Smt. Vasanthi vs Syed Ibrahim Anr
2021 Latest Caselaw 2957 Tel

     THE HON'BLE SRI JUSTICE B.SESHASAYANA REDDY

               Company Appeal Nos.6 and 7 of 2011


COMMON JUDGMENT:

      These two company appeals are directed against the common

order dated 07.04.2011 passed in Company Application Nos.143 of
2011 in Company Application No.60 of 2010 and                 Company
Application No.144 of 2011 in Company Application No.61 of 2010 in

Company Petition No.4 of 2009 on the file of the Company Law Board,
Principal   Bench, New      Delhi, whereby     and   whereunder, the

applications filed seeking amendment of prayers in C.A.No.60 and 61
of 2010 came to be allowed.


2.   More precisely; Company Appeal No.6 of 2011 is directed against

the order dated 07.4.2011 passed in Company Application No.143 of
2011 and whereas Company Appeal No.7 of 2011 is directed against
the order dated 07.04.2011 passed in Company Application No.144 of

2011. Union of India, Ministry of Corporate Affairs is the petitioner in

C.P.No.4 of 2009. The said case has been filed by the Union of India

under Section 388 B(1) of the Companies Act, 1956 before the
Company Law Board (for short, "CLB") for the purpose of enabling the

CLB to enquire into the case as to whether the affairs of the company

have been shrouded in fraud, misfeasance; persistent negligence in
carrying out the obligations and functions assigned under law and

also in a manner prejudicial to the public interest or not. In the said

company petition, company application Nos.95 and 96 of 2009 have
been taken out by the applicants, who are said to be the stakeholders

in the said company seeking their impleadment as respondents to the

company petition. The said applications came to be allowed on 5.3.2009. While so, the appellant herein filed C.A.No.24 of 2011 in C.P.No.4 of 2009 under Section 409 of the Companies Act, 1956

(hereinafter referred to as "the Act") seeking inter alia to induct IL &

FS Financial Services Limited as the new promoter by assigning the

direct management of the affairs of the appellant company and simultaneously to issue majority holdings to IL & FS group on certain

terms and conditions. The CLB, by order dated 13.01.2011, granted

the prayer sought for in C.A.No.24 of 2011. Thereupon, the impleaded parties in C.P.No.4 of 2009 filed two applications being C.A.Nos.60

and 61 of 2011 to recall the order dated 13.1.2011 passed in

C.A.No.24 of 2011 and also sought for directions for protection of their

interest since they made large investment to a tune of Rs.529 crores

and they have to get about 989 crores from the appellant company. The said applications came up for consideration before the CLB on

27.01.2011 and the said applications were directed to be listed on

5.4.2011 to enable the appellant company to file its response. The

impleaded parties in C.A.No.60 and 61 of 2011 were also directed to

serve notice on IL & FS group and other respondents. Aggrieved by

the order dated 27.01.2011 passed in C.A.No.24 of 2011 as well as

order dated 13.1.2011 passed in C.A.No.24 of 2011 in C.P.No.4 of

2009, SRS Orion Investment Ltd filed appeal. The said appeal came to be disposed of by this Court directing the CLB to hear the implead

parties and pass appropriate orders and accordingly, order dated

27.1.2011 passed by the CLB in C.A.Nos.60 and 61 of 2011 has been

modified. For better appreciation, I may refer the relevant portion of the

order passed by this Court in Company Appeal No.4 of 2011, which

reads as hereunder: -

" Though the plea of the appellants that the order dated 13.01.2011 was against the interest of the appellants has been seriously disputed by the learned counsel for the respondents, the learned counsel for both the parties have agreed that the controversy can be put to quietus by advancing the hearing in C.A.Nos.60 & 61 of 2011. The learned senior counsel for the appellants, while undertaking to ensure due service of notice in C.A.Nos.60 & 61 of 2011 on all the parties concerned, requested that till the said applications are heard and decided on merits, the respondents may be directed to maintain the state of affairs as on today concerning the 2nd respondent company.

Having regard to the fact that the appellants did not make such request even before the company Law Board though I am not inclined to grant any such direction for maintaining status quo, keeping in view the apprehensions expressed by the appellants, I deem it appropriate to advance the hearing in C.A.Nos.60 & 61 of 2011 subject to service of notice on all the parties to C.P.No.4 of 2009. Accordingly, the Appeal is disposed of with the following directions:

" The appellants and the respondents herein as well as Hill County Owners' Welfare Association which appeared before this Court through their counsel shall appear before the Company Law Board on 18.02.2011.The Company Law Board on that day shall pass appropriate orders for service of notice on all the parties who have not yet been duly served and fix a convenient date for hearing of C.A.Nos.60 & 61 of 2011 and dispose of the said applications on or before 28.02.2011 without fail".

The order dated 27.01.2011 passed by the Company Law Board in C.A.Nos.60 & 61 of 2011 is accordingly modified and the Appeal is disposed of with the above directions. No costs."

3. Pursuant to the direction given by this Court, the CLB took up C.As.60 and 61 of 2011 for hearing. While so, the applicants in

C.A.Nos.60 and 61 of 2011 moved applications being C.A.Nos.143

and 144 seeking amendment of the prayer sought for in C.A.Nos.60

and 61 of 2011. The appellant herein resisted the proposed amendment sought for by the applicants in C.A.Nos.60 and 61 of 2011.

4. The Company Law Board, on hearing the counsel appearing for

the parties, proceeded to allow C.A.Nos.143 of 2011 and 144 of 2011 and thereby, permitted the impleaded parties to incorporate the amendment to the prayer clause in C.A.Nos.60 and 61 of 2011, by

order dated 7.4.2011. The relevant portion of the order passed by the CLB on the amendment applications reads as hereunder:-

" The applicants have not prayed for any amendment to the factual averments made in CA No.60 and 61 but by filing C.A.No.143 and 144 only seek to enlarge the scope of the reliefs sought. Whether or not such reliefs should or should not be granted to the Applicant is not be decided now. I am of the considered opinion that the amendments sought by filing CA No.143/11 and 144/11 ought not to be rejected at the threshold as the non-applicant would have full opportunity to oppose the grant of such prayers sought by the amendment at the time of hearing on CA No.60 and 61. Counsel appearing for the non-applicants have also not been able to show any prejudice caused to the non applicants if amendment is allowed. On the other hand if amendment is refused the applicants would be precluded from arguing in CA No.60 and 62 whether such reliefs should be granted to them in law as the non applicants would then rightly raise an objection that such reliefs were not prayed. Placing reliance on Rajesh Kumar Aggarwal [ 2006(4) SCC 385] and Sampath Kumar [ (2002)7 SCC 559] and without delving into the merits of the amendment sought I allow the application CA No.143/11 and 144/11 ( sic..) and permit the applicants to incorporate the amendment to the prayer clause in CA No.60 and 61. Counsel for the non-applicants as also the officer appearing for UOI are granted a week's time to file additional response, if any, to the amendment allowed today. Rejoinder, if any, shall be filed within three days thereafter".

5. Assailing the order passed in C.A.Nos.143 of 2011 and 144 of

2011, the 2nd respondent in the said applications filed these two appeals under Section 10(f) of the Act.

6. When the appeals came up for admission on 15.4.2011, learned

Assistant Solicitor General took notice on behalf of the 1st respondent, Sri N.Harinath Reddy, learned counsel took notice on behalf of respondents 2 to 4 and Sri Vivek Chandrasekhar, learned counsel took notice on behalf of the respondents 5 to 7.

7. Heard learned counsel appearing for the parties.

8. Sri S.Ravi, learned senior counsel appearing for the appellant

submits that the proposed amendment is in no way relevant for proper adjudication of the issue involved in the Company Petition

and the claim of the respondents 2 to 6 pursuant to the award passed by the Arbitrator is the subject matter in an appeal filed under Section 34 of the Arbitration and Conciliation Act, 1996 and they also moved

applications under Section 9 of the Arbitration &Conciliation Act seeking certain interim orders and in which case, the very

applications filed by the respondents 2 to 6 seeking certain amendment pending disposal of the company applications are not

maintainable. He would also contend that the very impleadment of the parties in the Company Application is the subject matter in C.A.No.7 of 2009 and therefore, the CLB ought not have entertained the

applications being CA. Nos.143 of 2011 and 144 of 2011, in which case, the order impugned in these appeals is liable to be set aside.

9. Sri N.Harinath Reddy, learned counsel appearing for the

respondents 5 to 7 supported the contentions advanced by the learned senior counsel appearing for the appellant. Sri C.V. Mohan Reddy,

learned senior counsel appearing for the implead parties (i.e., respondents 2 to 4 herein) submits that the proposed amendment does not cause any prejudice to the appellant herein since the appellant

has been given an opportunity to file additional response to the company application No.60 and 61 of 2011. He would also contend

that the CLB is competent to pass any order as may be necessary to meet the ends of justice. The order impugned in the appeal has been passed by the CLB taking into consideration the stake of the

applicants in the appellant company and therefore, the order impugned in the appeals is not liable to be set aside. It is further contended by

the learned senior counsel that Regulations 44 and 46 do not contemplate the applicant to offer the reasons for amendment of

prayers . A further submission has been made that no prejudice has been caused to the appellant as all the non-applicants in the amendment applications have been given an opportunity to file

additional response. To buttress his submissions, reliance has been placed on the decisions of the Supreme Court in Jai Jai Ram

Manohar Lal v. National Building Material Supply[1]; S.M.Banerji

v. Sri Krishna Agarwal[2]; Rajesh Kumar Aggarwal & Ors. v.

K.K.Modi & Ors.[3] and V.S.Krishnan v. Westfort Hi-Tech. Hospital

Ltd.[4]. Much emphasis has been laid on para.20 of the judgment in Rajesh Kumar Aggarwal & Ors. v. K.K.Modi & Ors.'s case (3 supra),

which reads as hereunder:

"20. While considering whether an application for amendment should or should not be allowed, the Court should not go into the correctness or falsity of the case in the amendment. Likewise, it should not record a finding on the merits of the amendment and the merits of the amendment sought to be incorporated by way of amendment are not to be adjudged at the stage of allowing the prayer for amendment. This cardinal principle has not been followed by the High Court in the instant case."

10. Sri S.Ravi, learned senior counsel appearing for the appellant, in response to the contentions advanced by the learned senior counsel,

submits that the Regulation No.46 is explicit that the Board has to first make up its mind that the amendment is for the purpose of determining the real question or issue involved in the proceeding and that there being no such finding in the order impugned in the appeal, it is liable to

be set aside. Learned senior counsel also placed reliance on the judgment of the Supreme Court in Revajeetu Builders & Developers

v Narayanaswamy & Sons.[5]. Much emphasis has been laid on paras.58 and 63 of the said judgment, which read as hereunder:

"58. The first condition which must be satisfied before the amendment can be allowed by the court is whether such amendment is necessary for the determination of the real question in controversy. If that condition is not satisfied, the amendment cannot be allowed. This is the basic test which should govern the courts' discretion in grant or refusal of the amendment." "63. On critically analysing both the English and Indian cases, some basic principles emerge which ought to be taken into consideration while allowing or rejecting the application for amendment:

(1) Whether the amendment sought is imperative for proper and effective adjudication of the case;

(2) whether the application for amendment is bona fide or mala fide;

(3) the amendment should not cause such prejudice to the other side which cannot be compensated adequately in terms of money;

(4) refusing amendment would in fact lead to injustice or lead to multiple litigation;

(5) whether the proposed amendment constitutionally or fundamentally changes the nature and character of the case; and (6) as a general rule, the court should decline amendments if a fresh suit on the amended claims would be barred by limitation on the date of application.

These are some of the important factors which may be kept in mind while dealing with application filed under Order 6, Rule 17. These are only illustrative and not exhaustive."

11. The only issue that calls for adjudication in these appeals is: Whether the applicants in CA No.143 of 2011 and 144 of 2011 have offered sufficient reasons for permitting them to amend their prayers in C.A.Nos.60 and 61 of 2011 ?

12. POINT :I have gone through the applications being C.A.Nos.143 and 144 of 2011. These applications came to be moved after the remand of the matter by this Court in Company Appeal No.3 of

2011. The CLB has not stated in the order dated 7.4.2011 that the applicants have offered sufficient reasons for moving the applications seeking amendment of the relief sought for in C.A.Nos.60 and 61 of 2011. The applicants have not even pleaded before the CLB that the

omission of the relief in the original application is not wilful.

13. No doubt, Regulation 44 of the Company Law Board Regulations, 1991 empowers the CLB to pass such orders as may be necessary for the ends of justice or to prevent abuse of process of the Bench. Regulation 46 deals with general power of the CLB with regard to permitting the parties to amend their pleadings. For better

appreciation, I may refer the Regulation 46 , which reads as hereunder:-

"46. General power to amend:- A Bench may, at any time, and on such terms as to costs or otherwise, as it may think fit, amend any defect or error in any proceeding before it; and all necessary amendments shall be made for the purpose of determining the real question or issue raised by or depending on such proceeding."

A plain reading of the above Regulation indicates that the Board has power to permit the parties to amend any defect or error in any proceedings. The Board has also power to permit the parties to make necessary amendments, provided the amendments are essential for the purpose of determining the real question or issue

raised in the proceeding.

14. I have gone through the order impugned in the appeals. It is nowhere stated in the order that the amendment is to rectify any defect or error in the proceedings. The order also does not reflect that the

proposed amendment is for the purpose of determination of the real question in the company petition. Neither the applicants have stated the reasons for non-inclusion of the proposed amendment in their earlier applications nor the CLB came to the conclusion that the proposed amendment is for the purpose of determination of the real

question or the issue involved in the company petition. In these circumstances, the only option left to me is to set aside the order impugned in these appeals and to remand the matter to the CLB for hearing the parties afresh and pass appropriate orders on the

amendment applications.

15. Accordingly, these two appeals are disposed of at the admission stage remanding the Company Application Nos.143 and 144 of 2011 to the C.L.B. for hearing the parties afresh and pass appropriate orders. No order as to costs.

_____________________ B.SESHASAYANA REDDY, J Dt.19-04-2011 RAR/cs THE HON'BLE SRI JUSTICE B.SESHASAYANA REDDY

Company Appeal Nos.6 and 7 of 2011 DATED : 19-04-2011

[1] AIR 1969 S.C. 1267(1) [2] AIR 1960 S.C. 368 [3] (2006) 4 SCC 385 [4] (2008) 3 SCC 363 [5] (2009) 10 SCC 84