to notice that there is
no limitations on the reliefs to be granted
by the Company Court under this
provision. For, the provision enables the
Court to make such order as it thinks fit
with a view to bringing to an end the
matters complained thereof. The
emphasized portion of the above said
provision will clearly indicate that any
application under that provision shall
satisfy the Court that the company's affairs
are being conducted in a manner
prejudicial to public interest or in a manner
oppressive to any member or members till
the application is taken up for hearing. In
other words, it is the persistence of such
conduct by the persons in management of
the company that it will enable the
application under that provision to
hvn
COAPPL45.12
approach the Court and seek the remedy
therein. The subsequent events will amount
to pieces of additional evidence to support
the petition laid under section 397 and 398
of the Act. If such subsequent evidence
were not taken into account at the time
when the application under sections 397
and 398 of the Act was taken up for
disposal, it is not unlikely that the Court
would be flooded with as many
applications under the said provisions as
there are subsequent conducts on the part
of the company. Above all, it causes no
prejudice to the respondents as long as the
respondents are given all opportunities to
adduce rebuttal evidence regarding those
subsequent events or transactions."
The learned Single Judge thereafter noticed the
judgment of the Delhi High Court in the case of
B.R. Kundra and others v. Motion Pictures
Association, Delhi and others, 1978(48) Com.Cas.
536. Relying on the aforesaid two judgments, the
learned Single Judge permitted the amendments
incorporating therein the subsequent events.
20. This judgment of the learned Single Judge
was taken in Appeal before the Division Bench
being O.J. Appeal Nos. 26 of 1993 to 30 of 1993
with Civil Application Nos. 54 of 1993 to 58 of
1993. The Appeal was decided by a Division
Bench consisting of G.T. Nanavati & B.C. Patel,
JJ. The Division Bench whilst upholding the
judgment of the learned Single Judge noticed the
submissions made before the learned Single Judge
to the effect that the facts and events which are
sought to be introduced as additional facts and
grounds establishing the mismanagement and
oppression are already made in the petition. It was
also averred that the amendments seek to bring
events which have transpired recently i.e.
subsequent to the filing of the petition and which
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COAPPL45.12
have a necessary and direct bearing on the manner
in which respondent Nos. 2 and 3 have and are
continuing to mismanage the company and
oppress its shareholders. It was also submitted that
the amendment was on the same subject matter
and the amendment was also with a view to avoid
multiplicity of proceedings. It was further
contended that the new events indicating a fresh
cause of action for filing a new petition would not
come in the way of the petitioner in getting the
petition amended as the same was meant for
supplementing the main contention. It was
contended before the Division Bench that
amendments ought not to have been granted as it
would attract the provisions of Order 23, Rule 1. It
was further submitted that as there is a fresh cause
of action, proceedings would not be maintainable
in view of the amendment under the Companies
Act and the forum for the grievance would be the
Company Law Board. It was further submitted
that the subsequent events are not relevant for
deciding the issue in question. It was contended
that the additional evidence should be the
evidence in addition to the evidence already on
record in the form of original pleadings. New
material should partake the same character and
content as the original petition. As the allegations
are altogether different and have no nexus or
relevance to the original allegations, the
applications ought to have been rejected. It was
further submitted that as per the provisions
contained in sections 397 and 398 of the
Companies Act, petition has to be decided on the
facts existing on the date of presentation of the
petition and the Court was not concerned with
continuous course of conduct. In paragraph 9 of
the judgment the Division Bench noticed the
judgment of the Supreme Court in Kalinga Tubes
and held as follows:
"We have gone through the decisions cited
by the learned Counsel. So far as provision
regarding withdrawal of the suit is
concerned, it is required to be mentioned
hvn
COAPPL45.12
that the order passed by the Court need not
be express and the provisions of Order 23,
Rule 1 have to be read with the application
and the order passed thereon. It is required
to be noted that the subject matter of the
amendment application is not the same. The
learned Counsel relying upon the decision
in the case of M/s. Kalinga Tubes Ltd. v.
Shanti Prasad Jain, 1964(1) Com.L.J. 117,
submitted that petition is required to be
decided on the averments made in the
application itself. We have gone through
the decision reported in 1990(67) Company
Cases 185 wherein it is held that provisions
of the Code of Civil Procedure in so far as
applicable shall apply to all the proceedings
under the Companies Act. It is open for
Court to take notice of all subsequent
events to grant relief finally after the trial of
the Company matter, as held by the
Calcutta High Court in the case of Pramode
Kumar Mittal v. Southern Steel Ltd.
1980(50) Com.Cas. 555."
The Division Bench was referring to the judgment
of this Court in the case of Khimji M. Shah
(supra). The Division Bench also held that it is
necessary that with a view to see that there is no
multiplicity of proceedings, amendments should
be allowed. The aforesaid decisions of the
Division Bench makes it clear that the decision of
the Supreme Court in Kalinga was not dealing
with the case of amendment application and is,
therefore, not applicable to the facts and
circumstances of this case.
21. At this stage the Court is not required to
decide the petition on merits. The petition could be
held to be demurrable only if the claim put
forward cannot be established even if all the
allegations made in the petition are accepted to be
true. Such is not the position here. Very
hvn
COAPPL45.12
complicated questions of fact and law have been
raised. It is only at the final hearing of the petition
that the Court would be able to decide this issues
as to whether the dividend squeeze could amount
to an oppression. The Court would also have to
decide as to whether or not transfer of shares made
in contravention of the Articles of Association
would amount to an act of oppression. The Court
would also have to decide as to whether or not the
remuneration received by respondent No. 2 is an
act of oppression. These are all matters which
require detailed consideration and have to be
decided on merits at the final hearing of the
petition.
46.
And also in the case of Sampath Kumar vs. Ayyakannu & Anr.4
9. Order 6 Rule 17 of the CPC confers
jurisdiction on the Court to allow either party to
alter or amend his pleadings at any stage of the
proceedings and on such terms as may be just.
Such amendments as are directed towards putting-
forth and seeking determination of the real
questions in controversy between the parties shall
be permitted to be made. The question of delay in
moving an application for amendment should be
decided not by calculating the period from the date
of institution of the suit alone but by reference to
the stage to which the hearing in the suit has
proceeded. Pre-trial amendments are allowed more
liberally than those which are sought to be made
after the commencement of the trial or after
conclusion thereof. In former case generally it can
be assumed that the defendant is not prejudiced
because he will have full opportunity of meeting
the case of the plaintiff as amendment. In the latter
cases the question of prejudice to the opposite
party may arise and that shall have to be answered
by reference to the facts and circumstances of each
individual case. No strait-jacket formula can be
laid down. The fact remains that a mere delay
cannot be a ground for refusing a prayer for
4 (2002) 7 SCC 559
hvn
COAPPL45.12
amendment.
10. An amendment once incorporated relates
back to the date of the suit. However, the doctrine
of relation back in the context of amendment of
pleadings is not one of universal application and in
appropriate cases the Court is competent while
permitting an amendment to direct that the
amendment permitted by it shall not relate back to
the date of the suit and to the extent permitted by it
shall be deemed to have been brought before the
Court on the date on which the application seeking
the amendment was filed. (See observations in
Siddalingamma and Anr. v. Mamtha Shenoy
11. In the present case the amendment is being
sought for almost 11 years after the date of the
institution of the suit. The plaintiff is not debarred
from instituting a new suit seeking relief of
declaration of title and recovery of possession on
the same basic facts as are pleaded in the plaint
seeking relief of issuance of permanent prohibitory
injunction and which is pending. In order to avoid
multiplicity of suits it would be a sound exercise of
discretion to permit the relief of declaration of title
and recovery of possession being sought for in the
pending suit. The plaintiff has alleged the cause of
action for the reliefs now sought to be added as
having arisen to him during the pendency of the
suit. The merits of the averments sought to be
incorporated by way of amendment are not to be
judged at the stage of allowing prayer for
amendment. However, the defendant is right in
submitting that if he has already perfected his title
by way of adverse possession then the right so
accrued should not be allowed to be defeated by
permitting an amendment and seeking a new relief
which would relate back to the date of the suit and
thereby depriving the defendant of the advantage
accrued to him by lapse of time, by excluding a
period of about 11 years in calculating the period
of prescriptive title claimed to have been earned by
hvn
COAPPL45.12
the defendant. The interest of the defendant can be
protected by directing that so far as the reliefs of
declaration of title and recovery of possession, now
sought for, are concerned the prayer in that regard
shall be deemed to have been made on the date on
which the application for amendment has been
filed.
12. On the averments made in the application,
the same ought to have been allowed. If the facts
alleged by plaintiff are not correct it is open for the
defendant to take such plea in the written statement
and if the plaintiff fails in substantiating the factual
averments and/or the defendant succeeds in
substantiating the plea which he would obviously
be permitted to raise in his pleading by way of
consequential amendment then the suit shall be
liable to be dismissed. The defendant is not
prejudiced, more so when the amendment was
sought for before the commencement of the trial.
13. For the foregoing reasons, the appeal is
allowed. The impugned orders of the High Court
and the Trial Court are set aside. The plaintiff is
permitted to incorporate the plea sought to be
raised by way of amendment in the original plaint
foregoing the plea to the extent given up by him
before the Trial Court. However, in view of the
delay in making the application for amendment, it
is directed that the plaintiff shall pay a cost of Rs.
2,000/- (Rupees Two Thousand only) as a
condition precedent to incorporating the
amendment in the plaint. The prayer for
declaration of title and recovery of possession shall
be deemed to have been made on the date on which
the application for amendment was filed.
49. The CLB has dealt with application for amendment made by the 2 nd
respondent in paragraphs (10) to (15) of the impugned order passed by the
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COAPPL45.12
CLB. In para (13) of the impugned order, the CLB has held that proposed
respondent nos. 1, 2 and 3 were necessary and proper parties in Company
Petition No. 87 of 2010 and allowed Company Application No. 73 of 2012 to
that extent giving permission to file fresh memo of parties. The CLB has
observed that though the said application was allowed, the applicant had failed
to make out the case of collusion between respondent no.2 and the proposed
respondents and even the allegations of monetary receipts lack in material
particulars.
Paragraph (15) of the impugned order reads thus :-
15. It is noted that the respondents have no
quarrel with the case law relied upon by the
applicant to support his contentions for allowing of
this application for amendment of the C.P., though
merits of the case are not be gone into at this stage
of considering the application for amendment of
the CP for incorporation of certain events which
according to the respondents, and rightly so
contended, are not subsequent to the date of filing
of the CP but are fresh cause of action but are
hereby allowed for determination of the issues
between the parties and for the purpose of framing
the reliefs to avoid multiplicity of litigation, the
proposed amendment, it is noted would not
constitutionally or fundamentally change the
nature and character of the Petitioner's case in the
Company Petition, it is noted that no prejudice
would be caused to the Respondents if the
amendments are allowed, for proper effective and
just adjudication of the matter. The Applicants are
allowed to file the amended CP within three
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weeks. The Respondents are allowed to file
Counter Affidavits within three weeks of receipt of
the amended CP. Rejoinder within three weeks
thereafter.
50. I have heard the learned counsel and have given my anxious
consideration to the rival submissions made by the learned counsel.
51. On perusal of the impugned order passed by the CLB allowing
company application (73 of 2012) filed by respondent nos. 1 to 3 seeking
amendment to company petition (87 of 2010), it is clear that the CLB has
rendered a finding that the application for amendment was allowed for
determination of the issues between the parties and for the purpose of framing
issues for avoiding multiplicity of litigations. The CLB has rendered finding
that the proposed amendment would not constitute and fundamentally
change the nature and character of the applicants case in the company petition
and no prejudice would be caused to the appellants herein if the amendments
were allowed for proper, effective and just adjudication of the matter. The
CLB has permitted the appellants herein to file counter affidavits within three
weeks on receipt of the amended company Petition. The CLB has also
rendered a finding that the company Petition (87 of 2010) filed by the
respondent nos. 1 to 3 herein has not become infructuous. From the perusal of
the company petition (87 of 2010) it is clear that the challenge in the said
petition was not restricted to the extra ordinary general meeting dated 10 th
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November, 2010 but was also against any such meeting in future that might be
held for same or similar purposes. By application for amendment filed by the
respondent Nos. 1 to 3 the applicants therein had prayed for amendment of
the petition under section 397 and 398 and to bring on record the subsequent
events and development during the pendency of the company petition. It is not
in dispute that the company petition (87 of 2010) is pending before CLB. In
my view the CLB has exercised its discretionary power to allow the
amendment
to the petition by permitting the original applicants to place on
record subsequent events so as to avoid multiplicity of litigation and has
rendered finding that the amendment would not constitutionally or
fundamentally change the nature and character of the applicants case in
company petition and that no prejudice would be caused to the respondents. In
my view, the CLB has rightly exercised its discretion and no fault can be
found with the impugned order passed by the CLB in exercising
discretionary power so as to avoid multiplicity of proceedings. In my view
no question of law arises out of the impugned oder passed by the CLB in the
present appeal. In my view the facts in the case of Sitaram Padhye (supra)
relied upon by Mr. Subramanian, the learned senior counsel appearing on
behalf of the appellant are distinguishable in the facts of this case. In the
application for amendment, the applicants had pleaded that the acts
complained of which were sought to be brought on record by amendment were
further acts of oppression and mismanagement which allegations would have
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to be gone into in the company petition on its own merits.
52. The respondent nos. 1 to 3 have impugned the order dated 13 th August,
2012 passed by the CLB thereby vacating and modifying the ad interim
order dated 21st May, 2012 and thereby allowing the company application
filed by the respondent nos. 1 and 2 by filing company appeal (L) (41 of 2012)
which appeal was heard along with the present appeal and is being disposed
of by the separate order and judgment simultaneously. While arguing the said
appeal, both the parties have already made their rival submissions in respect
of all the issues which were raised not only in the Company Application No. 85
of 2012 but also in Company Application No. 73 of 2012 which was filed by
respondent nos. 1, 2 and 3 herein. The learned senior counsel Mr. Samdani
appearing for respondent nos. 1 to 3 herein had submitted that in view of the
submissions made by both the parties on all the issues, this court shall decide
all such issues though they were not fully decided by the CLB and were not the
subject matter of the Company Application No.85 of 2012. Since both the
parties had argued on all the issues at length, this court has considered all the
submissions including the submissions made by respondent nos. 1 to 3 and
the appellants herein in Company Application No.73 of 2012 and Company
Application No.91 of 2012 which is pending before the CLB. In view of this
court deciding all the issues by considering rival submissions made by the
parties, even if amendment as allowed by the CLB is upheld, in my view no
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prejudice would be caused to the appellants in any manner whatsoever.
53. In the result, appeal is dismissed. There shall be no order as to costs.
(R.D. DHANUKA, J.)
