Jer Rutton Kavasmneck alias Jer Jawahar Thandi - Bombay High ...
Jer Rutton Kavasmneck alias Jer Jawahar Thandi - Bombay High ...
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY<br />
ORDINARY ORIGINAL CIVIL JURISDICTION<br />
COMPANY APPEAL (L) NO. 41 OF 2012<br />
IN<br />
CLB COMPANY APPLICATION NO. 85 OF 2012<br />
IN<br />
CLB COMPANY PETITION NO. 87 OF 2010<br />
1. JER RUTTON KAVASMANECK )<br />
<strong>alias</strong> JER JAWAHAR THADANI, )<br />
residing at 193, Jupiter Apartment, )<br />
Cuffe Parade, Mumbai 400 005. )<br />
2. DARIUS RUTTON KAVASMANECK )<br />
residing at 626, Parsi Colony, )<br />
Dadar, Mumbai 400 014. ) ... APPELLANTS<br />
V/S<br />
1. GHARDA CHEMICALS LIMITED )<br />
a Company incorporated under the )<br />
Companies Act, 1956 and having its )<br />
registered address at Gharda House, )<br />
48, Hill Road, Bandra (West), )<br />
Mumbai 400 050. )<br />
2. KEKI HORMUSJI GHARDA )<br />
of Mumbai, Indian Inhabitant, )<br />
having his address at Gharda House, )<br />
48, Hill Road, Bandra (West), )<br />
Mumbai 400 050. )<br />
3. ABAN KEKI GHARDA )<br />
of Mumbai, Indian Inhabitant, )<br />
having his address at Gharda House, )<br />
48, Hill Road, Bandra (West), )<br />
Mumbai 400 050. )<br />
4. ALMIRA H. PATEL )<br />
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of Mumbai, Indian Inhabitant, )<br />
having his address at Gharda House, )<br />
48, Hill Road, Bandra (West), )<br />
Mumbai 400 050. )<br />
5. D.T.DESAI )<br />
of Mumbai, Indian Inhabitant, )<br />
having his address at Gharda House, )<br />
48, Hill Road, Bandra (West), )<br />
Mumbai 400 050. )<br />
6. MAHARUKH MURAD OOMRIGAR, )<br />
having her address at T/176, )<br />
AA Palm Beach, Juhu Tara Road, )<br />
Juhu, Mumbai 400 049. )<br />
7. PERCY RUTTON KAVASMANECK, )<br />
residing at 134, Olivera Way, )<br />
Palm Beach Garden 33418, Florida, )<br />
USA. )<br />
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8. ABAN PERCY KAVASMANECK, )<br />
residing at 134, Olivera Way, )<br />
Palm Beach Garden 33418, Florida, )<br />
USA. ) ... RESPONDENTS<br />
...................<br />
Mr Pravin Samdhani, Senior Advocate along with Mr.Shriraj Dhruv, Mr.Snehal<br />
Shah, Ms Khyati Ghevaria and Mr.Manish Acharya, i/b. M/s Dhruv & Co. for<br />
the Appellants.<br />
Mr Ravi Kadam, Senior Advocate along with Mr.Suhas Tulzapurkar,<br />
Mr.Nishad Nadkarni, Mr.Vineet Srivastava, Mr.Abhishek Adke, Mr.Ashutosh<br />
Sampat, i/b. Legasis Partners for Respondent No.1.<br />
Mr Vinod Bobde, Senior Advocate along with Mr.Suhas Tulzapurkar,<br />
Mr.Nishad Nadkarni, Mr. Vineet Srivastava, Mr. Abhishek Adke, Mr. Ashutosh<br />
Sampat, i/b. Legasis Partners for Respondent No.2.<br />
Mr T.N. Subramaniyam, Senior Advocate along with Mr. Suhas Tulzapurkar,<br />
Mr.Nishad Nadkarni, Mr.Vineet Srivastava, Mr.Abhishek Adke, Mr.Ashutosh<br />
Sampat, i/b. Legasis Partners for Respondent No.3.
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Mr Sunip Sen along with Mr.Suhas Tulzapurkar, Mr.Nishad Nadkarni,<br />
Mr.Vineet Srivastava, Mr.Abhishek Adke, i/b. Legasis Partners for Respondent<br />
Nos.4 and 5.<br />
Dr Birendra Saraf along with Ms. Ankita Singhania, i/b. M/s D.H.Law<br />
Associates for Respondent Nos.7 and 8.<br />
Mr.V.R.Dhond, Senior Advocate alongwith Mr.Amit Jamsandekar and<br />
Ms.Pratibha Mehta, i/b. M/s.Little & Co. for Applicant Godrej Industries<br />
Intervenor.<br />
ORAL JUDGMENT :<br />
CORAM : R.D.DHANUKA J.<br />
RESERVED ON : OCTOBER 16, 2012<br />
PRONOUNCED ON : DECEMBER 20, 2012<br />
Admit. By consent of the parties, the present appeal was heard finally<br />
at the admission stage and is disposed of by this Judgment.<br />
2. The appellants have formulated following questions of law for<br />
determination of this Court :<br />
A. Whether the CLB does not have the power to review its<br />
earlier Order when the earlier order was not obtained on fraud or<br />
fabricated documents ?<br />
B. Whether the CLB could not have entertained an application<br />
filed by the 1 st Respondent, which was in effect and even stated to<br />
be for review of an earlier order passed by the CLB ?<br />
C. Whether the CLB could not have vacated its Order dated May
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21, 2012 on the same grounds on the basis of which the Order<br />
dated May 2012 was passed ?<br />
D. Whether the CLB is required to “pronounce” its orders and<br />
whether an order merely posted by speed post without its being<br />
“pronounced” is not a judicial order in the eyes of law?<br />
E. Whether the CLB could not have permitted the 1 st<br />
Respondent from implementing a resolution purportedly passed at<br />
its Extraordinary General Meeting when :<br />
(i) the CLB itself permitted amendment of the Company Petition<br />
impugning the convening of the said EOGM, and<br />
(ii) the CLB had adjourned another Company Application for<br />
further amendment of the Company Petition questioning the<br />
conduct at the impugned EOGM?<br />
F. Whether the CLB could not have permitted the 1 st Respondent<br />
to implement the resolution purportedly passed at the impugned<br />
EOGM when the conduct of the impugned EOGM was under<br />
serious dispute and challenge and without even considering the<br />
prima facie case made out by the Appellants ?<br />
G. Whether the abrogation of the vested right of preemption<br />
from the Articles of Association itself amounts to oppression?<br />
H. Whether the majority rights cannot be abused for amending<br />
the Articles of Association of a Company in a manner that is<br />
oppressive to the minority shareholders ?
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I. Whether the Appellants are entitled to challenge the conduct<br />
of the impugned EOGM as well as the rulings given by the<br />
Chairman on the ground that the same were patently illegal, mala<br />
fide and a part of the preconceived deliberate oppressive design ?<br />
J. Whether the CLB could not have permitted the 1 st<br />
Respondent to implement the resolution deleting Article 57 on the<br />
ground that it was invalid when the challenge to the validity of the<br />
said Article was itself pending in the Hon'ble Supreme Court ?<br />
3. Some of the relevant facts which have bearing on various issues raised<br />
by the parties and which emerge from the pleadings and documents filed by the<br />
parties are as under.<br />
This appeal filed under Section 10F of the Companies Act, 1956 is<br />
directed against an order dated 13 th August 2012 passed by the Company Law<br />
Board, Mumbai (for short CLB) allowing Company Application No.85 of 2012<br />
which was filed by the first respondent in Company Petition No.87 of 2010.<br />
By the said order, the CLB has allowed Company Application No.85 of 2012<br />
by which the first respondent had applied for vacating and/or modifying ad<br />
interim order dated 21 st May 2012 passed by the CLB. By order dated 21 st<br />
May 2012 in C.A.No.73 of 2012 filed by the appellants, the CLB allowed the<br />
first respondent company to proceed with the Extra Ordinary General Body<br />
Meeting (EOGM) on 22 nd May 2012 and ordered that the resolutions passed if<br />
any, in the EOGM on 22 nd May 2012 shall be kept in abeyance till further
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orders. The said C.A. (73/12) was filed by the appellants in Company Petition<br />
No.87 of 2010 under Sections 397, 398 read with 402 of the Companies Act,<br />
1956 alleging oppression and mismanagement in respondent No.1 company by<br />
respondent No.2. In the said Company Petition (87/10) filed by the appellants,<br />
the appellants sought injunction against holding of EOGM then proposed to be<br />
held on 12 th November 2010 to consider resolutions to delete certain Articles<br />
including Art.57 which provides for a right for preemption to the shareholders<br />
of the first respondent company.<br />
4. <strong>Jer</strong> <strong>Rutton</strong> Kavasmaneck @ <strong>Jer</strong> <strong>Jawahar</strong> Thadani (herein after<br />
referred as JRK) is original first claimant in Company Petition No.<br />
87/397-398/CLB/MB/2010. Darius <strong>Rutton</strong> Kavasmaneck (herein after<br />
referred as DRK) is original second claimant in the said Company Petition.<br />
DRK is a son of JRK.<br />
The first respondent is a company (hereinafter referred as the said<br />
company) in which the appellants and the respondents are shareholders. The<br />
second respondent Mr Keki Hormusji Gharda (herein after referred as Dr<br />
Gharda) is the brother of JRK and is Chairman and Managing Director of the<br />
said company. The third respondent is wife of Dr Gharda and also a Director of<br />
the said company. The fourth respondent is wife of ex Chairman and Director<br />
of the said company. The fifth respondent is Chartered Accountant and is on<br />
the Board of Directors of the said company. The sixth to eighth respondents
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were joined as additional respondents to C.A.No.73 of 2012 before the CLB.<br />
The sixth respondent is daughter of JRK and sister of DRK. She owns and/or<br />
controls 3814 equity shares of the said company constituting approximately<br />
6%. The seventh respondent is the son of JRK and brother of DRK. The eighth<br />
respondent is wife of the seventh respondent and they between themselves hold<br />
and/or otherwise control 4301 equity shares of the first respondent constituting<br />
approximately 7%.<br />
5. On 28 th April, 1962 under a Deed of Partnership of M/s Gharda<br />
Chemicals, Kavasmanecks and Gharda became the partners. On 7 th March,<br />
1967 M/s Gharda Chemicals Pvt. Ltd. was incorporated to take away the<br />
affairs of said M/s Gharda Chemicals. On 7 th August, 1988, the said M/s<br />
Gharda Chemicals Pvt. Ltd., became a deemed public company as a result of<br />
turnover criteria under Section 43A of the Companies Act.<br />
6. In 1990 JRK, DRK along with other Kavasmanecks and Rebello filed<br />
Company Petition (77 of 1990) in this Court under Section 397 and 398 of the<br />
Companies Act against the said company. After the first respondent<br />
Company became a deemed public Company pursuant to Section 42 of the<br />
Companies Act with effect from 17 th August 1988, necessary changes were<br />
carried out in the Certificate of incorporation by the Registrar of Companies.<br />
Section 43(A) permitted deemed Public Limited Company to retain the
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provisions referred to in Section 3(i)(iii) of the Companies Act. Pursuant to the<br />
Companies Amendment Act 2000, Section 3 of the said Act was amended to<br />
add further requirement viz (d) prohibits any invitation or acceptance of<br />
deposits from the persons other than its members and directors or their<br />
relatives and Section 43(A) deleted by way of amendment in the year 2000.<br />
Consequently the third category of the Company i.e. Deemed Public Limited<br />
Companies which continued to be permitted to include provisions applicable<br />
to Private Limited Company ceased to exist. Thereafter there are only two<br />
categories of Companies in the Companies Act viz. 'Private' and 'Public'.<br />
7. On 2 nd April 2001, the first respondent Company issued a notice calling<br />
upon EOGM to pass special resolution to amend Art. 3 of the Articles of<br />
Association to insert clause (d) prohibiting acceptance of deposits from<br />
persons other than members, directors or their relatives and also to change the<br />
name of the Company from Gharda Chemicals Limited to Gharda Chemicals<br />
Private Limited. However, the said resolution was defeated in the EOGM<br />
dated 5 th January 2001 by the appellants and their group who approx. hold<br />
more than 32% of the paid-up capital.<br />
8. By letter dated 17 th May 2001, the first respondent Company informed<br />
the appellant No.2 that a transfer notice dated<br />
15 th May 2001 from Ms P.E. Daruwalla had been received by the Company
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expressing her desire to transfer her shares of the first respondent company and<br />
requesting the company to offer the same to all members as per Article 57 of<br />
the Articles of Association of the Company. The Company requested<br />
appellant No.2 to intimate his desire to purchase any or all such shares offered<br />
by Mrs. B.E.Daruwalla within 15 days as stipulated in Article 57 of the<br />
Articles of Association.<br />
9. By another letter dated 28 th May 2001, the first respondent company<br />
intimated the second appellant about a transfer notice dated 23 rd May 2001<br />
received from Shakuntala C. Gandhi expressing her desire of transferring 35<br />
equity shares of the first respondent company and requesting appellant No.2 to<br />
intimate his desire to purchase any or all her shares within 15 days.<br />
10. By letter dated 6 th June 2001, appellant No.2 informed the first<br />
respondent Company which read as under :<br />
“ I have received Transfer Notices dated 17 th May and 28 th May<br />
from Mrs. B.E.Daruwalla and Mrs. S.C.Gandhi, circulated by the<br />
Company purportedly under Article 57 of the Articles of<br />
Association of the Company.<br />
I am surprised to receive the above Transfer Notices. I am unable<br />
to understand as to how the Company continues to circulate<br />
Transfer Notices under Article 57, especially in view of the recent<br />
turn of events.<br />
I wish to put on record my objection to the Company, circulating<br />
Transfer Notices purportedly under Article 57 of the Articles of<br />
Association. I am ignoring these Transfer Notices and shall ignore
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further Transfer Notices, if any, circulated by the Company<br />
purportedly under Article 57.<br />
11. On 30 th September, 2002, Government of India, Ministry of Finance,<br />
Department of Company Affairs issued a Circular and made it clear that these<br />
companies which did not approach the Registrar of Companies, seeking<br />
reversion back to private company's status, are deemed to have chosen to<br />
remain as public company.<br />
12. On 8 th September, 2005, the JRK and DRK and Rebello withdrew from<br />
the said Company Petition (77 of 1990) and other Kavasmanecks continued to<br />
pursue the said petition. By an order dated 8 th September 2005 passed by Shri<br />
Justice A.M.Khanvilkar, in the said petition, this Court recorded statement of<br />
the appellants and two other parties who were also petitioners in the said<br />
petitions that those parties were not interested in prosecuting the Company<br />
Petition (77 of 1990). This Court accepted the said request of the appellants<br />
and two others to permit them to withdraw from proceedings by deleting their<br />
names from the array of parties. Petitioner Nos.4 and 5 in the said petition,<br />
however, continued to pursue the said company petition (77 of 1990). This<br />
Court permitted petitioner Nos.4 and 5 to the said petition to carry out<br />
necessary amendment to the said Company Petition (77 of 1990).<br />
13. By an order dated 14 th November 2008 passed by Shri Justice A.M.
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Khanvilkar, the said company petition No.77 of 1990 came to be dismissed. It<br />
is a common ground that none of the parties have challenged the said Judgment<br />
and Order dated 14 th November 2008 passed by this Court.<br />
14. On 11 th December, 2009, JRK and DRK filed another company petition<br />
before the CLB (CP 132 of 2009) under Section 397 and 398 of the Companies<br />
Act. On 25 th January, 2010, the CLB granted interim injunction in favour of<br />
JRK and DRK in the said C.P.(132 of 2009). On 26 th March, 2010, this Court<br />
in Company appeal, did not interfere with the interim order passed by the CLB<br />
on 25 th January, 2010 however directing that the hearing of the C.P. (132 of<br />
2009) be held and permitted inter member transfers. On 14 th May 2010, the<br />
CLB dismissed C.P.(132 of 2009) filed by JRK and DRK on the ground that<br />
the Company was a public limited company and article 57 of the Articles of<br />
Association was consequently invalid.<br />
15. On 28 th June, 2010 this Court admitted the appeal filed by JRK and DRK<br />
under Section 10F of the Companies Act, 1956 and granted interim relief.<br />
During the pendency of the said appeal, the said company convened an EOGM<br />
for deleting Article 57 on the ground that it was declared as invalid by the<br />
CLB by an Order dated 14 th May, 2010. In the month of October, 2010, JRK<br />
and DRK filed C.P.(87 of 2010) before the CLB interalia challenging the<br />
action of the said company to convene an EOGM for deleting Article 57 of the
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Articles of Association. On 9 th November, 2010, the CLB rejected the interim<br />
injunction prayer for by JRK and DRK to restrain holding of the proposed<br />
EOGM. CLB however, directed hearing of the petition on a later date and the<br />
parties were directed to complete the pleadings.<br />
16. On 10 th November, 2010 JRK and DRK filed Company Appeal under<br />
Section 10F of the Companies Act, 1956 in this Court which was numbered as<br />
Company Appeal (2 of 2011). This Court passed an Order dated 10 th<br />
November, 2010, directing holding of the meeting, however not to implement<br />
the resolution passed therein till 18 th November, 2010.<br />
17. On 9 th December, 2010, the said company withdrew notice of EOGM.<br />
On 14 th June, 2011, this Court dismissed Company Appeal filed by JRK and<br />
DRK on the ground that the said company was a public company and thus<br />
Article 57 was invalid.<br />
18. The appellants challenged the Judgment and Order dated 14 th June 2011<br />
delivered by this Court by filing Special Leave Petition in the Supreme Court<br />
(Special Leave to Appeal (Civil) No.16994/11). On 22 nd July, the Supreme<br />
Court passed the following order :<br />
“ Let this matter be listed on 27 th July, 2011, before other<br />
matters, to consider issuance of notice.<br />
Till then, the interim orders which had been passed by the
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COAPPL41.12<br />
19. On 27 th July 2011, the Supreme Court passed the following Order in the<br />
same Special Leave to Appeal No.16994/2011) filed by the appellant :<br />
“ Issue notice, returnable six weeks hence.<br />
All the respondents, except for the respondent No.4, are duly<br />
represented on caveat. Accordingly, service on the said<br />
respondents is dispensed with. As far as the respondent No.4, is<br />
concerned, since he was a nominee Director and is no longer on<br />
the Board, service of notice on the said respondent is dispensed<br />
with.<br />
The respondents will be entitled to file their respective counter<br />
affidavits to the special leave petition within 4 weeks. Rejoinder,<br />
if any, may be filed within two weeks thereafter.<br />
The interim order, which was passed on 22 nd July, 2011, will<br />
continue in the meantime.<br />
Let the matter be listed on the returnable date.”<br />
The said Special Leave to Appeal (16994/11) is pending and is not yet<br />
admitted by the Supreme Court.<br />
20. On 8 th August 2011, the appellants withdrew Company Appeal (2 of<br />
2011). This Court passed the following order.<br />
“ 1. Mentioned. Not on board.<br />
2. It is stated that two Company Appeals were on this Court's<br />
board. One company Appeal has been disposed of, whereas no<br />
orders are made on the other Company Appeal.<br />
3. It is stated that by a letter dated 9-12-2010, the Extra<br />
Ordinary General Meeting which was scheduled to be held on<br />
10-12-2010 has been adjourned/postponed. A fresh notice will be<br />
issued intimating the date of the Extra Ordinary General Meeting.
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4. In these circumstances, the Learned Counsel Mr Samdhani<br />
appearing for the Appellants seeks leave to withdraw this Appeal<br />
with liberty to adopt appropriate proceedings, in case an occasion<br />
arises and if fresh meeting is convened.<br />
5. The application for withdrawal is granted. The Company<br />
appeal is allowed to be withdrawn and is dismissed as such with<br />
liberty to the Appellants to adopt appropriate proceedings in case<br />
a fresh Extra Ordinary General Meeting is convened. All<br />
contentions of both the sides in that behalf including the<br />
maintainability are kept open.<br />
6. Needless to, therefore, state that if the Appellants adopt<br />
appropriate proceedings, the Company Law Board or such other<br />
Forum may decide the same on its own merits and in accordance<br />
with law.<br />
7. Needless to state that a fresh Extra Ordinary General<br />
Meeting is convened, that would necessarily mean a fresh cause<br />
of action and once this Appeal is withdrawn, there is no doubt that<br />
the Company Law Board or such other forum which is<br />
approached by the Appellant, will decide the proceedings<br />
independent of the observations made in the earlier order.”<br />
21. On 31 st March 2012, the respondent Nos.6 to 8 collectively holding<br />
12.58% of the paid-up share capital issued by the first respondent Company,<br />
issued a notice under Section 169 of the Companies Act 1956 and Article 76 of<br />
the Articles of Association to convene an Extra Ordinary General Meeting<br />
(EOGM) of the members of the Company to transact the following business by<br />
special resolution.<br />
“ Amendment of Articles of Association of the company for<br />
deletion of Article 57 of the Articles of Association of<br />
company.”<br />
“RESOLVED THAT pursuant to section 31 of the<br />
Companies Act, 1956 and other applicable provisions
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thereof, if any, the Articles of Association of the Company<br />
be amended by deleting the existing Article 57 of the<br />
Articles of Association of the Company.”<br />
The said notice was received by the first respondent company on 20 th<br />
22. On 25 th April 2012, the first respondent company issued a notice to the<br />
shareholders in compliance with requisition dated 31 st March 2012 under<br />
Section 169 of the Companies Act 1956 and Article 76 received from<br />
respondent Nos.6 to 8 and proposed to hold EOGM on 22 nd May 2012 at 11.30<br />
am to pass a following resolution as special resolution.<br />
“ RESOLVED THAT pursuant to section 31 of the<br />
Companies Act, 1956 and other applicable provisions<br />
thereof, if any, the Articles of Association of the Company be<br />
amended by deleting the existing Article 57 of the Articles of<br />
Association of the Company.”<br />
23. Along with the said notice, the Company annexed the copy of requisition<br />
dated 31 st March 2012 and informed that the original could be inspected at the<br />
registered office of the company. It was made clear that a member entitled to<br />
attend and vote in the meeting was entitled to appoint a proxy to attend and<br />
vote instead of himself and the proxy need not be a member. It was also<br />
conveyed that no explanatory statement had been received by the company<br />
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<br />
sought amendment to C.P.(87/10) and stay in respect of the notice dated 25 th<br />
April 2012 issued by the first respondent company from convening EOGM on<br />
22 nd May 2012 or on any subsequent dates for the purpose of considering<br />
and/or passing resolution referred to in the said notice dated 25 th April 2012 or<br />
any part thereof or any other resolution similar thereto.<br />
25. On 19 th May 2012, one of the requisitionist Ms Mahrukh Oomrigar<br />
respondent No.6 holding 6% shares addressed a letter to her Advocates and<br />
Solicitors M/s Juris Corp instructing to support the C.A.(73 of 2012) filed by<br />
the appellants and to concede to the injunction prayed for in the said<br />
application. The sixth respondent conveyed that she did not propose to move<br />
or support the proposed resolution for deletion of Art.57. She informed that a<br />
copy of the said letter was also sent to the Registrar of CLB and to the<br />
Advocates for the petitioner/applicants.<br />
26. On 19 th May 2012, M/s Godrej Industries Ltd., addressed a letter to the<br />
first respondent company informing that the Godrej Industries Ltd., was<br />
pledgee of 6355 shares of Gharda Chemicals standing in the names of Darius<br />
and <strong>Jer</strong> Kavasmaneck and hold the said shares as security for loan aggregating<br />
to Rs. 10.34 crores granted by Godrej Industries Ltd. to them and to certain
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other shareholders of the company. The said shareholders had executed<br />
loan/pledge agreement and irrevocable power of attorneys. Copies of powers<br />
of attorney were annexed. It is stated that the power of attorney expressly<br />
authorised Godrej Industries Ltd., to attend, vote and/or otherwise take part in<br />
all meetings held in connection with the company in relation to shares and to<br />
sign proxies for the purposes of voting and for any other purposes connected<br />
therewith as freely as the shareholders could themselves do. By the said letter,<br />
the Godrej Industries Ltd., authorized Mr Rajiv Bakshi, Executive Vice<br />
President (Legal) to attend, participate and vote at the EOGM of the company<br />
to be held on 22 nd May 2012 or on any adjourned date thereof pursuant to the<br />
powers contained in irrevocable powers of attorney. Godrej Industries Ltd.,<br />
certified signature of Mr Bakshi appended thereon. The said letter was signed<br />
by Mr Clemant Pinto, Vice President (Finance) on behalf of Godrej Industries<br />
Ltd. The said letter was received by the first respondent company on 19 th May<br />
2012.<br />
27. Mr Rajiv Bakshi signed a proxy form on behalf of the second appellant<br />
on the strength of the powers of attorney granted in favour of Godrej Industries<br />
Ltd. The said proxy form was in respect of 4645 shares held by appellant No.2<br />
in the first respondent company. The said proxy form was received by first<br />
respondent company on 19 th May 2012. A similar proxy form was signed<br />
by Mr Rajiv Bakshi on behalf of Godrej Industries Ltd. being constituted
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attorney (CA) of the first appellant in respect of 1710 shares. The said proxy<br />
form was received by the first respondent company on 19 th May 2012. It is the<br />
case of respondent No.1 company as well as Godrej Industries Ltd., that the<br />
appellants had authorized the Godrej Industries Ltd., to appoint Mr Rajiv<br />
Bakshi as proxy to vote for the appellants at the EOGM to be held on 22 nd May<br />
2012 and at any adjournment thereof.<br />
28. On 21 st May 2012, the CLB passed an Order in C.A.No.73/12 thereby<br />
allowing the first respondent company to proceed with the convening of the<br />
meeting, however directed that resolution if passed, cannot be allowed to<br />
preempt adjudication of questions of law before the Apex Court and hence<br />
resolution passed, if any, in the EOGM on 22 nd May 2012 shall be kept in<br />
abeyance till further orders. The relevant paragraphs of the said order dated<br />
21 st May 2012 are as under :<br />
5. … CLB has the jurisdiction on the issue of convening of<br />
EOGM by the R-1 Company which is in the affairs of the R1<br />
Company in which a petition No.87/10 is pending adjudication on<br />
completion of pleadings which are not complete as yet. It is noted<br />
that CP.No.87/10 has not become infructuous as alleged by the<br />
Respondents. Besides the issue of deletion of Articles (including<br />
Article 57) of this Public Ltd. Company which is not a listed<br />
company, the petitioners have made other allegations as well as the<br />
CLB in its order dated 9-11-2010 had required the parties to<br />
complete pleadings in the matter. In the facts and circumstances of<br />
this case, it is noted that filing of SLP before the Apex Court which<br />
has also allowed the interim injunctions granted by the Hon'ble<br />
<strong>High</strong> Court at Mumbai to continue, does not fetter the rights of the<br />
requisitionists to move for convening of EOGM, nor does it restrict<br />
the R-1 company from convening of EOGM. The R-1 Company
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has not choice under Section 169 of the Act but to convene the<br />
meeting. Even if the R-I Company does not convene the meeting,<br />
the requisitionists have the right, after the prescribed period, to go<br />
ahead with convening of the meeting. This right of the<br />
shareholders is, except in exceptional circumstances, not curtailed<br />
by the CLB.<br />
6. In view of the foregoing, I hereby allow the R-1 Company to<br />
go ahead with the convened Meeting, but keeping in view the<br />
questions of law raised in the SLP in which the Apex Court has<br />
decided to permit continuation of the interim injunction granted by<br />
the Hon'ble <strong>High</strong> Court, the Resolutions, if passed, cannot be<br />
allowed to pre-exempt adjudication of the questions of law before<br />
the Apex Court, hence, the Resolutions passed, if any, in the<br />
EOGM on 22 nd May 2012 shall be kept in abeyance till further<br />
orders.<br />
29. The Chairman of the first respondent company appointed the second<br />
appellant and one Mr Michael Raj as Scrutinizers for the EOGM dated 22 nd<br />
May 2012. On 22 nd May 2012, appellant No.2 and Mr Michael Raj submitted<br />
a report to the Chairman in the said EOGM recording of various observations<br />
made by them. In the said report, the appellant No.2 rejected the power of<br />
attorney under which Mr Rajiv Bakshi had voted in respect of 1710 shares held<br />
by the first appellant. It is submitted that Mr Rajiv Bakshi was not relative of<br />
Godrej Industries Ltd., and hence power of attorney itself was to be considered<br />
defective, invalid and ought to be rejected. In the said report, it was observed<br />
that no board resolution authorizing Mr Rajiv Bakshi on behalf of Godrej<br />
Industries Ltd. to attend and vote at the meeting was lodged with the company.<br />
30. On 22 nd May 2012 in the said EOGM of the first respondent, 8 members<br />
were personally present. One power of attorney holder was present, two
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authorised representatives were present. Number of shares represented by<br />
proxies were at 10408. The Chairman declared that special resolution was<br />
passed to delete Art.57 of Articles of Association of the first respondent<br />
company with requisite majority. The amended Article 57 before deletion<br />
reads as under :-<br />
ARTICLES OF ASSOCIATION<br />
ARTICLE 57<br />
(As amended)<br />
The amended Article 57 of the Articles of Association<br />
which has been deleted reads thus :-<br />
57. Save as aforesaid, the following provisions shall apply<br />
to the transfer of shares :-<br />
(a) A member of the Company may transfer a share to his<br />
lineal descendent, but save as aforesaid no share shall be<br />
transfered to a person who is not a member of the Company so<br />
long as any member is willing to purchase the same at the fair<br />
value as hereinafter provided ;<br />
(b) The member proposing to transfer any shares<br />
(hereinafter called the proposing transferor) shall give notice<br />
in writing (hereinafter called a transfer notice) to the<br />
Company that he desires to transfer the same ;<br />
(c) Within the period of seven days from the receipt of a<br />
transfer notice as aforesaid the Company shall offer to each of
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the existing members of the Company respectively such<br />
number of the shares included in the transfer notice as a pro<br />
rata or as nearly as may be to the holding of each member<br />
respectively on the footing that if he desires to purchase any<br />
or all of such numbers of the said shares at the fair value he<br />
shall within fifteen days of the offer be entitled to apply for<br />
the purchase and transfer of the same and the Company shall<br />
be bound, upon payment to the transferor of the fair value of<br />
such shares to transfer the shares of member applying;<br />
(d) In case of any member or members shall not have<br />
applied for the purchase and transfer of any or all of the shares<br />
to which he is entitled, the Company shall within seven days<br />
of the date at which the offer closed, offer the untaken shares<br />
to such of the members as have applied for the purchase and<br />
transfer of all of the shares to which they were entitled by the<br />
terms of the original offer in proportion as the holding of each<br />
of such members bears to the total number of shares held by<br />
them and they shall be entitled within fifteen days of the offer<br />
to apply for the purchase and transfer of a pro rata number of<br />
the said untaken shares and the Company shall be bound,<br />
upon payment to the transfer of the fair value of such shares to<br />
transfer the shares to the member applying;<br />
(e) The proposing transferor shall be bound to execute a<br />
transfer in respect of any shares so sold and in default thereof<br />
be deemed to have executed such a transfer. The Company<br />
shall thereupon cause the names of the members who have<br />
purchased the shares to be entered in the Registrar as the<br />
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holders of such shares and thereafter the validity of the<br />
proceedings shall not be questioned by any person;<br />
(f) In case no member shall apply for any of the shares<br />
included in the transfer notice or in case any are untaken after<br />
compliance with the foregoing provisions of this Article the<br />
intending transferor shall have the right (which right shall<br />
endure for the period of one year from the date of transfer<br />
notice) to sell and dispose of his shares to any person and at<br />
any price and to apply for registration of the transfer of the<br />
same and the company shall be bound to give effect to the<br />
transfer of such shares accordingly;<br />
(g) For the purpose of this clause the fair value of the share<br />
shall be such sum, if any, as the auditors for the time being of<br />
the Company shall certify as the fair value thereof provided<br />
that it expressly declared that the fair value shall be (1) the<br />
amount of capital paid up thereon plus, (2) a sum bearing the<br />
same proportion to the value as appearing in the Company’s<br />
last balance sheet of any reserve fund or other fund of the<br />
Company as the capital paid up on all the shares of the<br />
Company for the time being issued plus or minus as the case,<br />
may be, (3) a sum bearing the same proportion to the value as<br />
appearing in the Company’s last chance sheet of any balance<br />
in the profit and loss account consisting of or representing<br />
undivided profits or losses account consisting of or<br />
representing undivided profits or losses as the capital paid up<br />
on such shares, bears to the total capital paid up on all the<br />
shares of the Company for the time being issued.<br />
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Amendment to Articles : Article Nos. 57(h), 57(i), 57(j) and<br />
57(k) were inserted as additional clauses to Article 57<br />
pursuant to Special Resolution dated 15th<br />
February, 1990.<br />
Nothing contained in clauses 57(a) to 57(g) hereof shall<br />
apply to any transfer of shares which falls under any one or<br />
more of the following circumstances :-<br />
57(h) transfer by a person to another person who is a<br />
“relative” within the meaning ascribed thereto in the<br />
Companies Act, 1956.<br />
57(i) transfer to a body corporate in which a majority of<br />
directors (or other persons who in law are to be regarded as<br />
Directors) or shareholders holding not less than 51% of the<br />
voting rights are persons who are the members of the<br />
company.<br />
57(j) transfer by way of gift whether on account of love and<br />
affection between persons who are relatives of each other or<br />
by way of philanthropy.<br />
57(k) transfer by a person to another person who is an<br />
existing member of the company.<br />
PROVIDED THAT in each case the question as to<br />
whether the case falls under any of the foregoing circumstance<br />
shall be subject to a decision by the Board of Directors who<br />
shall be entitled to call for such information and particulars as<br />
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may be reasonably required to examine as to whether the case<br />
does infact bona fide fall under any of the foregoing<br />
circumstances.”<br />
COAPPL41.12<br />
31. The Chairman of the meeting signed minutes of EOGM dated 22 nd May<br />
2012. According to the said Minutes, the Chairman gave ruling after giving<br />
due consideration to the objection and observations made by both the<br />
scrutinizers as referred in the minutes of meeting and announced the result of<br />
the poll. According to the said minutes of meeting of EOGM dated 22 nd May<br />
2012, the total votes polled were 62883. Votes in favour of the resolution were<br />
47623 (75.73%) and the votes against the resolution were 15260 (24.26%).<br />
32. On 9 th June 2012, the appellants filed CA (91/12) for further amendment<br />
to CP(87/10) before the CLB challenging the meeting dated 22 nd May 2012 and<br />
seeking injunction on implementation of the resolution dated 22 nd May 2012.<br />
On 12 th June, 2012, the first respondent company filed CA (85/12) before CLB<br />
for vacating and/or modifying interim injunction order dated 21 st May 2012<br />
passed by CLB in CA (73/12).<br />
33. On 10 th August, 2012 arguments on C.A. (73/12) and C.A.(85/12) were<br />
closed and orders were reserved. C.A.(91/12) was adjourned to 6 th September<br />
2012. On 13 th August 2012, the CLB passed a detailed order and judgment<br />
allowing C.A.(73/12) seeking amendment to C.P.(87/10) filed by the
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appellants. The CLB also by the same order allowed C.A. (85/12) filed by the<br />
first respondent company and vacated order dated 21 st May, 2012.<br />
34. Being aggrieved by order dated 13 th August 2012 passed by the CLB<br />
allowing CA No.73/12 filed by the appellants herein, the first respondent<br />
company has filed Company Appeal (L) No.45/12 under Section 10F of the<br />
Companies Act 1956 in this Court which was heard along with present<br />
company appeal and being disposed of by a separate order. Being aggrieved<br />
by order dated 13 th August 2012 allowing C.A. No.85/12 filed by the first<br />
respondent company, the appellants have filed this appeal.<br />
35. Some of the relevant provisions of Companies Act and Company<br />
Law Board Regulations, 1991 relied upon the parties are extracted as<br />
under :<br />
Section 3. Definitions of “company”, “existing company”,<br />
“private company” and “public company”.<br />
(1), (2) Not relevant.<br />
(3) Every private company, existing on the commencement of the<br />
Companies (Amendment) Act, 2000, with a paid-up capital of less<br />
than one lakh rupees, shall, within a period of two years from such<br />
commencement, enhance its paid-up capital to one lakh rupees.<br />
(4) Every public company, existing on the commencement of the<br />
Companies (Amendment) Act, 2000, with a paid-up capital of less
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than five lack rupees, shall within a period of two years from such<br />
commencement, enhance its paid-up capital to five lakh rupees.<br />
Section 9. Act to override memorandum, articles, etc. :-<br />
(a) the provisions of this Act shall have effect<br />
notwithstanding anything to the contrary contained in the<br />
memorandum or articles of a company, or in any<br />
agreement executed by it, or in any resolution passed by<br />
the company in general meeting or by its Board of<br />
directors, whether the same be registered, executed or<br />
passed, as the case may be, before or after the<br />
commencement of this Act; and<br />
(b) any provision contained in the memorandum, articles,<br />
agreement or resolution aforesaid shall, to the extent to<br />
which it is repugnant to the provisions of this Act, become<br />
or be void, as the case may be.<br />
Sec.10F. : Appeals against the order of the Company Law Board :-<br />
Any person aggrieved by any decision or order of the Company<br />
Law Board may file an appeal to the <strong>High</strong> Court within sixty days<br />
from the date of communication of the decision or order of the<br />
Company Law Board to him on any question of law arising out of<br />
such order:<br />
Provided that the <strong>High</strong> Court may, if its is satisfied that the appellant<br />
was prevented by sufficient cause from filing the appeal within the<br />
said period, allow it to be filed within a further period not exceeding<br />
sixty days.<br />
Sec.43 : Consequences of default in complying with conditions<br />
constituting a company a private company, - Where the articles<br />
of a company include the provisions which, under clause (iii) of<br />
sub-section (1) of section 3, are required to be included in the<br />
articles of a company in order to constitute it a private company, but<br />
default is made in complying with any of those provisions, the
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company shall cease to be entitled to the privileges and exemptions<br />
conferred on private companies by or under this Act, and this Act<br />
shall apply to the company as if it were not a private company:<br />
Provided that the (Central Government) on being satisfied that the<br />
failure to comply with the conditions was accidental or due to<br />
inadvertence or to some other sufficient cause, or that on other<br />
grounds it is just and equitable to grant relief, may, on the<br />
application of the company or any other person interested and on<br />
such terms and conditions as seem to the (Central Government) just<br />
and expedient, order that the company be relieved from such<br />
consequences as aforesaid.<br />
Sec.43(A) : A private company to become public company in<br />
certain cases :- (1) Save as otherwise provided in this section,<br />
where not less than twenty-five per cent of the paid-up share capital<br />
of a private company having a share capital, is held by one or more<br />
bodies corporate, the private company shall :<br />
(a) on an from the date on which the aforesaid percentage is<br />
first held by such body or bodies corporate, or<br />
(b) where the aforesaid percentage has been first so held<br />
before the commencement of the Companies (Amendment)<br />
Act, 1960 (65 of 1960), on and from the expiry of the period<br />
of three months from the date of such commencement unless<br />
within that period the aforesaid percentage is reduced below<br />
twenty-five per cent of the paid-up share capital of the private<br />
company, become by virtue of this section a public company:<br />
Provided that even after the private company has so become a<br />
public company, its articles of association may include<br />
provisions relating to the matters specified in clause (iii) of
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sub-section (1) of section 3 and the number of its members<br />
may be, or may at any time be reduced, below seven:<br />
Provided further that in computing the aforesaid percentage,<br />
account shall not be taken of any share in the private company<br />
held by a banking company, if, but only if, the following<br />
conditions are satisfied in respect of such share, namely;<br />
(a) that the share -----<br />
(i) forms part of the subject-matter of a trust,<br />
(ii) has not been set apart for the benefit of any body<br />
corporate, and<br />
(iii) is held by the banking company either as a trustee of<br />
that trust or in its own name on behalf of a trustee of that<br />
trust, or<br />
(b) that the share ---<br />
(i) forms part of the estate of a deceased person,<br />
(ii) has not been bequeathed by the deceased person by his<br />
will to any body corporate, and<br />
(iii) is held by the banking company either as an executor<br />
or administrator of the deceased person or in its own name<br />
on behalf of an executor or administrator of the deceased<br />
person, and the registrar may, for the purpose of<br />
satisfying himself that any share is held in the private<br />
company by a banking company as aforesaid, call for at any<br />
time from the banking company such books and papers as<br />
he considers necessary.<br />
Sec.43(2)(A) : Where a public company referred to in sub-section<br />
(2) becomes a private company on or after the commencement of<br />
the Companies (Amendment) Act, 2000, such company shall
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inform the Registrar that it has become a private company and<br />
thereupon the Registrar shall substitute the word “private company”<br />
for the word “public company” in the name of the company upon<br />
the register and shall also make the necessary alterations in the<br />
certificate of incorporation issued to the company and in its<br />
memorandum of association within four weeks from the date of<br />
application made by the company.<br />
Sec.397. Application to Company Law Board for relief in cases<br />
of oppression :- (1) Any member of a company who complain<br />
that the affairs of the company are being conducted in a manner<br />
prejudicial to public interest or in a manner oppressive to any<br />
member or members (including any one or more of themselves)<br />
may apply to the Company Law Board for an order under this<br />
section, provided such members have a right so to apply in virtue of<br />
section 399.<br />
(2) If, on any application under sub-section (1), the Court is os<br />
opinion :<br />
(a) that the company's affairs (are being conducted in a<br />
manner prejudicial to public interest or) in a manner<br />
oppressive to any member of members; and<br />
(b) that to wind up the company would unfairly prejudice<br />
such member or members, but that otherwise the facts<br />
would justify the making of a winding-up order on the<br />
ground that it was just and equitable that the company<br />
should be wound up,<br />
the Company Law Board may, with a view to bringing to an<br />
end the matters complained of, make such order as it thinks<br />
fit.
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Sec.398 : Application to Company Law Board for relief in cases of<br />
mismanagement :<br />
(1) Any members of a company who complain :-<br />
(a) that the affairs of the company are being conducted in a<br />
manner prejudicial to public interest or in a manner<br />
prejudicial to the interests of the company; or<br />
(b) that a material change not being a change brought about<br />
by, or in the interests of, any creditors including debenture<br />
holders, or any class of shareholders, of the company) has<br />
taken place in the management or control of the company,<br />
whether by an alteration in its Board of directors, or<br />
manager), or in the ownership of the company's shares, or if<br />
it has no share capital, in its membership, or in nay other<br />
manner whatsoever, and that by reason of such change, it is<br />
likely that the affairs of the company will be conducted in a<br />
manner prejudicial to public interest or in a manner<br />
prejudicial to the interests of the company,<br />
may apply to the Company Law Board for an order under<br />
this section, provided such members have a right so to apply<br />
in virtue of section 399.<br />
(2) If, on any application under sub-section (1), the Company Law<br />
Board is of opinion that the affairs of the company are being<br />
conducted as aforesaid or that by reason of any material change as<br />
aforesaid in the management or control of the company, it is likely<br />
that the affairs of the company will be conducted as aforesaid, the<br />
Company Law Board may, with a view to bringing to an end or<br />
preventing the matters complained of or apprehended, make such<br />
order as it thinks fit.
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Sec.402. Powers of “Company Law Board” to apply under<br />
section 397 and 398 : - Without prejudice to the generality of the<br />
powers of the Company Law Board under section 397 or 398, any<br />
order under either section may provide for<br />
(a) the regulation of the conduct of the company's affairs in future ;<br />
(b) the purchase of the shares or interests of any members of the<br />
company by other members thereof or by the company ;<br />
(c) in the case of a purchase of its shares by the company as<br />
aforesaid, the consequent reduction of its share capital.<br />
(d) the termination, setting aside or modification of any agreement,<br />
howsoever arrived at, between the company on the one hand, and<br />
any of the following persons, on the other, namely<br />
(i) the managing director.<br />
(ii) any other director,<br />
(iii)<br />
(iv)<br />
(v) the manager, upon such terms and conditions as may,<br />
in the opinion of the Company Law Board, be just and<br />
equitable in all the circumstances of the case ;<br />
(e) the termination, setting aside or modification of any agreement<br />
between the company and any person not referred to in clause (d),<br />
provided that no such agreement shall be terminated, set aside or<br />
modified except after due notice to the party concerned and<br />
provided further that no such agreement shall be modified except<br />
after obtaining the consent of the party concerned ;<br />
(f) the setting aside of any transfer, delivery of goods, payment,<br />
execution or other act relating to property made or done by or<br />
against the company within three months before the date of the<br />
application under section 397 or 398, which would, if made or done<br />
by or against an individual, be deemed in his insolvency to be a<br />
fraudulent preference ;<br />
(g) any other matter for which in the opinion of the Company Law<br />
Board it is just and equitable that provision should be made.
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Company Law Board Regulations, 1991.<br />
COAPPL41.12<br />
29. Order of the Bench.- (1) Every order of the Bench shall be in<br />
writing and shall be signed by the member or members constituting<br />
the Bench which pronounces the order.<br />
(2) In case of difference of opinion among the members of the<br />
Bench, the opinion of the majority shall prevail and the opinion or<br />
orders of the Bench shall be expressed in terms of the views of the<br />
majority: Provided that where a matter is heard by a Bench<br />
consisting of an even number of members and such members are<br />
divided equally in their opinion, it shall be placed before the<br />
Chairman who may himself deal with the matter or nominate any<br />
other member to deal with the same.<br />
(3) Any order of the bench deemed fit for publication in any<br />
journal, authoritative report or the Press may be released for such<br />
publication on such terms and conditions as the Board may specify<br />
by general or special order.<br />
(4) A copy of every interim order granting or refusing or modifying<br />
interim relief and final order passed on any petition or reference<br />
shall be communicated to the petitioner or the applicant and to the<br />
respondents and other parties concerned free of cost:<br />
Provided that in the case of an order under section 17 confirming<br />
change of registered office, two copies of the order shall be<br />
supplied to the petitioner company free of cost.<br />
(5) If the petitioner or the applicant or the respondent to any<br />
proceeding requires a copy of any document or proceeding, the<br />
same shall be supplied to him on such terms and conditions and on<br />
payment of such fee as may be fixed by the Bench by general or<br />
special order.<br />
(6) The Bench may make such order or give such direction as may<br />
be necessary or expedient to give effect to its orders or to prevent<br />
abuse of its process or to secure the ends of justice.<br />
(7) It shall be lawful for a Bench to fix, and award, costs to any of<br />
the parties before it where it is of opinion that the award of such<br />
costs is necessary.<br />
33. Registers of petitions and applications :-<br />
(2) In every register, referred to in sub regulation (1), there shall
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be entered the following particulars, namely,<br />
(a) to (i) not relevant.<br />
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(j) the date when the formal order is drawn up and communicated<br />
to the parties.<br />
44. Saving of inherent power of the Bench.- Nothing in these Rules shall be<br />
deemed to limit or otherwise affect the inherent power of the Bench<br />
to make such orders as may be necessary for the ends of justice or<br />
to prevent abuse of the process of the Bench.<br />
36. On question of maintainability of present appeal, Mr.Bobde, the learned<br />
senior counsel appearing for respondent no. 2 submits as under :<br />
(a) Under section 10F of the Companies Act, the appeal to the <strong>High</strong><br />
Court is maintainable from the order of the CLB only on the question of law.<br />
CLB is the final authority on facts unless the said findings are perverse based<br />
on no evidence and or are otherwise arbitrary. The jurisdiction of the appellate<br />
court under section 10F is restricted to the question as to whether on the facts<br />
as noticed by the CLB, the inference could reasonably be arrived at that such<br />
conduct was against the probity and good conduct and or was mala fide or<br />
for a collateral purpose or was burdensome, harsh or wrongful. The present<br />
appeal makes out no case warranting any interference by this court.<br />
Section 10F of the Companies Act, 1956 reads as under :<br />
“10F. 3[ Appeals against the orders of the Company Law Board. Any<br />
person aggrieved by any decision or order of the Company Law<br />
Board may file an appeal to the <strong>High</strong> Court within sixty days from<br />
the date of communication of the decision or order of the Company
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Law Board to him on any question of law arising out of such order:<br />
Provided that the <strong>High</strong> Court may, if it is satisfied that the appellant<br />
was prevented by sufficient cause from filing the appeal within the<br />
said period, allow it to be filed within a further period not exceeding<br />
sixty days.] ”<br />
(b) This court can only consider if the question of law has been<br />
wrongly decided and can not substitute its own discretion with that of the<br />
CLB and or inquire into the merits of the case on facts unless the order is<br />
arbitrary, capricious or has ignored settled principles regulating grant or<br />
refusal of injunctions or other interim orders. In the present case, no such<br />
case is made out by the appellants warranting interference. The respondents<br />
placed reliance upon the judgment of the Supreme Court in the case of V.S.<br />
Krishnan Vs. Westfort Hi-tech Hospital Limited and Ors. (2008) 3<br />
S.C.C. 363 and more particularly para 16 which reads :<br />
“16. It is clear that Section 10F permits an appeal to the <strong>High</strong><br />
Court from an order of the Company Law Board only on a question of<br />
law i.e., the Company Law Board is the final authority on facts unless<br />
such findings are perverse based on no evidence or are otherwise<br />
arbitrary. Therefore, the jurisdiction of the appellate Court under Section<br />
10F is restricted to the question as to whether on the facts as noticed by<br />
the Company Law Board and has placed before it, an inference could<br />
reasonably be arrived at that such conduct was against probity and good<br />
conduct or was mala fide or for a collateral purpose or was burdensome,<br />
harsh or wrongful. The only other basis on which the appellate Court<br />
would interfere under Section 10F was if such conclusion was (a) against<br />
law or (b) arose from consideration of irrelevant material or (c) omission<br />
to construe relevant materials.”<br />
37. Mr. Samdani, learned senior counsel appearing for the appellant submits<br />
that the question of law have been framed in appeal and are to be found at
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Paragraphs (A) to (J). It is submitted that it is settled law that mixed question<br />
of law and fact is also a question of law. The appellant placed reliance upon<br />
the judgment of the Supreme Court in the case of Sree Meenakshi Mills Ltd.<br />
Vs. Commissioner of Income Tax, AIR 1957 SC 47 more particularly para 10<br />
which reads thus :<br />
“10. It was next contended for the appellant that inference from facts<br />
was a question of law, and that as the conclusion of the Tribunal that<br />
the intermediaries were dummies and that the sales standing in their<br />
names were sham and fictitious was itself an inference from several<br />
basic facts found by it, it was a question of law and that the appellant<br />
had the right under section 66(1) to have the decision of the court on<br />
its correctness, and support for this position was sought from certain<br />
observations in Edwards (Inspector of Taxes) v. Bairstow , Bomford<br />
v. Osborne ; , Thomas Fattorini (Lancashire), Ltd. v. Commissioners<br />
of Inland Revenue : 24 T. C. 328.], Cameron v. Prendergast ; 8 I. T.<br />
R. Supplt. 75.] and The Gramophone and Typewriter Company, Ltd.<br />
v. Stanley ; 5 T. C. 358.]. At the first blush, it does sound somewhat<br />
of a contradiction to speak of a finding of fact as one of law even<br />
when that finding is an inference from other facts, the accepted<br />
notion being that questions of law and of fact form antithesis to each<br />
other with spheres distinct and separate. When the Legislature in<br />
terms restricts the power of the court to review decisions of<br />
Tribunals to questions of law, it obviously intends to shut out<br />
questions of fact from its jurisdiction. If the contention of the<br />
appellant is correct, then a finding of fact must, when it is an<br />
inference from other facts, be open to consideration not only on the<br />
ground that it is not supported by evidence or perverse but also on<br />
the ground that it is not a proper conclusion to come to on the facts.<br />
In other words, the jurisdiction in such cases is in the nature of a<br />
regular appeal on the correctness of the finding. And as a contested<br />
assessment - and it is only such that will come up before the Tribunal<br />
under section 33 of the Act, must involve disputed questions of fast,<br />
the determination of which must ultimately depend on findings on<br />
various preliminary or evidentiary facts, it must result that<br />
practically all orders of assessment of the Tribunal could be brought<br />
up for review before courts. That will, in effect, be to wipe out the<br />
distinction between questions of law and questions of fact and to<br />
defeat the policy underlying sections 66(1) and 66(2). One should
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hesitate to accept a contention which leads to consequences so<br />
startling, unless there are compelling reasons therefore. Far from that<br />
being the case, both principle and authority are clearly adverse to it.”<br />
38. In rejoinder on this issue the learned counsel appearing for the<br />
respondent no.2 distinguished the judgment of the Supreme Court in the case<br />
of Sree Meenakshi Mills (supra) on the ground that the said judgment did not<br />
pertain to appeal under section 10F of the Companies Act, 1956 and in any<br />
event does not hold that the question of law means mixed question of facts<br />
and law or that this court is empowered to reconsider the facts and come to a<br />
different conclusion on such reconsideration. It is reiterated that plain reading<br />
of section 10F of the Companies Act makes it clear that the appeal may be<br />
filed only on the question of law. The CLB has rendered findings of facts and<br />
thus interference of this court under section 10F is not permissible.<br />
39. In my view, the appeal lies to the <strong>High</strong> Court under Section 10F on any<br />
question of law arising from any decision or order of the Company Law<br />
Board. The finding of fact recorded by CLB Is final and is not appealable<br />
unless it is perverse, based on no evidence or otherwise arbitrary. Even if the<br />
court would have come to a different conclusion on the facts, appeal cannot be<br />
entertained on a mere finding of fact. The Supreme Court in case of<br />
V.S.Krishnan (supra) has held that section 10F can be invoked only on a<br />
question of law and CLB is final authority on facts unless such findings are
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perverse based on no evidence or otherwise arbitrary. The jurisdiction of<br />
appellate court under section 10F is restricted to the question as to whether on<br />
the facts as noticed by the CLB and has placed before it, an interference could<br />
reasonably be arrived at that such conduct was against probity and good<br />
conduct or was malafide or for a collateral purpose or was burdensome, harsh<br />
or wrongful. The appellate court can also interfere if the conclusion was<br />
against law or arose from consideration of irrelevant material or omission to<br />
construe relevant materials.<br />
40. The appellants have formulated various questions which are setout in<br />
para (2) of this order which shall be dealt with by this court in the subsequent<br />
paragraphs of this order as to whether any question of law as formulated by the<br />
appellants arise for the determination of this court or not.<br />
41. Mr. Samdhani, learned senior counsel appearing for the appellant<br />
submitted that the impugned order passed by the CLB in Company Application<br />
(85 of 2012) on 13 th August, 2012 is in the nature of review. It is submitted<br />
that the CLB has no power to review and thus Company Application (85 of<br />
2012) ought to have been rejected. In the alternate, it is submitted that even if<br />
CLB did have power to review its earlier order, it could not come to the<br />
diametrically opposite conclusion on the same arguments that were advanced<br />
before passing the order of 21 st May, 2012. It is submitted that Company
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Application (85 of 2012) was thus not maintainable and thus injunction order<br />
dated 21 st May, 2012 could not have been vacated by the CLB. It is submitted<br />
that under the guise of clarification or modification one can not seek review.<br />
The learned counsel submits that notwithstanding that the appellant had<br />
contended that the order was an ad interim order, the fact remains that the<br />
respondents did not agree with that interpretation of the appellants. It is<br />
submitted that the nature of the order dated 21 st May, 2012 has to be<br />
ascertained on the perusal of the order itself. From the reading of the order, it<br />
clearly states that the order of 21 st May, 2012 was not ad interim order but<br />
was interim order disposing of the application regarding injunction. The only<br />
new event was that the impugned meeting had now been held. It is submitted<br />
that merely because meeting was held would not entitle the respondents to<br />
seek vacation/modification/review of the order dated 21 st May, 2012. The CLB<br />
had already considered possibility of the resolution being passed.<br />
42. Mr. Bobde, the learned senior counsel appearing on behalf of the<br />
respondents, on the other hand submits as under :<br />
(a) The power of review is vested in civil courts by section 114<br />
and order XLVII Rule 1 of Code of Civil Procedure, 1908 in relation to final<br />
decrees/orders passed under the Code. The order sought to be reviewed must<br />
have finally disposed of the case. No review is permissible under the Criminal<br />
Procedure Code. Variation, modification or vacation of interim order does
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not amount to review of that order. By its very nature, interim order or ad<br />
interim orders are capable of being modified or vacated on the latter date.<br />
(b) Order XXXIX rule 1 and 2 of C.P.C. 1908 provide for grant of<br />
temporary injunction. Rule 4 expressly provide for discharge, variation or<br />
setting aside of a temporary injunction. The CLB exercises inherent powers<br />
when granting, refusing, modifying or vacating an interim order. It is<br />
submitted that the sole question is whether the interim order is just and<br />
equitable and secures the ends of justice. Earlier order dated 21 st May, 2012<br />
was ad interim order “till further orders” and was passed without having<br />
benefit of resolution which was passed next day. It is submitted that the order<br />
was passed on the very preliminary view of the order since the EOGM was<br />
scheduled for the next date and that is why it was expressly stated to be “till<br />
further orders”. It is submitted that when EOGM was held, the respondent no.<br />
1 company filed Company Application (85 of 2012) for vacating/modifying<br />
the order dated 21 st May, 2012 after bringing on record the resolution passed<br />
In EOGM by Respondent No. 1. The respondents placed reliance on the<br />
judgment of the Supreme Court in the case of Manohar Lal Vs. Seth Hiralal,<br />
AIR 1962 SC 527 and more particularly para 23 thereof which reads thus :<br />
“The section itself says that nothing in the Code shall be deemed to<br />
limit or otherwise affect the inherent power of the Court to make<br />
orders necessary for the ends of justice. In the face of such a clear<br />
statement, it is not possible to hold that the provisions of the Code<br />
control the inherent power by limiting it or otherwise affecting it.<br />
The inherent power has not been conferred upon the Court; it is a<br />
power inherent in the Court by virtue of its duty to do justice
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43. The learned counsel for the respondents placed reliance on Regulation<br />
29(4) of the Company Law Board Regulation, 1991 which reads as under:<br />
“A copy of every interim order granting or refusing or modifying<br />
interim relief and final order passed on any petition or reference<br />
shall be communicated to the petitioner or the applicant and to the<br />
respondents and other parties concerned free of cost.”<br />
44. Relying upon Regulation 29(4) it is submitted that the said Regulation<br />
postulates that CLB has power to grant interim order or refuse or modify that.<br />
It is submitted that the source of that power is to be found in section 403 of<br />
the companies Act, 1956 read with regulation 44 which saves inherent power<br />
of the Bench. It is submitted that on a conjoint reading of Regulation 44 and<br />
29(4), the CLB has inherent powers to grant interim relief and to modify or<br />
vacate or refuse interim relief as may be necessary for the ends of justice or to<br />
prevent the abuse of the process of the Bench.<br />
45. Mr. Kadam, the learned senior counsel appearing for respondent no. 1<br />
submitted that no provisions in law can control inherent powers of the court.<br />
The inherent powers are exercised to do complete justice. It is submitted that<br />
the order dated 21 st May, 2012 passed by CLB clearly provide that the same<br />
was “till further orders”. The first respondent company had applied for
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vacating the said ad interim order and the said application was not for seeking<br />
any review. It is submitted that the as per Order XXXIX rule 4, the order of<br />
injunction also may be varied if there is change in circumstances or if<br />
hardship is caused to the party. The learned counsel for the first respondent<br />
placed reliance upon the judgment of the Supreme Court in the case of<br />
Gujarat Bottling Co. Ltd. Vs. Coco Cola Co. (1995) 5 S.C.C. 545 and<br />
more particularly para 47 which reads thus :<br />
“46. The grant of an interlocutory injunction during the pendency of<br />
legal proceedings is a matter requiring the exercise of discretion of<br />
the court. While exercising the discretion the court applies the<br />
following tests - (i) whether the plaintiff has a prima facie case; (ii)<br />
whether the balance of convenience is in favour of the plaintiff; and<br />
(iii) whether the plaintiff would suffer an irreparable injury if his<br />
prayer for interlocutory injunction is disallowed. The decision<br />
whether or not to grant an interlocutory injunction has to be taken at<br />
a time when the existence of the legal right assailed by the plaintiff<br />
and its alleged violation are both contested and uncertain and remain<br />
uncertain till they are established at the trial on evidence. Relief by<br />
way of interlocutory injunction is granted to mitigate the risk of<br />
injustice to the plaintiff during the period before that uncertainty<br />
could be resolved. The object of the interlocutory injunction is to<br />
protect the plaintiff against injury by violation of his right for which<br />
he could not be adequately compensated in damages recoverable in<br />
the action if the uncertainty were resolved in his favour at the trial.<br />
The need for such protection has, however, to be weighed against the<br />
corresponding need of the defendant to be protected against injury<br />
resulting from his having been prevented from exercising his own<br />
legal rights for which he could not be adequately compensated. The<br />
court must weigh one need against another and determine where the<br />
'balance of convenience' lies. See : Wander Ltd. and Anr. v. Antox<br />
India P. Ltd. MANU/SC/0595/1990 . In order to protect the<br />
defendant while granting an interlocutory injunction in his favour the<br />
Court can require the plaintiff to furnish an under taking so that the<br />
defendant can be adequately compensated if the uncertainty were<br />
resolved in his favour at the trial.”
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46. Mr. Sen, the learned counsel appearing for Respondent nos. 4 and 5<br />
invited my attention to Para 6 of the order dated 21 st May, 2012 passed by CLB<br />
allowing the first respondent company to go ahead with convening the<br />
meeting, however, making it clear that the resolution passed, if any in the<br />
EOGM on 21 st May, 2012 shall be kept in abeyance till further orders. The<br />
learned counsel invited my attention to the order sheet dated 21 st May, 2012<br />
in the Company Application (73 of 2012) which reads thus :<br />
“Part heard. Company Application No. 74 of 2012 with<br />
respect to interim injunction as prayed for in Company Application<br />
No. 73 of 2012. R-I company is hereby allowed to hold EOGM<br />
scheduled on 22-5-2012 at 11.30 a.m. That the resolution if any<br />
passed, shall not be given effect to till further orders. Detailed order<br />
follows.”<br />
47. Mr. Sen, the learned counsel submits that it is clear that the order passed<br />
by the CLB on 21 st May, 2012 was pro tem/ad interim order and the matter<br />
being part heard, was to be heard subsequently after EOGM was held on 21 st<br />
May, 2012. Company Application (73 of 2012) was specifically kept part<br />
heard. The learned counsel submits that thus the CLB has not passed any<br />
order reviewing its earlier order but has passed the final order on the<br />
Company Application (85 of 2012) after hearing the parties after EOGM<br />
meeting came to be held. The final order dated 13 th August, 2011 also<br />
records that the order dated 21 st May, 2012 was ad interim order and the<br />
matter was part heard. It is submitted that the order dated 21 st May, 2012 was
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thus operative only until further orders as recorded in the said order. Since no<br />
date was posted, the matter did not appear on board and therefore, the first<br />
respondent company applied for further orders. Thus, there is no question of<br />
any review or modification or any other similar issue having arisen. It is<br />
submitted that in any event, any interim/ad interim order can always be<br />
modified or recalled under Regulation 29(4) of the Company Law Board<br />
Regulations, 1991.<br />
48. In rejoinder, Mr. Samdhani, learned counsel appearing for the appellant<br />
submits that in the pleadings the first respondent had categorically stated that<br />
the Company Application (85 of 2012) was for the review of the order dated<br />
21 st May,2012 passed in Company Application (73 of 2012). It is submitted<br />
that the power of review is not inherent power. It is submitted that even if<br />
the CLB modified its earlier order, it can do so only on some additional<br />
material or in the changed circumstances. In the present case there was neither<br />
any additional material nor any changed circumstance. It is submitted that<br />
even if holding of EOGM was to be viewed as the changed circumstance, its<br />
conduct was expressly subject matter of the challenge in Company Application<br />
(91 of 2012) and without adjudicating the Company Application (91 of 2012),<br />
CLB could not have vacated the injunction granted earlier. The learned<br />
counsel placed reliance on the judgment of the Supreme Court reported in<br />
(2010) 9 S.C.C. 437 and more particularly para 12 which reads as under :
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“12. It is settled legal proposition that unless the statute/rules so<br />
permit, the review application is not maintainable in case of<br />
judicial/quasi-judicial orders. In absence of any provision in the Act<br />
granting an express power of review, it is manifest that a review<br />
could not be made and the order in review, if passed is ultra-vires,<br />
illegal and without jurisdiction. (vide: Patel Chunibhai Dajibha v.<br />
Narayanrao Khanderao Jambekar and Anr. MANU/SC/0287/1964 :<br />
AIR 1965 SC 1457 and Harbhajan Singh v. Karam Singh and Ors”<br />
49. The CLB has dealt with the issue of Review raised by the appellant in<br />
the impugned order in Paragraphs 25, 28 and 34. para 34 of the impugned<br />
order as under :<br />
“ The Applicant has rightly contended that what it is seeking<br />
in Application 85 is modification/variation/vacation of an ad interim<br />
order dated 21.05.2012 given in C.A. 73/2012 which was not<br />
disposed off when this ad interim order was given and further that<br />
this ad interim order was given till further orders.<br />
Variation/modification/Vacation of an ad interim order of CLB in a<br />
Company Application/Company Petition can by no stretch of<br />
imagination be called review of CLB's orders. It has also been<br />
correctly pointed out that this order was till further orders in this<br />
matter which can in all events be considered for<br />
Vacation/modification/Variation depending upon the facts and<br />
circumstances of a case. Considering the facts and circumstances of<br />
this case, in view of the final hearing of Applications in this mater<br />
and perusing of further affidavits clarifying the parties contentions<br />
before the higher courts, I find no reason for not considering the<br />
Applicant's prayer for modification/Vacation of the ad interim given<br />
till further orders.”<br />
50. The question that arises for consideration of this court is whether the<br />
impugned order passed by CLB on 13 th August, 2012 in Company Application<br />
(85 of 2012) is in the nature of review of its earlier order dated 21 st May, 2012<br />
and if it is in the nature of review, whether CLB has power to review its
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earlier order under the provisions of the Companies Act, 1956 or under the<br />
Company Law Board Regulation, 1991. By the impugned order dated 13 th<br />
August, 2012 the CLB has vacated the order dated 21st May, 2012 by holding<br />
that there was no justification in restraining the first respondent company<br />
from implementation of the special resolution passed and from filing of the<br />
requisite forms with R.O.C. in that regard. The CLB has rendered a finding<br />
of fact that the first respondent in Application (85 of 2012) was seeking<br />
modification/varification/vacation of the ad interim order dated 12 th may, 2012<br />
passed in Company Application (73 of 2012) which was not disposed of<br />
when that ad interim order was passed and the same was till further orders. It<br />
has been held that the variation/modification/vacation of the ad interim order<br />
of the CLB in Company Application by no stretch of imagination be called<br />
review of the CLB's orders.<br />
51. On 21 st May, 2012, the CLB passed order in Company Application (73<br />
of 2012) filed by the appellants herein seeking impleadment of respondent<br />
nos. 6, 7 and 8 and amendment of the Company Petition on the ground of<br />
subsequent alleged acts of oppression and also seeking stay of the notice of<br />
requisition dated 31 st Mach, 2012, notice dated 25 th April,2012 as well as<br />
seeking injunction against holding of the EOGM on 22 nd May, 2012. In the<br />
order dated 21 st May, 2012, CLB observed that the first respondent company<br />
had no choice under section 169 of the Companies Act but to convene the
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meeting and if the company does not convene the meeting, the requisitionists<br />
have the right after the prescribed period to go ahead with the convening of<br />
the meeting. It is observed that this right of the shareholders is except in<br />
exceptional circumstances not curtailed by the CLB. In view thereof, the CLB<br />
allowed the first respondent to convene the meeting proposed to be held on<br />
22 nd May, 2012 and recorded that the resolution passed if any in the EOGM<br />
dated 22 nd May, 2012 shall be kept in abeyance till further orders. The<br />
attendance cum order sheet dated 21 st May, 2012 indicates that the Company<br />
Application (73 of 2012) was part heard with respect to interim inunction as<br />
prayed for in the said application. It is not in dispute that the meeting was<br />
thereafter held on 22 nd May, 2012 as scheduled and it was resolved to delete<br />
article 57. Perusal of the Company Application (85 of 2012) filed by the first<br />
respondent company shows that the company had prayed for<br />
modifying/vacating and/or varying ad interim order dated 21 st May, 2012.<br />
From the perusal of the order dated 21 st May, 2012, it is clear that the said<br />
order was an ad interim order and was operative only until further orders.<br />
Company Application (73 of 2012) filed by the appellants for seeking interim<br />
injunction was part heard and was pending. The CLB had not fixed any<br />
further date for hearing of the said company application and this mater did not<br />
appear on board. The first respondent thereafter applied for<br />
vacating/modifying and or varying the said order dated 21 st May, 2012 in view<br />
of the meeting having been held on22 nd May, 2012 and the resolution to delete
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article 57 having been passed by requisite majority. The record indicates that<br />
the CLB considered the detailed affidavits filed by the parties in response to<br />
the said application (85 of 2012) and considering those affidavits and<br />
considering the fact that the resolution was already passed by the requisite<br />
majority to delete article 57, ad interim order passed on 21 st May, 2012 came<br />
to be modified and/or vacated. The CLB itself had directed convening of the<br />
meeting on 22 nd May, 2012 while passing ad interim order dated 21 st May, 2012<br />
and was conscious of the fact of passing of resolution if any would have to<br />
be considered while hearing the matter finally which was admittedly part heard<br />
on 21 st May, 2012. In my view, the first respondent was justified in making the<br />
application for modifying and vacating and/or varying the ad interim order<br />
dated 21 st May, 2012 in the pending application in view of the subsequent<br />
events more particularly passing of the resolution to delete article 57. While<br />
hearing the matter finally by the CLB, in my view, the CLB was justified in<br />
considering the subsequent events and more particularly crucial events of<br />
passing of the resolution to delete article 57 while disposing of the Company<br />
Application (85 of 2012). In my view, any ad interim order in the pending<br />
matter is capable of being modified, vacated and/or varied at the time of final<br />
disposal of the interim application and it does not amount to review. In my<br />
view, the order sought to be reviewed shall be an order finally disposing of the<br />
case. However, in this case it is clear that when the order dated 21 st May, 2012<br />
was passed by the CLB, it was ad interim order in the pending company
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application which was part heard. In my view in no circumstances, the<br />
impugned order dated 13 th August, 2012 passed by the CLB can be construed<br />
as an order reviewing the earlier order i.e. dated 21 st May, 2012.<br />
52. Since, the counsel for both the parties have made submissions about the<br />
powers of the CLB to review, I am considering the said submissions also.<br />
53. In my view, the Companies Act, 1956 is a self contained code. Unless<br />
statute/rules permit or provides power to the court or quasi judicial authority<br />
to review its own order, no order in review can be passed by the court or such<br />
authority. In my view inherent powers cannot be exercised so as to review<br />
any order passed by the court and or authority. In my view, Mr.Samdani,<br />
learned senior counsel appearing for the appellant is right in placing reliance<br />
upon the judgment of the Supreme Court reported in (2010) 9 S.C.C. 437 by<br />
which it has been held that in the absence of any provisions under the Act<br />
granting express power of review, it is manifest that the review cannot be<br />
made and the order in review if passed is ultra vires, illegal and without<br />
jurisdiction. In my view, section 403 which empowers the CLB to pass interim<br />
order pending making of the final order under section 397 or 398 read with<br />
Regulation 29(4) of the Company Law Board Regulation 1991 does not<br />
empower the CLB to review its order. The judgment relied upon by the<br />
respondents in the case of Manoharlal (supra) and in the case of Gujarat<br />
Bottling (supra) are not applicable to the facts of this case as the said
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judgments does not deal with similar provisions, either under the provisions<br />
of the Companies Act, 1956 or under the CLB Regulation 1991.<br />
54. In my view, CLB does not have power to review its earlier order.<br />
However, in the facts of this case, after considering the pleadings and record, I<br />
have already taken a view that the respondent company had not sought any<br />
review in Company Application No. 85 of 2012 and the CLB has not reviewed<br />
its earlier order. In my view, thus CLB has rightly entertained an application<br />
filed by the 1 st respondent (85/2012) for modification and/or vacation of the<br />
order dated 21 st May, 2012 as the said order was ad-interim order operative<br />
during the pendency of the Company Application (85 of 2012). On perusal of<br />
the impugned order passed by CLB, it is clear that the CLB has not vacated its<br />
earlier order dated 21 st May, 2012 on the same grounds on which order dated<br />
21 st May, 2012 was passed. It is common ground that pursuant to the said<br />
order dated 21 st May, 2012, the CLB permitted the 1 st respondent to conduct<br />
EOGM on 22 nd May, 2012 but not to implement resolution if any during the<br />
pendency of the company application (85 of 2012). It is not in dispute that the<br />
meeting was thereafter held on 22 nd May, 2012 and resolution was passed<br />
resolving to delete Article 57 from Articles of Association. Both parties<br />
thereafter filed affidavit before CLB which have been considered by CLB<br />
while passing final order on 13 th August, 2012 in (85 of 2012). The CLB has<br />
given various reasons in the impugned order dated 13 th August, 2012. In my
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view, there is no question of law arises as formulated by the appellant and<br />
setout in paragraphs 2B and 2C of this order.<br />
55. The next submission of Mr. Samdhani, the learned counsel for the<br />
appellant is that the impugned order passed by the CLB had not been<br />
pronounced. It is submitted that the respondents had received the impugned<br />
order and took steps to implement it even before the appellants learnt and/ or<br />
received the said order. It is submitted that the order that is not pronounced is<br />
not an order in the eyes of law.<br />
56. On the other hand, Mr.Bobde, the learned senior counsel for the<br />
respondent no.2 submits that :<br />
(a) Pronouncement or delivery of a judgment or order “in open court”<br />
has a two-fold object, firstly, the court or tribunal cannot alter the judgment<br />
once it is delivered and secondly, the parties know with certainty as to what<br />
the judgment, or its operative part, is and how their rights are affected and the<br />
period of limitation for challenging the judgment beings to run. It matters not<br />
that the judgment is signed later and certified copy is received later. The<br />
essence of the matter is to make known to the parties exactly what the<br />
judgment is, that is to say, communication of the judgment to the parties. The<br />
knowledge of the judgment may be either actual or constructive. It is actual<br />
when parties or their counsel are present when the judgment is delivered<br />
immediately after the hearing is concluded, or in case of a reserved judgment,
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parties or counsel are present pursuant to a notice intimating them about the<br />
date of delivery of judgment. The notice may be by the cause-list or by a<br />
separate notice. It is constructive when parties or counsel have notice of the<br />
date of delivery but choose not to remain present in court, in either case, the<br />
delivery “in open court” makes the judgment effective against the parties<br />
because it stands communicated to them.<br />
(b) Where the Act or Rules do not require pronouncement “in open<br />
court”, the pronouncement or delivery does not have the effect of making the<br />
judgment known to the parties. The manner of making such pronouncement<br />
or delivery is a matter of practice of that tribunal and it matters not how it is<br />
done. While the tribunal cannot alter the judgment so delivered, the parties<br />
come to know when the copies of the judgment are communicated to them by<br />
post or e-mail or hand delivery. Such communication makes the judgment fully<br />
effective so far as the parties are concerned by imparting to them knowledge of<br />
the judgment.<br />
(c ) The real purpose of delivery “in open court” and delivery<br />
otherwise, followed by communication, is to make known to the parties what<br />
the judgment is. The essence of both modes is communication of the judgment<br />
to the parties. There is no universal or inflexible rule or principle of law that a<br />
judgment must always be pronounced “in open court”by every tribunal. The<br />
mode of delivery of judgment or order depends on the particular Act and Rules<br />
or Regulations. Moreover, the exact way in which such delivery takes place
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(d) The Companies Act, 1956 enacted by Parliament provides in<br />
Section 397 and 398 that the CLB shall “make such orders as it thinks fit”.<br />
Section 10E(4B) provides for “order made” by a bench of the CLB. Section<br />
10F provides that the limitation for the appeal shall commence from the date<br />
of communication of the decision or order”. Hence, the Act prescribes two<br />
essential things, firstly, the making of the order and secondly, the<br />
communication of the order. The CLB Regulations of 1991 framed by the CLB<br />
under Section 10E(6) vide Regulation 29(1) that the order shall be in writing<br />
and shall be signed by the member or members constituting th bench which<br />
pronounces the order. This is the manner of”making” the order and the<br />
essential elements are that the order is in writing and is signed. The emphasis<br />
in Regulation 29(1) is on the order being written and signed by the Member or<br />
Members who pronounced it. Regulation 29(1) does not say that the order shall<br />
be pronounced nor does it prescribe the mode of pronouncement. The word<br />
“which pronounces the order” merely describe the bench which delivers the<br />
order in writing and signs the same. Pronouncing the order is simply the act<br />
of making, delivering or rendering the written and signed order. In the context<br />
of Regulation 29(1), the word “pronounces”must take its colour and meaning<br />
from Section 397 and 398 which use the word “make” and hence, cannot, in<br />
or under a statute, have the meaning of only an oral utterance in open court.<br />
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<br />
pronouncement has to be “in open Court”,. The purpose of providing that the<br />
order shall be in writing and signed is to “secure certainty in the<br />
ascertainment of what the judgment was”. The absence of the words “in open<br />
court” clearly indicates that the pronouncement or delivery of the order is not<br />
required to be done in open court.<br />
(f) It is further submitted that the second step is of the utmost<br />
importance, namely, to make the order known to the parties so that they know<br />
what it is and not it affects their rights and enables them to pursue the remedy<br />
of appeal. Regulation 29(4) provides for communicating copies of the order to<br />
the parties free of cost. This provision obviates the need for applying for<br />
certified copies which needs to be done when an order or judgment is<br />
pronounced in open court under Order XX of Civil Procedure Code, 1908.<br />
Communication imparts knowledge of the order and concludes and binds the<br />
parties.<br />
(g) It is further submitted that it is settled law that even in cases<br />
covered by the CPC and Cr.P.C. where the judgment has to be pronounced in<br />
open court, the Hon'ble Supreme Court has held that small irregularities in the<br />
manner of pronouncement or the mode of delivery do not matter and<br />
irregularities in the manner which the judgment is authenticated or signed and<br />
sealed can be cured because they are all rules designed to secure certainty<br />
about the contents of the judgment.
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57. The learned senior counsel Mr. Bobde, placed reliance upon the<br />
judgment of the Supreme Court in the case of State Bank of India and Ors<br />
Vs. S.N. Goel (2008) 8 S.C.C. 92 and more particularly paragraph 28 which<br />
reads thus :<br />
“.....The position is different with reference to quasi judicial<br />
authorities. While some quasi judicial tribunals fix a day for<br />
pronouncement and pronounce their orders on the day fixed, many<br />
quasi judicial authorities do not pronounce their orders. Some<br />
publish or notify their orders. Some prepare and sign the orders and<br />
communicate the same to the party concerned. A quasi judicial<br />
authority will become functus officio only when its order is<br />
pronounced, or published/notified or communicated (put in the<br />
course of transmission) to the party concerned. When an order is<br />
made in an office noting in a file but is not pronounced, published or<br />
communicated, nothing prevents the Authority from correcting it or<br />
altering it for valid reasons. But once the order is pronounced or<br />
published or notified or communicated, the Authority will become<br />
functus officio......”<br />
58. The learned senior counsel also placed reliance upon the judgment of the<br />
Supreme Court in the case of Harish Chandra Raj Singh Vs. Land<br />
Acquisition, AIR 1961 S.C. 1500 and more particularly para 6 which reads<br />
thus :<br />
“The knowledge of the party affected by such a decision, either<br />
actual or constructive, is an essential element which must be satisfied<br />
before the decision can be brought into force. Thus considered the<br />
making of the award cannot consist merely in the physical act of<br />
writing the award or signing it or even filing it in the office of the<br />
Collector; it must involve the communication of the said award to<br />
the party concerned either actually or constructively. If the award is<br />
pronounced in the presence of the party whose rights are affected by<br />
it it can be said to be made when pronounced. If the date for the<br />
pronouncement of the award is communicated to the party and it is
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accordingly pronounced on the date previously announced the award<br />
is said to be communicated to the said party even if the said party is<br />
not actually present on the date of its pronouncement. Similarly if<br />
without notice of the date of its pronouncement an award is<br />
pronounced and a party is not present the award can be said to be<br />
made when it is communicated to the party later. ….......”<br />
59. The learned senior counsel also placed reliance upon the judgment of the<br />
Supreme Court in the case of Transport Commissioner Vs. Nand Singh<br />
(1979) 4 S.C.C. 19 and more particularly paragraph 2 which reads thus :<br />
“The order must be communicated either directly or constructively in<br />
the sense of making it known, which may make it possible for the<br />
authority to say that the party affected must be deemed to have<br />
known the order in a given ease, the date of putting the order in<br />
communication under certain circumstances may be taken to be the<br />
date of the communication of the order or the date of the order but<br />
ordinarily and generally speaking, the order would be effective<br />
against the person affected by it only when it comes to his<br />
knowledge either directly or constructively, otherwise not......”<br />
60. The learned counsel placed reliance upon the judgment of the Supreme<br />
Court in the case of Commissioner of Central Excise Vs. M.M. Rubber<br />
and Co. 1992 Supp (1) S.C.C. 471 and more particularly para 13 which reads<br />
thus :<br />
“The knowledge of the party affected by such a decision, either<br />
actual or constructive, is thus an essential element which must be<br />
satisfied before the decision can be said to concluded and binding on<br />
him. Otherwise, the party affected by it will have no means of<br />
obeying the order or acting in conformity with it or of appealing<br />
against or otherwise having it set aside. This is based upon, as<br />
observed by Ranmannar, CJ in Muthia Chettiar vs. CIT, AIR 1951<br />
Mad. 204 “a salutary and just principle.” The application of this rule<br />
so far as the aggrieved party is concerned is not dependent on the
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provisions of the particular statute, but is so under general law.”<br />
COAPPL41.12<br />
61. The learned senior counsel submitted that whenever parliament<br />
considers it necessary that the courts must pronouncement in the open court,<br />
it provides for express provisions under the statute. The learned counsel placed<br />
reliance upon Order 20 rule 1 and Order 41 rule 30 of Code of Civil Procedure,<br />
section 397 and 398 of the Companies Act, Regulation 29(1) and Regulation<br />
29(4) of the Company Law Board Regulation 1991, section 31(5) of the<br />
Arbitration and Conciliation Act, 1996, various provisions of Central Excise<br />
Act, 1944, Customs Act, 1962, Mines and Minerals Development Regulation<br />
Act, 1957, Electricity Act, 2003, Administrative Tribunals Act, 1985, Telecom<br />
Disputes Settlement and Appellate Tribunal Procedure, 2005, Consumer<br />
Protection Regulation 2005, Computation Commission of India (General)<br />
Regulation, 2009, Mineral Concession Rules, 1960. The learned counsel<br />
placed reliance on the judgment of the Court of Appeal, New Zealand reported<br />
in Bell-Booth Vs. Bell-Booth (1999) 4 L.R.C. 1, the judgment of the Supreme<br />
Court in the case of Ram and Shyam Co. Vs. State of Haryana, (1985) 3<br />
S.C.C. 267, Vinodkumar Vs. Banaras Hindu University (1988) 1 S.C.C. 80,<br />
Yadlapati Vs. State of Andhra Pradesh 1995 supp (2) SCC 590 in support of<br />
the plea that the pronouncement of the judgment by the CLB in the open<br />
court was not mandatory.
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62. Mr. Sen, the learned counsel for respondent nos. 4 and 5 submits that<br />
neither under the provisions of the companies Act, 1956 nor under the<br />
Company Law Board Regulations, 1991, there is any requirement for<br />
pronouncement. The word used “pronouncement” in the context of the<br />
requirement for signature of all the members of the Bench are only with a<br />
view to identify the Bench and could not have been intended to impose the<br />
obligation to pronounce much less in open court. It is submitted that the<br />
order stands “communicated” once it is pronounced in an open court. Once the<br />
order is pronounced in open court, there should be no further requirement of<br />
communication of the same. It is submitted that Regulation 29(4) requires<br />
communication of the order inspite of the word “pronounced” used in<br />
Regulation 29(1). If the intent of the Legislature In using the word<br />
“pronounced” under article 29(1) was to require pronouncement in open court,<br />
the provisions in Regulation 29(4) requiring communication shall be totally<br />
redundant since the order already have been communicated upon<br />
pronouncement. It is submitted that Regulation 29 therefore, has not required<br />
pronouncement of the order in the open court.<br />
63. In rejoinder Mr. Samdhani learned senior counsel appearing for the<br />
appellant submits that the Regulation 29 itself caste obligation on the CLB<br />
“to pronounce the judgment and order. It is submitted that the word<br />
“pronouncement” indicate that it can only be done in the open court. The
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learned counsel invited attention of this court to order at page 380, Vol. III<br />
which is another order of CLB to demonstrate that it was practice of CLB of<br />
making pronouncement of order/judgment in the open court. The learned<br />
counsel submits that even the judgment relied upon by the second respondent<br />
and particularly reported in AIR 1954 S.C.C. 194 and (1988) 1 S.C.C. 80<br />
holds that the communication of the judgment has to be done in the judicious<br />
way by pronouncing it. It is submitted that the judgment that is not signed but<br />
pronounced is a valid whilst the judgment that is signed but not pronounced is<br />
invalid.<br />
64. It is not in dispute that the impugned order dated 13 th August, 2012<br />
passed by the CLB was not pronounced in the open court. It is also not in<br />
dispute that the impugned order was communicated to all the parties and copy<br />
of the same had been received by all the parties from CLB. The grievance<br />
however, made by the appellant is that the respondent had received the copy of<br />
the impugned order from CLB before the same was communicated to the<br />
appellants and as a result whereof the respondents took steps to implement it<br />
even before the appellants learnt and or received copy of the said order.<br />
Regulation 29(1) and 29(4) of the CLB Regulation, 1991 is pressed into<br />
motion by the learned counsel appearing for the appellant and the respondents<br />
in support of their respective arguments. On conjoint reading of Article 29(1)<br />
read with 29(4) it is clear that there is no mandatory requirement of
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pronouncement of the order by the CLB in open court. From reading of<br />
Regulation 29(1) and (4) it is clear that it is the intention of the legislature that<br />
the order passed by the CLB has to be communicated to the parties in the<br />
absence of any mandatory requirement of pronouncement of the judgment<br />
and order in the open court. The essence of pronouncement and<br />
communication is that the parties are made aware of the order or judgment<br />
exactly. Once the order or judgment is delivered, the parties have constructive<br />
notice of delivery. Once the parties are communicated with the order of<br />
judgment, the CLB cannot make any alterations in the said judgment so<br />
delivered. In my view, once the order is communicated to the party, it<br />
becomes fully effective. The limitation for challenging to such order or<br />
judgment would commence when the certified copy is received. The Supreme<br />
Court in the case of State Bank of India Vs. S.N.Goel (supra) has held that<br />
the position in the case of quasi judicial authorities is different. Many times,<br />
the quasi judicial authorities though fix the date for pronouncement, the orders<br />
are not pronounced. Some time orders are signed and communicated to the<br />
parties concerned. It is held that the quasi judicial authority will become<br />
functus officio only when its order is pronounced, published and notified or<br />
communicated to the party concerned. It is held that once the order is<br />
pronounced or published or notified or communicated, the authority would<br />
become functus officio. In my view even if the order of CLB impugned in<br />
this proceedings was not formally pronounced in the open court, but
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admittedly communicated either on the same or the next day at most, it would<br />
lead to small irregularity in the matter of pronouncement or mode of delivery<br />
and cannot be construed as illegal or invalid order. I am not inclined to accept<br />
the submissions made by Mr. Samdani the learned senior counsel appearing<br />
for the appellant that the impugned order was though served by the CLB,<br />
however, not having been pronounced in the open court, is invalid and/or<br />
illegal.<br />
65. Though the learned counsel for both the parties have placed reliance on<br />
various judgments referred to in the earlier paragraphs of this order, in view of<br />
the clear wording of Regulation 29, I need not to deal with all the<br />
judgments referred to and relied upon by the learned counsel in detail. In my<br />
view there was no illegality committed by the CLB in not pronouncing the<br />
impugned order in the open court.<br />
66. As far as question 2D formulated by the appellant regarding<br />
pronouncement of the order is concerned, in my view issue raised by the<br />
appellant raises question of law. I have already dealt with this question in<br />
detail and have taken a view that even if impugned was not formally<br />
pronounced in the open court but was admittedly communicated, it would lead<br />
to small irregularities in the matter of pronouncement and the order cannot be
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construed illegal. I have already taken a view that once the order is<br />
communicated to the parties, it becomes totally effective. The question of law<br />
formulated by the appellant in para (2D) is answered accordingly.<br />
67. Mr. Samdani, the learned senior counsel for the appellants submits that<br />
the record and the proceedings reveals that there are serious justifiable<br />
allegations with regard to the manner in which the resolution is purportedly<br />
passed and the said allegations forms part of the Company Application (91 of<br />
2012) which is pending before the CLB. It is submitted that by the impugned<br />
judgment passed by the CLB Company Application (91 of 2012) has been<br />
rendered infructuous. The CLB has permitted the first respondent to implement<br />
the resolution, challenge to which is pending adjudication. The CLB has<br />
recoded a finding that the resolution had been validly passed without even<br />
adjudicating upon various objections raised by the appellants.<br />
68. On the other hand, the learned counsel appearing for the respondents<br />
submits as under :<br />
(a) Company Application (85 of 2012) was first mentioned on 18 th<br />
June, 2012 and was directed to be listed for hearing on 28 th June, 2012. On<br />
this date, the Company Application (91 of 2012) was not even filed. The<br />
Company Application (91 of 2012) was filed on 19 th June, 2012. On 28th June,
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2012 the Company Application (85 of 2012) was argued, part heard and<br />
adjourned to 10 th July, 2012 when the direction for completion of pleadings in<br />
Company Application (91 of 2012) were given. On 10 th July, 2012, Company<br />
Application (85 of 2012) and (73 of 2012) were heard partly and were<br />
adjourned for conclusion of hearing on 21 st July, 2012. The respondent was<br />
granted liberty to file sur-rejoinder in Company Application (91 of 2012). The<br />
appellant sought adjournment of the hearing on 21 st July, 2012 and accordingly<br />
the matter was adjourned to 10 th August, 2012. Hearing of the Company<br />
Application No. 73 and 85 of 2012 was completed on 10 th August, 2012 when<br />
the appellant sought time to argue Company Application No. 91 of 2012.<br />
(b) The appellants themselves in their affidavit in reply in Company<br />
Application (85 of 2012) had sought to challenge the conduct of the EOGM<br />
held on 22 nd May, 2012 as also passing of the resolution therein. The<br />
observations made in the impugned order with regard to the conduct of the<br />
EOGM held on 22 nd May, 2012, the decision of the Chairman and passing of<br />
the resolution therein are correct and does not require any interference. The<br />
CLB was correct in making observations in relation thereto in the impugned<br />
order and no fault can be found in not having heard the Company<br />
Application (91 of 2012).<br />
69. In its alternate submission, the respondent no.2 submits as under :
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The pleadings, facts and documents in Company Application No. 91 of<br />
2012 filed in the present appeal in Volume VII cannot be considered for the<br />
purposes of the present appeal since the same were not the record before the<br />
Hon'ble CLB and not under consideration for the purposes of the impugned<br />
order dated 13.8.2012. The facts contained therein are therefore, beyond the<br />
scope of and can not be considered in a section 10F appeal filed against an<br />
order passed in Company Application (85 of 2012).<br />
70. In rejoinder, Mr. Samdhani learned senior counsel for appellants submits<br />
that all the parties have made their submissions on the various claims and<br />
issues raised by the appellants in Company Application (73/2012) and also in<br />
Company Application (91 of 2012) and in view of the fact that the CLB also<br />
in the impugned order has made certain observations in respect of the<br />
subsequent events, this court shall consider subsequent events also which are<br />
permitted to be brought on record in Company Application (73/2012) which<br />
were forming part of the Company Application (91 of 2012) while deciding<br />
this appeal. It is submitted that the CLB has referred to Company Application<br />
(91 of 2012) in Para 28 29, 32 and 36 to 40 of the impugned order.<br />
71. The appellants have formulated, the question 2E and F based on the
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contention that CLB could not have permitted the 1 st respondent from<br />
implementing a resolution purportedly passed at its EOGM when the CLB<br />
itself permitted the amendment in the company petition impugning convening<br />
of the said EOGM and has adjourned the company petition (91 of 2012) for<br />
further amendment of the company petition questioning the conduct at the<br />
impugned EOGM. Though initially the appellants raised this issue, later<br />
invited my attention to paragraphs 4, 28, 36 to 39 of the impugned order<br />
passed by CLB referring to and dealing with the facts and issues raised by the<br />
appellant as well as respondents arising out of application for amendment<br />
(73/2012) and also company application (91/2012). Mr.Samdhani, the learned<br />
senior counsel also invited my attention to the pleadings and documents which<br />
are produced in various compilation filed by both parties. The learned senior<br />
counsel submits that the CLB could not have deferred the hearing in Company<br />
Application Nos. 91 of 2012 and 73 of 2012 in which appellant had questioned<br />
the conduct at the impugned EOGM and the same was pending.<br />
72. The learned counsel submits that as a result of the CLB deferring the<br />
hearing in Company Application Nos. 91 of 2012 and 73 of 2012 , decision<br />
rendered by the CLB in Company Application No. 85 of 2012 has made the<br />
applications filed by the appellants which are pending before the CLB<br />
infructuous. The learned counsel accordingly submits that since all parties in<br />
this proceedings have relied upon the pleadings and documents including the
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applications which are pending before the CLB, considering that and also in<br />
view of the fact some of this facts are observed and dealt with in the impugned<br />
order by CLB, this court shall render its decision on all such issues in the<br />
present appeal. It is not in dispute that though the respondents initially<br />
opposed that fact that pleadings and documents forming part of the Company<br />
Application Nos. 91 of 2012 and 73 of 2012 were not subject matter of<br />
Company Application No. 85 of 2012, this court shall not permit the appellants<br />
to agitate those issues in this appeal, however, have during the course of<br />
argument relied upon the pleadings and documents filed by the respondents on<br />
those issues and have made their detail oral and written submissions in the<br />
present proceedings. This court, therefore, permitted all parties to make their<br />
submissions on all such issues which are forming part of the Company<br />
Application Nos. 91 of 2012 and 73 of 2012 and has dealt with all those issues<br />
in the subsequent paragraphs of this order.<br />
73. Mr.Samdhani, the learned senior counsel appearing for the appellant<br />
submits that by convening EOGM On the requisition of the requisitionist for<br />
the purpose of deleting Article 57 was without any such direction in the order<br />
passed by Shri Justice S.C.Dharmadhikari and was during the pendency of<br />
Special Leave Petition filed by the appellant challenging the said order, the 1 st<br />
and 2 nd respondents have committed an act of oppression in continuation of its
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past oppressive acts which are prejudicial to the public interest and oppressive<br />
to the members of the 1 st respondent company. It is submitted that thus, the<br />
CLB ought not to have permitted the company to give effect to the resolution<br />
passed in the EOGM held on 22 nd May, 2012. The learned counsel submits<br />
that the appellants were thus justified in filing petition under Sections 397 and<br />
398 read with Section 402 of the Companies Act, 1956 which is still pending<br />
before the CLB. It is submitted that the said company petition is maintainable<br />
as the appellants have made out a case for reliefs under those provisions of law.<br />
74. On the other hand, the learned senior counsel appearing for the<br />
respondent no. 2 submits that the Company Petition filed by the appellants<br />
under section 397 and 398 read with section 402 of the Companies Act,1956<br />
itself is not maintainable and made the following submissions :<br />
(a) The petition filed by the appellants under section 397 and 398 of<br />
the Companies Act, 1956 does not disclose any cause of action under<br />
section 397 and 398. The appellants have not made out any case as to why the<br />
facts of the present case would justify winding up of respondent no.1<br />
company on just and equitable grounds as per requirement of section 397 and<br />
398. Consequence of section 402 would only be applicable if the appellant<br />
have made out any case under section 397 and 398 of the companies Act.<br />
(b) The first respondent company has acted in accordance with law in
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calling EOGM at the instance of the requisitionists under section 169 of the<br />
Companies Act and passing of the resolution in the EOGM can never<br />
amount to oppression of the minority or mismanagement or justify winding up<br />
on just and equitable cause under section 433. It was simple corporate<br />
democracy and an action pursuant to and in compliance with law. The<br />
deletion of Article 57 benefits all the shareholders and is also in the interest of<br />
company and in the public interest since the shareholders can sell their shares<br />
at market value and the public can freely buy the shares of the company<br />
subject to the powers of the Board of Directors of the Company to either<br />
register or refuse to register the transfer.<br />
(c) Calling of the EOGM was in compliance of the notice received<br />
from the requisitionists under section 169 of the Companies Act read with<br />
Article 76 of the Articles of Association. There was no option available to the<br />
first respondent company but to call EOGM in compliance with the<br />
provisions of the law. The respondents place reliance upon section 169 of the<br />
companies Act and Article 76 of the Articles of Association which reads as<br />
under :<br />
“Section 169 - Calling of extraordinary general meeting on<br />
requisition :<br />
(1) The Board of directors of a company shall, on the requisition of such<br />
number of members of the company as is specified in sub-section (4),<br />
forthwith proceed duly to call an extraordinary general meeting of the<br />
company.
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(2) The requisition shall set out the matters for the consideration of<br />
which the meeting is to be called, shall be signed by the requisitionists,<br />
and shall be deposited at the registered office of the company.<br />
(3) The requisition may consist of several documents in like form, each<br />
signed by one or more requisitionists.<br />
(4) The number of members entitled to requisition a meeting in regard to<br />
any matter shall be—<br />
(a) in the case of a company having a share capital, such number of<br />
them as hold at the date of the deposit of the requisition, not less than<br />
one-tenth of such of the paid-up capital of the company as at that date<br />
carried the right of voting in regard to that matter;<br />
(b) in the case of company not having a share capital, such number of<br />
them as have at the date of deposit of the requisition not less than<br />
one-tenth of the total voting power of all the members having at the<br />
said date a right to vote in regard to that matter.<br />
(5) Where two or more distinct matters are specified in the requisition,<br />
the provisions of sub-section (4) shall apply separately in regard to each<br />
such matter; and the requisition shall accordingly be valid only in<br />
respect of those matters in regard to which the condition specified in that<br />
sub-section is fulfilled.<br />
(6) If the Board does not, within twenty-one days from the date of the<br />
deposit of a valid requisition in regard to any matters, proceed duly to<br />
call a meeting for the consideration of those matters on a day not later<br />
than forty-five days from the date of the deposit of the requisition, the<br />
meeting may be called—<br />
(a) by the requisitionists themselves;<br />
(b) in the case of a company having a share capital, by such of the<br />
requisitionists as represent either a majority in value of the paid-up<br />
share capital held by all of them or not less than one-tenth of such of<br />
the paid-up share capital of the company as is referred to in clause (a)<br />
of sub-section (4), whichever is less; or
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(c) in the case of a company not having a share capital by such of the<br />
requisitionists as represent not less than one-tenth of the total voting<br />
power of all the members of the company referred to in clause (b) of<br />
sub-section (4).<br />
Explanation.—For the purposes of this sub-section, the Board shall,<br />
in the case of a meeting at which a resolution is to be proposed as a<br />
special resolution, be deemed not to have duly convened the meeting<br />
if they do not give such notice thereof as is required by sub-section<br />
(2) of section 189.<br />
(7) A meeting called under sub-section (6) by the requisitionists or any<br />
of them—<br />
(a) shall be called in the same manner, as nearly as possible, as that in<br />
which meetings are to be called by the Board; but<br />
(b) shall not be held after the expiration of three months from the<br />
date of the deposit of the requisition.<br />
Explanation.—Nothing in clause (b) shall be deemed to prevent a<br />
meeting duly commenced before the expiry of the period of three<br />
months, aforesaid, from adjourning to some day after the expiry of<br />
that period.<br />
(8) Where two or more persons hold any shares or interest in a company<br />
jointly, a requisition, or a notice calling a meeting, signed by one or<br />
some only of them shall, for the purposes of this section, have the same<br />
force and effect as if it had been signed by all of them.<br />
(9)Any reasonable expenses incurred by the requisitionists by reason of<br />
the failure of the Board duly to call a meeting shall be repaid to the<br />
requisitionists by the company; and any sum so repaid shall be retained<br />
by the company out of any sums due or to become due from the<br />
company by way of fees or other remuneration for their services to such<br />
of the directors as were in default.”<br />
Article 76 of the Articles of Association :
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“76. All General Meeting other than Annual General Meeting shall<br />
be called Extraordinary General Meeting. The Board may,<br />
whenever it thinks fit, call an Extraordinary Meeting. The Board<br />
shall also call an Extraordinary General Meeting on the requisition<br />
of members of the Company in accordance with all the provisions<br />
of Section 169 of the Act, which shall apply to this Company.”<br />
(d) The provisions of section 397 can not be attracted to passing of<br />
the resolution permitted under section 31 and mandated under section 169 of<br />
the Companies Act, for altering or deleting articles in public interest. Merely<br />
because some of the requisitionists had withdrawn their consent or ceased to be<br />
members the requisition does not become invalid and more particularly by<br />
virtue of the letter dated 19 th May 2012 addressed by respondent no.6 to the<br />
first respondent company. The learned senior counsel placed reliance upon<br />
paragaph 2.1 from Ramaiya's Guide to Companies Act, 1956, Part II, 17 th<br />
Edition at page 1982 which reads thus :-<br />
Once a valid requisition has been submitted, the directors can act<br />
upon it and it remains their obligation to call the meeting even if<br />
some of the requisitionists have withdrawn their consent or<br />
ceased to be members.<br />
75. Mr.Samdhani submitted that the decision of the Chairman is subject to<br />
judicial scrutiny and would be subject matter of section 397 and 398 petition.<br />
Such decision is not conclusive or unchallengable.<br />
76. The Supreme Court in the case of Shri. V.S. Krishnan (supra) has called<br />
out the situation in which the oppression attracting section 357 would be
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made out. The Supreme Court in the said judgment has held thus :<br />
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“10. In a number of judgments, this Court considered in extenso the<br />
scope of Sections 397 and 398. The following judgments could be usefully<br />
referred to:<br />
(a) Needle Industries (India) Ltd. and Ors. v. MANU/SC/0050/1981<br />
: Needle Industries Newey (India) Holding Ltd. and Ors.<br />
[1981]3SCR698 .<br />
(b) M.S. Madhusoodhanan and Anr. v. MANU/SC/0553/2003 :<br />
Kerala Kaumudi (P) Ltd. and Ors. (2004)9SCC204 .<br />
(c) Dale and Carrington Investment (P) Ltd. and Anr. v.<br />
MANU/SC/0748/2004 : P.K. Prathapan and Ors. (2005)1SCC212 .<br />
(d) Sangramsinh P. Gaekwad and Ors. v. MANU/SC/0052/2005 :<br />
Shantadevi P. Gaekwad (Dead) Through L.Rs. and Ors.<br />
AIR2005SC809<br />
(e) Kamal Kumar Dutta and Anr. v. MANU/SC/8408/2006 : Ruby<br />
General Hospital Ltd. and Ors. 2006(7)SCALE668 .<br />
From the above decisions, it is clear that oppression would be made out:<br />
(a) Where the conduct is harsh, burdensome and wrong.<br />
(b) Where the conduct is mala fide and is for a collateral purpose<br />
where although the ultimate objective may be in the interest of the<br />
company, the immediate purpose would result in an advantage for<br />
some shareholders vis-a-vis the others.<br />
(c) The action is against probity and good conduct.<br />
(d) The oppressive act complained of may be fully permissible under<br />
law but may yet be oppressive and, therefore, the test as to whether<br />
an action is oppressive or not is not based on whether it is legally<br />
permissible or not since even if legally permissible, if the action is<br />
otherwise against probity, good conduct or is burdensome, harsh or<br />
wrong or is mala fide or for a collateral purpose, it would amount to<br />
oppression under Sections 397 and 398.<br />
(e) Once conduct is found to be oppressive under Sections 397 and
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398, the discretionary power given to the Company Law Board<br />
under Section 402 to set right, remedy or put an end to such<br />
oppression is very wide.<br />
(f) As to what are facts which would give rise to or constitute<br />
oppression is basically a question of fact and, therefore, whether an<br />
act is oppressive or not is fundamentally/basically a question of<br />
fact.”<br />
77. In my view, in the proceedings filed under Sections 397 and 398, the<br />
petitioners have to show that there has been some sort of oppression on the part<br />
of majority shareholders of the company on the minority shareholders. In my<br />
view, an isolated act or incident is not oppressive. Petitioner has to prove the<br />
act of oppression which must continue upto the date of filing of the petition.<br />
The petitioner has to prove that oppression was of minority shareholders by<br />
majority shareholders and that facts exist which would justify winding up of<br />
the company on the ground that it would be just and equitable to do so but in<br />
the facts and circumstances, to wind up the company would unfairly prejudice<br />
the petitioners.<br />
78. The expression “public interest” has not been defined under the<br />
provisions of the Companies Act, 1956. It may have to be distinguished from<br />
self interest of individual or sectional or class or group interest, as<br />
circumstances may indicate. What is required is that it should not be such as to<br />
be prejudicial to public interest i.e. common ground or general welfare of the<br />
community.
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79. Mr.A.Ramaiya in his work “Guide to the Companies Act” has<br />
considered the Dictionary Of Sociology on this aspect and says “it is<br />
essentially anything is said to the public interest where it is or can be made to<br />
appear to be contributive to the general welfare rather than to the special<br />
privileges of a class, group or individual”. In my view, in the absence of any<br />
proof that affairs of the company are being conducted in a manner prejudicial<br />
to the public interest or in the manner oppressive to the petitioners, the CLB<br />
would not have jurisdiction to pass an order under Section 397. Oppression or<br />
management is not enough. The act of oppression must have continued or<br />
existed at the time of application filed under section 397 of the Act. In my<br />
view, past acts which have come to an end would not attract section 397. The<br />
averments in the petition filed by the appellant shows that the same is basically<br />
filed on the basis of alleged past oppressive conduct on the part of the majority<br />
shareholders which have been already considered in the earlier proceedings<br />
filed in this case and have been dealt with and negatived.<br />
80. In the order and judgement delivered by this Court on 14 th June, 2011, a<br />
finding is rendered that there was no act of oppression on the part of the<br />
majority shareholders on the minority shareholders. Question now arises for<br />
the consideration of this court in this proceeding is that by the requisitioning<br />
EOGM by the management of the 1 st respondent company and by passing a<br />
resolution to delete Article 57 from the Articles of Association would amount
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to an act of oppression and would attract section 397 read with section 402 of<br />
the Companies Act, 1956 which shall be dealt with by this court in the later<br />
part of this order.<br />
81. Both parties have addressed this court at length on the issue as to<br />
whether order dated 14 th November, 2008 passed by Shri Justice<br />
A.M.Khanwilkar in Company Petition No. 77 of 1990 would apply to the<br />
present appellant and would operate in rem and also on the issue as to whether<br />
order and judgment dated 14 th June, 2011 in Company Appeal No. 24 of 2010<br />
would be executable and binding on the parties in the absence of stay of the<br />
said judgment by the Supreme Court in the pending Special Leave Petition<br />
filed by the appellants. Both parties have also addressed this court on the<br />
effect of the pendency of Special Leave Petition filed by the appellants on the<br />
present proceedings. The submission of the respondent is that admittedly, the<br />
judgment delivered by this court on 14 th June, 2011 in Company Appeal No. 24<br />
of 2010 has not been stayed and was not even applied for by the appellant<br />
whereas the submission of the appellant is that the issues arises in the present<br />
appeal is subjudice before the Supreme Court in the pending Special Leave<br />
Petition and thus order and judgment delivered by this court on 14 th June, 2011<br />
cannot be relied upon by the respondents. The submission of the respondent is<br />
that independently of pendency of the matter in the Supreme Court, this court<br />
can decide the issue raised in the present appeal on the basis of the pleadings
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and documents placed on record by both parties and this court can come to the<br />
conclusion as to whether majority shareholders have committed any act of any<br />
oppression on the minority shareholders in requisitioning the meeting and<br />
passing a resolution for deletion of the Article 57 from the Articles of<br />
Association and pass resolution thereon.<br />
82. I shall, therefore, first decide whether on the basis of the pleadings and<br />
documents produced by both the parties on record before the CLB whether<br />
CLB was justified in recording the finding that no act of oppression was<br />
committed by the majority shareholders on minority shareholders under section<br />
397 of the Companies Act, 1956 or not. In that context, I shall also decide that<br />
if the order and judgment dated 14 th June, 2011 passed by this court holding<br />
that Article 57 is void and is of no effect, whether an act of convening EOGM<br />
and resolution passed therein pursuant to the requisition of a meeting at the<br />
instance of the members for the purpose of deleting Article 57 and to give a<br />
effect to the order passed by this Court would amount to an act of oppression<br />
or not. I shall also decide the issue as to whether in case of the respondent no.1<br />
being a public limited company, Article 57 in the Articles of Association was<br />
redundant, dead and was unenforceable considering the effect of Section 9 of<br />
the Companies Act.<br />
83. It is not in dispute that the 1 st respondent company was incorporated on
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6 th March, 1963 under the Companies Act, 1956, as private limited company.<br />
On 17 th August, 1988, the 1 st respondent became the deemed public limited<br />
company pursuant to Section 43(A) of the Companies Act, 1956. At the<br />
meeting of the members of the 1 st respondent held on 5 th May, 2001, a special<br />
resolution was proposed to insert an additional clause (d) in its Articles of<br />
Association pursuant to the Companies (Amendment) Act, 2000. On and from<br />
December 13, 2000 when the Companies (Amendment) Act 53 of 2000 came<br />
into effect, the concept of the deemed public limited company was done away.<br />
The 1 st respondent company which was initially incorporated a private limited<br />
company became a deemed company by virtue of section 43(A) of the<br />
Companies Act. 1 st respondent company had accordingly issued notice of<br />
EOGM on 2 nd April, 2001 seeking to amend Article 3 of the Articles of<br />
Association and also to change its name from Gharda Chemicals Ltd. to<br />
Gharda Chemicals Pvt. Ltd. and thereby revert to be a private limited company.<br />
In the said meeting, the appellant and other members of Kavasmaneck Rebello<br />
group collectively held 32% of the shareholding of the 1 st respondent defeated<br />
the said resolution. As a consequence thereof on and from 5 th May, 2001, the<br />
1 st respondent company became and continued to be a public limited company.<br />
As a result thereof, all the statutory filing of the 1 st respondent have been made<br />
on the basis of the fact that it is a public company. It is not in dispute that the<br />
1 st respondent has more than 50 members and has more than three directors as<br />
is obligatory under the Companies Act, 1956 in case of a public limited
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company. The 1 st respondent has also accepted the deposit in the form of fixed<br />
deposit from the public and is public limited company for all purposes. It is<br />
not in dispute that the appointment of the managing director of the 1 st<br />
respondent was also after following the provisions of section 269 of the<br />
Companies Act as applicable to the public limited company. The requisite<br />
approval of the State Government has been sought and obtained which are not<br />
required in case of the private limited company. The 1 st respondent has done<br />
various acts which are applicable to a public limited company and not to<br />
private limited companies.<br />
84. On 17 th May, 2001 and 20 th May, 2001 respectively the 1 st respondent<br />
company received from its members Mr.B.E.Daruwalla and Mr.S.G.Gandhi<br />
expressing their desire to transfer their shares in the first respondent which<br />
transfer notice came to be circulated amongst all the members under Article 57<br />
of the Articles of Association by the 1 st respondent. In response to the said<br />
letters, the appellant no.2 by his letter dated 6 th June, 2001 stated that he was<br />
unable to understand as to how the company continue to circulate transfer<br />
notice under Article 57 especially in view of the recent turn of events being a<br />
non passing of special resolution for amendment of articles. Appellant No.2<br />
recorded his objection that he would be ignoring the transfer notice if any<br />
circulated by the 1 st respondent under Article 57 of the Articles of Association.<br />
The appellant no.2 applied for transfer of some of his shares as a result where
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the strength of members of 1 st respondent exceeded 50 and increased to 54.<br />
85. In my view, this conduct on the part of the appellant and defeating the<br />
resolution which was proposed by the 1 st respondent company in EOGM held<br />
on 5 th May, 2001 and thereafter by taking a stand that notice inviting objection<br />
from the appellant for transfer of shares by two of the members under Article<br />
57 was unwarranted and any such notice given in future would be ignored, one<br />
of the appellant having transferred some of his shares in favour of his family<br />
members in the 1 st respondent company and thereby membership of the 1 st<br />
respondent having exceeded 50 and thereby taking advantage of 1 st respondent<br />
having become a public limited company, in my view, the appellants are<br />
estopped from challenging the status of the 1 st respondent company as public<br />
limited company. The appellants have acted upon and have proceeded on the<br />
footing that the 1 st respondent company has become public limited company.<br />
In my view 1 st respondent is a public limited company.<br />
86. The CLB in para 40 of the impugned order has rendered a finding that<br />
passing of the resolution by the shareholders of the company in exercise of<br />
their democratic rights in a EOGM requisitioned by the shareholders of the<br />
company does not in any manner amount to oppression or mismanagement and<br />
cannot form a subject matter of a petition under Section 397/398 of the<br />
Companies Act and thus there is no reason to interfere with the internal
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democracy of the company. In my view the conclusion drawn by the CLB that<br />
passing of a resolution by the shareholders of the company in EOGM did not<br />
in any manner amount to oppression or management and cannot be subject<br />
matter of the petition under section 397/398 of the Companies Act cannot be<br />
interfered with. In my view, the decision was taken by the majority of the<br />
share holders and the said decision was rightly upheld by the CLB keeping in<br />
mind principles of corporate democracy. In my view, the CLB has rightly<br />
vacated the ad-interim order dated 21 st May, 2012. In my view, the<br />
respondents have not committed any act as alleged by the appellants which can<br />
be called as an act of oppression by the majority shareholders on minority<br />
shareholders.<br />
87. The question that now arises for consideration of this court is that in<br />
view of the 1 st Respondent Company being the public limited company,<br />
whether Article 57 of the Articles of Association which was inserted in the<br />
Articles of Association giving right to preemption to the members when the<br />
status of the company was private limited company could be continued in the<br />
Articles of Association or the same is inconsistent and not inconformity with<br />
the provisions of the Companies Act, 1956.<br />
88. The question that arises for consideration of this court is whether there<br />
can be any restriction on transfer of shares of the first respondent. In this
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regard reference to Section 82 of the Companies Act, 1956 would be relevant<br />
which reads thus :-<br />
Section 82 in The Companies Act, 1956<br />
82. Nature of shares. The shares or other interest<br />
of any member in a company shall be movable<br />
property, transferable in the manner provided by<br />
the articles of the company.<br />
89. On the plain reading of Section 82, it is clear that shares in the company<br />
are moveable property transferable in the manner provided in the Articles. In<br />
my view in case of a public limited company, articles cannot impose and<br />
onerous terms which would affect substance of right to transfer shares by<br />
applying right of preemption. The appellants had also understood the effect of<br />
the status of the 1 st respondent company being a public limited company and<br />
had rightly opposed the consent sought by the company in the year 2001 for<br />
transferring shares applied for by few other members of the company. Under<br />
Section 111 of the Companies Act and more particularly Section 111(14) which<br />
was inserted w.e.f. 20 th September, 1995, it was clarified that Section 111<br />
applies to the company which is a private company and include the private<br />
limited which has became public limited by virtue of Section 43(A) of the<br />
Companies Act. On reading of Section 111 read with Section 43(A) of the
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Companies Act, it is clear that Section 111 is not applicable to the 1 st<br />
respondent. Section 111A deals with register of transfer and sub-section (1) of<br />
Section 111A provides that the word “company” unless the context otherwise<br />
requires means a company other than a company referred to in sub-section 14<br />
of section 111 of the Companies Act and immediately by sub-section 2 clarifies<br />
that subject to the provisions of section 111A the shares or debentures and any<br />
interest therein of a company shall be freely transferable. In my view, article<br />
57 which provides right of preemption became redundant and infructuous in<br />
view of the change of status of 1 st respondent company as public limited<br />
company. In my view, 1 st respondent company could no longer be governed by<br />
Article 57 in view of the change of status. The 1 st respondent company is thus<br />
right in passing resolution to delete such article which had become redundant,<br />
infructuous and dead in view of the change in status of the 1 st respondent<br />
company in conformity with Section 9 of the Companies Act which reads<br />
thus :-<br />
9. Act to override memorandum, articles,<br />
etc.- Save as otherwise expressly provided in the<br />
Act -<br />
(a) the provisions of this Act shall have effect<br />
notwithstanding anything to the contrary contained<br />
in the memorandum or articles of a company, or in<br />
any agreement executed by it, or in any resolution
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passed by the company in general meeting or by its<br />
Board of directors, whether the same be registered,<br />
executed or passed, as the case may be, before or<br />
after the commencement of this Act; and<br />
(b) any provision contained in the<br />
memorandum, articles, agreement or resolution<br />
aforesaid shall, to the extent to which it is<br />
repugnant to the provisions of this Act, become or<br />
be void, as the case may be.<br />
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90. In my view the 1 st respondent company has rightly exercised its right for<br />
alteration of Articles under Section 31 of the Act by following procedure under<br />
Section 169 read with Articles of Association. In my view, continuity of<br />
Article 57 in the Articles of Association after 1 st respondent having become a<br />
public limited company would be inconsistent with the provisions of<br />
Companies Act 1956. Under Section 9 of the Companies Act, the provision of<br />
the act shall have effect notwithstanding anything to the contrary contained in<br />
the Articles of Association of such company and any provisions in such articles<br />
terms or agreement to the extent which is to the provisions of the Act become<br />
void. In my view Article 57 thus being inconsistent contrary to and repugnant<br />
to the provisions of the Companies Act became void, redundant, dead and thus<br />
has been rightly deleted from the articles of association with a view to make
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articles of association consistent with the provisions of Companies Act, 1956.<br />
In my view steps taken by the 1 st respondent company to impleadment the<br />
mandate provided under Section 9 of the Act by deleting, such articles which<br />
was redundant and repugnant to the provisions of the Companies Act cannot<br />
amount to oppression under Section 397 of the Companies Act. In my view<br />
any legal steps taken by the company to follow provisions of law cannot<br />
amount to oppression. In my view, on the contrary by making the shares freely<br />
transferable, such act on the part of the 1 st respondent would be in the public<br />
interest and not against it. In my view, action taken by the 1 st respondent and<br />
majority of the shareholders in passing a resolution to delete Article 57 was a<br />
simple corporate democracy and is in compliance with law. Such powers<br />
given to the Board of Directors to transfer shares of the company by allowing<br />
shareholders to transfer shares and market value is undoubtedly subject to the<br />
powers of the board of the directors to either register or refuse to register the<br />
transfer in accordance with law.<br />
91. In my view, action on the part of the appellant in opposing the resolution<br />
passed by the 1 st respondent company to delete Article 57 cannot be construed<br />
in public interest. The application filed by the appellants under section 397 of<br />
the Companies Act thus does not satisfy the conditions for attraction of<br />
Sections 397 and 398 of the Companies Act in this case. In my view<br />
requisitioning of a meeting by the board of the 1 st respondent company was a
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ministerial act of convening EOGM for the purpose of deleting Article 57 so as<br />
to comply with the provisions of law and to delete the articles which has<br />
become redundant and void and does not amount to act of oppression under<br />
section 397 of the Act. In my view, deletion of Article 57 and allowing free<br />
transferability of shares is for the benefit of all the shareholders of first<br />
respondent company and in the interest of justice and public interest.<br />
92. In my view, the appellants have failed to prove that conduct on the part<br />
of the majority shareholders is harsh, burdensome, wrong, malafide, is for<br />
collateral purpose, advantageous to some of the shareholders vis-a-vis others,<br />
against probity and good conduct. CLB can exercise discretionary powers<br />
under Section 402 read with Section 397 of the Companies Act to set right,<br />
remedy or put an end to such oppression only if the criteria laid aforesaid are<br />
satisfied. Thus in my view, petition filed by the petitioner under Sections 397,<br />
398 read with Section 402 itself is misconceived and not maintainable.<br />
93. In the alternate to the submissions referred in this order, the learned<br />
senior counsel for respondent no.2 submits that the judgment and order dated<br />
14 th May, 2010 passed by CLB in Company Petition No. 132 of 2009 is upheld<br />
by the judgment and order dated 14 th June, 2011 passed by this court in<br />
Company Appeal (24 of 2010) after considering all the submissions and<br />
contentions on behalf of the appellants and holding that Article 57 is void
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94. The CLB has recorded a finding of fact and has followed the judgment<br />
of this court. It is submitted that the order and judgment delivered by this court<br />
on 14 th June, 2011 has not been stayed by the Supreme court. The judgment<br />
of this court was thus rightly followed by the CLB as the same is binding not<br />
only on the parties, CLB but also on single Judge of this Court. It is submitted<br />
that order passed by this Court on 14.6.2011 in Company Appeal (24 of 2010)<br />
operates in rem. The respondents also placed reliance upon the following<br />
paragraphs of the order and judgment delivered by this court on 14 th June, 2011<br />
in Company Appeal No. 24 of 2010 which reads thus :<br />
78] Mr.Samdhani, learned counsel appearing for<br />
appellants submits that the impugned order is illegal and deserves<br />
to be set aside. The conclusions are unsustainable and are contrary<br />
to law. The CLB has failed to notice certain vital provisions and its<br />
conclusions are, therefore, vitiated.<br />
79) He submits that there is no fixed statutory definition for<br />
“oppression”. It can take various forms. Whether or not there is<br />
oppression is a question of fact. Actions that may be perfectly legal<br />
have also been held to be oppressive. Acts or omissions that are<br />
burdensome, harsh and wrongful are recognised to be “oppressive”.<br />
Actions that are lacking in probity and fair dealing in the affairs of<br />
a company to the prejudice of some portions of the members are all<br />
held to be oppressive. Even a single act of oppression can be subject<br />
matter of a company petition as Sections 397 and 398 are a<br />
complete code in themselves. The Court has wide and unlimited<br />
powers and can pass orders to prevent oppression of the minority.<br />
80] It is further submitted that GCL is a family company which<br />
has been incorporated and continued by the Kavasmaneck/Gharda<br />
families on the basis of the relations existing between them and on
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the basis of the mutual trust and confidence. There exists a special<br />
underlying obligation between the members where in the event one<br />
partner chooses to sell his share, the same should be first offered to<br />
the others so that any outsider cannot be permitted to enter the<br />
venture without the consent of the other partners. In fact, GCL is a<br />
glorified partnership and the principles of partnership would apply.<br />
81] It is submitted that Articles of Association constitute a<br />
contract not only between the company and its members but also<br />
amongst the members inter se. The right of preemption contained in<br />
the Articles is a solemn contract not only between the shareholders<br />
and the company, but also between the members inter se. In fact, the<br />
right of preemption that has been enshrined in the articles is merely<br />
a reiteration of the earlier understanding whereby a stranger<br />
cannot be inducted in the partnership (which was taken over by<br />
GCL) without the consent of the other partners and forms the<br />
fundamental understanding on the basis on which the families got<br />
together to constitute and continue GCL.<br />
82] It is further submitted that breach of Articles would be ultra<br />
vires and breach of the right of preemption constitutes an act of<br />
oppression. To that effect, taking away or cancelling a right of<br />
preemption will also amount to oppression and will be actionable.<br />
What cannot be done directly cannot be permitted to be done<br />
indirectly. The right of preemption is a vested right of a shareholder<br />
and cannot be taken away or cancelled without his consent. The<br />
power to amend articles cannot be used to oppress the minority and<br />
or take away their vested rights.<br />
83] Further it is submitted by Mr.Samdani that the notice and<br />
explanatory statement dated 16th October 2010 are misleading and<br />
are not in conformity with section 173 of the Companies Act, 1956.<br />
The material facts of (i) the pendency of the Appeal No.24 of 2010,<br />
(ii) the said appeal having been admitted, (iii) this Court having<br />
granted an injunction not to violate Article 57, (iv) the questions<br />
formulated have all been omitted-giving a totally misleading<br />
picture. It is further stated that compliance of section 173 is<br />
mandatory. A meeting convened on the basis of a notice which is not<br />
compliant with section 173 will be bad in law and so will the<br />
resolutions passed thereat.<br />
84] He submits that the questions of law, therefore, as framed arise<br />
for determination and they can be broadly indicated thus:
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(a) Whether the 2000 amendment is prospective which states<br />
that section 43A will not apply “on and after” its introduction is<br />
prospective and companies that had already acquired such status<br />
earlier would continue to retain such status?<br />
(b) Assuming that the 2000 amendment is construed as a<br />
'repeal' of section 43A, whether under section 6 of the General<br />
Clauses Act, such repeal would not disturb the status of companies<br />
that had already acquired the status of deemed public companies?<br />
(c) If a company, which was incorporated as a private<br />
company prior to the 2000 amendment (a) does not alter its article<br />
by introducing clause (d) of section 3(1)(iii); (b) or by fiction of law<br />
is treated as a public company, it does not loose its character/fabric<br />
of a private company?<br />
(d) Whether a deemed public company or an unlisted public<br />
company can validly provide for a right of preemption in its<br />
Articles?<br />
(e) Section 111A is the only provision that talks of free<br />
transferability. In view of section 111A (1), read with section<br />
111(14), the provisions of section 111A do not apply to a private<br />
company which had become a public company by virtue of section<br />
43A. Accordingly, section 111A is not applicable to GCL. Thus,<br />
there is no provision that provides for free transferability of shares<br />
of GCL.<br />
(f) Alternatively, there is nothing in the Companies Act that<br />
prohibits a 'public company' from providing any of the matters set<br />
out in sections (a) to (d) of Section 3(1)(iii). Thus, the Articles of a<br />
public company can contain a right of preemption.<br />
(g) Section 82 of the Companies Act, 1956provides that the<br />
shares are movable property transferable in the manner provided<br />
in the Articles. The Articles of GCL continue to provide for<br />
preemption and Section 9 thereof has no applicability. Whether the<br />
attempt by the majority shareholders to sell the shares in breach of<br />
the right of preemption constitutes oppression; and<br />
(h) whether taking away or cancelling a right of preemption<br />
by amending the Articles will also amount to oppression and will be<br />
actionable.<br />
85] Mr.Samdani submits that if the judgement of the Company<br />
Law Board is perused carefully, it would be apparent that there is<br />
no finding rendered on sections 111A(1) read with section 111A(14),<br />
although a specific contention is raised by the appellants and which<br />
is recorded. The preemptive right is recognised. In these
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circumstances, the finding recorded is vitiated by non application of<br />
mind. The conclusion that there cannot be any reversal of Status<br />
from public limited to private limited company and, therefore,<br />
Article 57 must yield and give way to section 111A of the Companies<br />
Act is not accurate, because assuming that if GCL is a public<br />
limited company it is a unlisted public company. The shares are not<br />
listed on the stock exchange. Such a company can always have a<br />
right of preemption. Upon this vital issue and question, no finding is<br />
rendered by the Board. There is no finding on question of<br />
oppression as well. Mr.Samdani submits that it is also to be borne in<br />
mind that the dispute is between family members. The principles of<br />
partnership apply to a family concern/ company. It cannot also be<br />
forgotten that initial partnership and later on becoming a company<br />
is only an arrangement to take over business of partners. The initial<br />
partners are appointed as Founder Directors. Mr.Samdani submits<br />
that ground of oppression and mismanagement of minority and the<br />
background for filing the petition cannot be lost sight of by this<br />
Court. Mr.Samdani then contended that section 43A of the<br />
Companies Act, 1956 should have been properly construed and<br />
interpreted. He invites my attention to section 43A(2) and submits<br />
that this provision ceases to apply after 13th December 2000.<br />
Inviting my attention to section 82, 111(14) and 111A(1), he submits<br />
that these provisions have no application to a private company or to<br />
a company which has become public company. Section 111A(2) is<br />
also not applicable and in these circumstances, the impugned order<br />
is patently erroneous and unsustainable and should be set aside.<br />
Mr.Samdani has taken me through the paras of the company petition<br />
and he read out almost all affidavits and highlighted each of the<br />
Acts which are terms as mismanagement and oppression of<br />
minority. He emphasised the allegations of dividend squeezing and<br />
unjust enrichment. He also invited my attention to the allegations of<br />
diversion of funds by the majority to trusts and educational<br />
institutions controlled by Dr.Gharda. He also referred to some<br />
documents on record and particularly the report of Earnest Young<br />
and Arthur D'Little dated 9th November 2009. It is his contention<br />
that on the basis of available record, the company petition should<br />
not have been dismissed and therefore, this appeal deserves to be<br />
allowed.<br />
86] On the other hand, Mr. V.A.Bobde, learned Senior Counsel<br />
appearing on behalf of respondent No.2 submits that the company<br />
petition filed before the Company Law Board alleged breach of<br />
preemptive rights, adoption of unfair dividend squeezing and
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respondent No.2 unjustly enriching himself. He submits that first<br />
two grounds relate to oppression and third is mismanagement. He<br />
submits that the presumption on which the allegations in the petition<br />
proceed is that the respondent No.1 is a glorified partnership and,<br />
therefore, the appellants continue to have preemptive rights under<br />
Article 57. Further, the company is not a public limited company<br />
under section 3(1)(iv) but a deemed public company under section<br />
43A(1)(A) and, therefore, section 111A(2) is inapplicable. In other<br />
words, the shares are not easily transferrable.<br />
87] Mr.Bobde submits that first two grounds and contentions<br />
based thereon are not available in view of the unconditional<br />
withdrawal of the appellants from the Company Petition No.77 of<br />
1990. That company petition contained all these grounds and<br />
allegations and once the appellants have withdrawn from the same<br />
unconditionally, they cannot seek to raise them in the present<br />
proceedings and particularly when they filed a petition before CLB<br />
without any opportunity being granted by this Court. Mr.Bobde<br />
submits that even the effect of final judgement dated 14th November<br />
2008 in Company Petition No.77 of 1990 will conclude this issue. In<br />
his submission, Company Petition No.77 of 1990 was pursued by<br />
remaining petitioners. The findings of the learned Single Judge in<br />
the judgement in Company Petition No.77 of 1990 bind the<br />
appellants. It is held by the learned Judge that the present appellant<br />
consciously acquiesced in the acts complained of and this can be<br />
inferred by their unconditional withdrawal from the proceedings on<br />
8th September 2005. Their conscious acts relate back to the petition<br />
in relation to the grievances made by them. Further according to<br />
Mr.Bobde, even the act of unjust enrichment of respondent No.2 as<br />
alleged was taken up and raised in Amendment Application (CA 403<br />
of 2005), which Company Application was moved in Company<br />
Petition No.77 of 1990 on 18th March 2005. Even that issue cannot<br />
be raised because of unconditional withdrawal of the appellants<br />
from the proceedings on 8th September 2005. Mr.Bobde invites my<br />
attention to Order XXIII of CPC and submits that this provision<br />
must be read into the Companies Act, 1956 and the Company Court<br />
Rules, 1959 and in that behalf relies upon Rules 6 and 88 of the said<br />
Rules. In these circumstances and when those petitioners who did<br />
not withdraw from proceedings gave up ground of mismanagement<br />
and confined their arguments to the ground of oppression alone,<br />
then all the more that issue now cannot be raised and agitated by<br />
the appellants. Mr.Bobde invites my attention to the findings of the<br />
learned Single Judge in the order dated 14th November 2008.
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88] Mr.Bobde then submits that the main issue is about free<br />
transferability of shares. That issue, for being answered must<br />
necessarily require a finding and conclusion as to what is the Status<br />
of GCL i.e. Respondent No.1. Mr.Bobde submits that this Court has<br />
held that as a result of special resolution moved in EOGM dated 5 th<br />
May 2001 having been defeated, GCL has become a public limited<br />
company. Once it acquires that status the restriction on the right of<br />
transfer of shares applicable to a private limited company would<br />
not apply and it would be open to the present appellants to sell the<br />
shares to any outsider as per the price finalised with them inter se.<br />
Mr.Bobde submits that the effect of the judgement in the company<br />
petition must be considered. However, he submits that respondent<br />
No.2 is not running away from answering this issue and core<br />
question.<br />
89] In this behalf, Mr.Bobde submits that the two events of vital<br />
importance occurred in 2001 which, taken even singly, made the<br />
company cease to be a private company as defined by Section 3(iii)<br />
and to become a public company as defined by section 3(1)(iv). The<br />
first event was that notice was given on 2nd April 2001 for a<br />
meeting on 5th May 2001 for the purpose of incorporating the<br />
requirements of clause (d) of section 3(1)(iii) which was added in<br />
2000 and for changing the name to 'Private Ltd'. The Appellants<br />
and their supporters opposed the resolution and the same was<br />
defeated. They voted to make the company, which had been a<br />
deemed public company, into a public company. Thus, the EOGM of<br />
the company decided that the Articles shall not contain the<br />
provision required by clause (d) of Section 3(1)(iii). Thus, ipso facto<br />
and ipso jure, the company ceased to be 'private company' and<br />
became, by operation of law a public company. This factual and<br />
legal position is, in effect, admitted by the appellant No.2 in his<br />
letter dated 6.6.2001 wherein, in response to transfer notices issued<br />
as a result of transfer requests from Mr.Daruwalla and Mr.Gandhi,<br />
he refers to 'the recent turn of events' (i.e the defeat of resolution of<br />
5.5.2001) and says he doesn't understand why transfer notices are<br />
being issued to members and that he would be ignoring such notices<br />
under Article 57. Thus, appellant No.2 who was chiefly instrumental<br />
in the defeat of the resolution of 5.5.2001, fully understood that the<br />
company was now a public company and Article 57 had become<br />
inoperative and void by reason of inconsistency between the Act and<br />
the Articles as provided in section 9 of the Companies Act, 1956.
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90] It is further submitted by Mr.Bobde that in 2005 before the<br />
present appellants withdrew from C.P.No.77/1990, they filed an<br />
amendment application being C.A.No.403/2005. Therein, they<br />
proceeded on the basis that the company is a public company and<br />
averred, inter-alia that “the amendment to the terms of appointment<br />
of second respondent whereby the payment of remuneration is<br />
altered/enhanced is also illegal and violative of Section 268 of the<br />
Companies Act, 1956.” It is clear that section 268 applies only to<br />
public companies. Hence, the appellants herein had, in effect,<br />
admitted that the company is a public company.<br />
91] It is submitted that the second event was that appellant No.2<br />
applied on 30.10.2001 for transfer of five shares held by him. The<br />
company registered the transfer on 31.12.2001 as a result of which<br />
the number of members became 54. Section 3(1)(iii)(b) requires that<br />
a private company cannot have more than 50 members. Hence, on<br />
31.12.2001, yet another requirement of the law for being a private<br />
company disappeared.<br />
92] He further submitted that in the light of the above<br />
indisputable factual and legal position that the company was no<br />
more a private company which became a deemed public company<br />
under section 43A, after 13.12.2000 and this position being<br />
reinforced and made permanent from 5.5.2001 when the resolution<br />
to make the company a private company was defeated, sections 3(1)<br />
(iv) and 111-A (2) have operated with full force and made the shares<br />
of the respondent No.1 public company freely transferable.<br />
109] Both sides also made a reference to section 9 to point out that<br />
the Companies Act, 1956 would over ride the memorandum and<br />
Articles of Association even if there is anything contrary contained<br />
in the same. Thus, the argument is that by sub-clause (b) of section<br />
9 any provision contained in the memorandum/Articles/agreement<br />
or resolution to the extent to which it is repugnant to the provisions<br />
of this Act become void as the case may be.<br />
110] Then comes section 43 and 43A which read thus:<br />
“43. Where the articles of a company include the provisions which,<br />
under clause (iii) of sub-section (1) of section 3 are required to be<br />
included in the Articles of a Company in order to constitute it a<br />
private company, but default is made in complying with any of those<br />
provisions, the company shall cease to be entitled to the privileges<br />
and exemptions conferred on private companies by or under this
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Act, and this Act shall apply to the company as if it were not a<br />
private company:”<br />
Provided that the Central Government on being satisfied that the<br />
failure to comply with the conditions was accidental or due to<br />
inadvertence or to some other sufficient cause, or that on other<br />
grounds it is just and equitable to grant relief, may, on the<br />
application of the company or any other person interested and on<br />
such terms and conditions as seems to the Central Government just<br />
and expedient, order that the company be relieved from such<br />
consequences as aforesaid.”<br />
“43A. (1) Save as otherwise provided in this section, where not less<br />
than twenty five per cent of the paid up share capital of a private<br />
company having a share capital, is held by one or more bodies<br />
corporate, the private company shall -<br />
(a) on and from the date on which the aforesaid percentage is first<br />
held by such body or bodies corporate, or<br />
(b) where the aforesaid percentage has been first so held before the<br />
commencement of the Companies (Amendment) Act, 1960 on and<br />
from the expiry of the period of three months from the date of such<br />
commencement unless within that period the aforesaid percentage is<br />
reduced below twenty five percent of the paid up share capital of the<br />
private company,<br />
become by virtue of this section a public company,”<br />
Provided that .....<br />
Provided further that .....<br />
(a) ....<br />
(i) ...<br />
(ii) ....<br />
(iii) ....<br />
(b) ....<br />
(i) ...<br />
(ii) ....<br />
(iii) ....<br />
Explanation:- .....<br />
(1A) ......<br />
Provided that .....<br />
(1B) ......<br />
(a) .....<br />
(b) ......<br />
Provided that ....<br />
(1C) Where, after the commencement of the Companies
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(Amendment) Act, 1988 a private company accepts, after an<br />
invitation is made by an advertisement, or renews, deposits from the<br />
public, other than its members, directors or their relatives, such<br />
private company shall, on and from the date on which such<br />
acceptance or renewal as the case may be, is first made after such<br />
commencement, become a public company and thereupon all the<br />
provisions of this section shall apply thereto;<br />
Provided that even after the private company has so become a<br />
public company, its articles of association may include provisions<br />
relating to the matters specified in clause (iii) of sub-section (1) of<br />
section 3 and the number of its members may be, or may at any time<br />
be, reduced below seven;<br />
(2) Within three months from the date on which a private<br />
company becomes a public company by virtue of this section, the<br />
company shall inform the Registrar that it has become a public<br />
company as aforesaid, and thereupon the Registrar shall delete the<br />
word “Private” before the word “Limited” in the name of the<br />
company upon the register and shall also make the necessary<br />
alterations in the certificate of incorporation issued to the company<br />
and in its memorandum of association.<br />
(2A) Where a public company referred to in subsection (2) becomes<br />
a private company on or after the commencement of the Companies<br />
(Amendment) Act, 2000, such company shall inform the Registrar<br />
that it has become a private company and thereupon the Registrar<br />
shall substitute the word “private company” for the word “public<br />
company” in the name of the company upon the register and shall<br />
also make the necessary alterations in the certificate of<br />
incorporation issued to the company and in its memorandum of<br />
association within four weeks from the date of application made by<br />
the company”<br />
(3) ....<br />
(4) ....<br />
(5) ....<br />
(6)& (7) omitted by Act 31 of 1988<br />
(8) ....<br />
(a) ....<br />
(b) .....<br />
(c) .....<br />
(d) .....<br />
(9) .......<br />
(a) ......<br />
(i) .....
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(ii) ......<br />
(iii) .......<br />
(b) ........<br />
(c) ........<br />
(10) .......<br />
(11) Nothing contained in this section, except subsection (2A), shall<br />
apply on and after the commencement of the Companies<br />
(Amendment) Act, 2000.”<br />
111] A perusal of these sections would indicate that they deal with<br />
private companies and they appear in Part II of the Companies Act.<br />
Prior thereto is Sec.26 which appears below the sub-heading<br />
“Articles of Association.” A perusal of Sec.26 would indicate that<br />
there may, in the case of a public company limited by shares, and<br />
there shall in the case of an unlimited company or a company<br />
limited by Guarantee or a private company limited by shares, be<br />
registered with the Memorandum,Articles of Association signed by<br />
the subscribers of the Memorandum, prescribing Regulations for the<br />
company. Thus, the registration of Articles of Association with the<br />
Memorandum of Association is mandatory for a private limited<br />
company by shares whereas there is no such mandate in the case of<br />
a public company limited by shares. After providing for Articles of<br />
Association and Membership of Company and their registration,<br />
sections 43 and 43A appear in the Statute book and it is clear from<br />
a reading of the same that whenever there is any provision which<br />
under clause (iii) of section 3(1) is required to be included in the<br />
Articles of Company in order to constitute it as a private company,<br />
then, that is a private company. However, in default of compliance<br />
with the same, the company would lose the privileges and exemption<br />
conferred on private companies by or under the Companies Act but<br />
the Act continues to apply to it and it will be then treated as if it is<br />
not a private company.<br />
112] Section 43A provides for a private company to become public<br />
company in certain cases. This provision was inserted by Act 65 of<br />
1960 with effect from 28th December 1960. Thereafter, there have<br />
been certain amendments inasmuch as by Act 91 of 1974 change<br />
was effected from 1st February 1975 and sub-section 1(A) was<br />
inserted in Section 43A. Thereafter, an explanation below<br />
subsection 1 of 43A came to be inserted and at the same time<br />
subsection 1A which was inserted in 1974 had to be amended.<br />
113] By 1988 Act so also prior thereto by 1974 Act, sub-sections
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1B and 1C were inserted in section 43A and in 2000 by Act 53 of<br />
2000, with effect from 13th December 2000 sub-section 2A was<br />
inserted. That dealt with the situation of a public company<br />
becoming a private company. In other words, this section permitted<br />
a private company to become a public company in certain cases and<br />
once the word private is deleted it becomes a public company.<br />
However, there was nothing which permitted such public company<br />
to again become private company and that is achieved by insertion<br />
of section 43(2A). Sub-section 43A(11) which also was inserted by<br />
Act 53 of 2000 from 13th December 2000, clarified that nothing<br />
contained in section 43A, save and except sub-section 2A shall<br />
apply on and after the commencement of Companies (Amendment)<br />
Act 2000. In other words, whole of section 43A except for one subsection<br />
viz., subsection 2A ceases to apply after the commencement<br />
of Companies (Amendment) Act, 2000. The reason for this is<br />
obvious because the Parliamentary Standing Committee submitted a<br />
report which is known as 64th report on Companies Second<br />
Amendment Bill 1999. It recommended that entire section 43A must<br />
be deleted. The recommendation was that some part and<br />
particularly section 43A(4) may be retained so that deemed public<br />
companies may submit certificate of incorporation to Registrar of<br />
Companies for correction by adding the word “Private” before the<br />
word “Limited”, in the name as indicated in the certificate of<br />
incorporation. However, when that bill became an Act, new subsection<br />
2A came to be inserted in the aforesaid terms. Thus, section<br />
43A itself became inapplicable by virtue of sub-section 11. The<br />
effect of all this is that the concept of deemed public company under<br />
section 43A and introduced by the Companies (Amendment) Act has<br />
now been abolished based on the recommendation of the working<br />
group the Companies Act, 1956.<br />
114] In my view, the legal consequences of the amendments, which<br />
have been termed as of far reaching importance and substantial by<br />
none other than Mr.A.Rammaiyya in his work “Guide to the<br />
Companies Act”, cannot be ignored. If these amendments are<br />
placed in the forefront, then, there is much substance in the<br />
contentions of Mr.Bobde, learned Senior Counsel appearing on<br />
behalf of respondent No.2.<br />
115] Mr.Bobde is right in his contention that after these<br />
amendments are noted only two broad categories of companies viz.,<br />
public company and private company remain and there is no scope<br />
for introduction of any third type or category. The amendment was
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made with obvious purpose. If a private company is to become<br />
public company in certain cases, then, all attributes and<br />
characteristics of a public company get attached to it. Thereafter,<br />
there should be no scope left for it to revert back to the status of a<br />
private company. If while amending section 43A care was taken to<br />
introduce sub-clause (d) in section 3(1)(iii) of the Companies Act,<br />
1956 and at the same time substitute section 3 (1)(iv)of the<br />
Companies Act, 1956, then, there is no warrant for creation of third<br />
category or permitting reversal of status from a public company to a<br />
private company. In other words if sub-clause (d) was inserted to<br />
provide for a prohibition against inviting or accepting deposits from<br />
persons other than the members of a private company, its Directors<br />
or their relatives in addition to the prohibition from inviting the<br />
public to subscribe for any shares or debentures of a private<br />
company, then, the demarcation and distinction ought to be clear<br />
and specific. If the broad definition of the term “public company” is<br />
that it means a company which is not a private company and further<br />
requires minimum paid up capital, but importantly the term “public<br />
company” also means a company which is a private company but is<br />
a subsidiary of company which is not a private company, then, this<br />
only shows that the Legislature wanted to include within the term<br />
“public company” a private company which is a subsidiary of a<br />
company which is not private. If the holding company is not a<br />
private company but its subsidiary is a private company such<br />
subsidiary also becomes a public company now. If all this is read<br />
together and seen as a whole, it becomes at once clear that the<br />
Legislature did not desire to continue any concept of deemed public<br />
company which was in force on account of the amendment made in<br />
the year 1974 to the Companies Act. The effect and implication of<br />
1974 amendment is to be wiped out completely and that has been<br />
done by the 2000 Act to the extent it made the whole of section 43A<br />
except sub-section 2A inapplicable and from ineffective from 13 th<br />
December 2000.<br />
116] It is clear from the factual position that the attempt to amend<br />
the Memorandum and Articles of Association of the first respondent<br />
was unsuccessful. The said resolution proposed in the meeting held<br />
on 5th May 2001 was not carried but in fact defeated. Once it was<br />
defeated, then, the first respondent which had become a public<br />
company on 17th August 1988 continued with that status. It would<br />
be of relevance to note that the resolution was moved in the meeting<br />
held on 5th May 2001. That resolution was defeated on that day.
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However, the Companies Amendment Act 2000 had come into effect<br />
already and to be precise from 13th December 2000. On 13 th<br />
December 2000, GCL was not a deemed public company but a<br />
public company. Once it was a public company, then, the argument<br />
of the appellants that it continued to retain its fundamental and<br />
basic character as a private company cannot be accepted. The<br />
status is conferred by law. The status was sought to be changed or<br />
amended by moving an amendment to the Articles of Association.<br />
Once that amendment to insert an additional clause (d) was<br />
defeated, then, there is no scope to alter the status of the respondent<br />
No.1 company by either terming it as a deemed public company or a<br />
public company retaining the fundamental and basic character of a<br />
private company. Both these concepts are unknown to law. Once<br />
they are contrary to the statutory mandate flowing from the terms as<br />
defined in the Companies Act, 1956, read together with section 43A<br />
and particularly sub-section 11 thereof, then, all the more the<br />
arguments of Mr.Samdani cannot be accepted. Mr.Samdani's<br />
attempt was to show that sub-section 11 of section 43A is not<br />
attracted in the facts of this case. Mr.Samdani argued that the<br />
principles of partnership which govern the administration and<br />
management of first respondent through out hold good in any event.<br />
His first contention was that section 43A(11) ceases to make section<br />
43A inapplicable after 13th December 2000. Alternatively and even<br />
if the amendment is taken as a repeal, that repeal of section 43A will<br />
not affect the underlying character of the first respondent as a<br />
family concern or glorified partnership.<br />
117] Mr.Samdani is not right on both counts. The amendment to<br />
Section 43A was brought into effect on 13th December 2000. The<br />
amendment to the Articles of Association was proposed and it was<br />
to be considered at a meeting held on 5th May 2001. That<br />
amendment was to alter the status of the company by insertion of<br />
sub-clause (d) in the Articles of Association. That amendment was<br />
not carried. Therefore, sub-section 11 of section 43A and the entire<br />
amendment of 2000 as far as section 43A is concerned, is operative<br />
and is applicable to respondent No.1. The appellants and others<br />
proposed the change in the status of GCL after the amendment had<br />
come into force. In such circumstances, emphasis on the words “on<br />
and after” as appearing in Section 43A(11) will not be of any<br />
assistance to the appellants.<br />
118] In any event, as far as the principles of statutory<br />
interpretation are concerned, long back in a decision reported in
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A.I.R. 1988 S.C. 740 Bhagatram Sharma Vs. Union of India, the<br />
Supreme Court held that it is a matter of legislative practice to<br />
provide, while enacting and amending a law, that an existing<br />
provision would be deleted and a new provision substituted. Such<br />
deletion has effect of repeal of the existing provision. Such a law<br />
may also provide for introduction of new provision. There is no real<br />
distinction between “repeal” and “amendment”. The Supreme<br />
Court holds that amendment is in fact a wider term and it includes<br />
abrogation or deletion of a provision in a existing statute. If the<br />
amendment of existing law is small the act professes to amend the<br />
Act. If it is wide, it repeals a law and re-enacts it. (see paras 16 to<br />
18 pgs.745-746).<br />
119] Therefore, in my view, once the first respondent is a public<br />
company as evidenced by the certificate referred to above, with<br />
effect from 17th August 1988, then, the amendment made in 2000<br />
would be applicable and section 43A ceases to apply to it. That the<br />
words “On and After”, are used makes no difference as far as<br />
present case is concerned. In the present case, the status of the first<br />
respondent as a public company remains and it is now academic to<br />
find out whether it was a deemed public company earlier as<br />
contended. Once the law makes only a broad categorisation as<br />
noticed above, then, it is not necessary to deal with this contention<br />
any more.<br />
120] Once it is understood that GCL is public company, then, all<br />
that remains is to find out as to whether there is any restriction on<br />
the transfer of its shares. In this behalf, Part IV of the Companies<br />
Act, 1956 which contains section 82 clarifies that the shares or<br />
debentures, other interest of any member in a company shall be<br />
moveable property, transferable in the manner provided by the<br />
Articles of the Company. That they are moveable property and,<br />
therefore, transferable is amply clear in law. The Articles only<br />
provide for the manner in which the transfer has to be effected. In<br />
this behalf section 111 of the Companies Act 1956 was referred to by<br />
the Counsel. That provision reads thus:-<br />
“111. Power to refuse registration and appeal against refusal --- (1)<br />
If a company refuses, whether in pursuance of any power of the<br />
company under its articles or otherwise, to register the transfer of,<br />
or the transmission by operation of law of the right to, any shares or<br />
interest of a member in, or debentures of, the company, it shall,<br />
within two months from the date on which the instrument of transfer,
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or the intimation of such transmission, as the case may be, was<br />
delivered to the company, send notice of the refusal to the transferee<br />
and the transferor or to the person giving intimation of such<br />
transmission, as the case may be giving reasons for such refusal.<br />
(2) The transferer or transferee, or the person who gave<br />
intimation of the transmission by operation of law, as the case may<br />
be, may appeal to the Tribunal against any refusal of the company<br />
to register the transfer or transmission, or against any failure on its<br />
part within the period referred to in sub-section (1) either to<br />
register the transfer or transmission or to send notice of its refusal<br />
to register the same.<br />
(3) An appeal under sub-section (2) shall be made within two<br />
months of the receipt of the notice of such refusal or where no notice<br />
has been sent by the company, within four months from the date on<br />
which the instrument of transfer, or the intimation of<br />
transmission as the case may be, was delivered to the company.<br />
(4) If --<br />
(a) the name of any person ----<br />
(i) is, without sufficient cause, entered in the register of members of<br />
a company; or<br />
(ii) after having been entered in the register, is, without sufficient<br />
cause, omitted therefrom; or<br />
(b) default is made, or unnecessary delay takes place, in entering in<br />
the register the fact of any person having become, or ceased to<br />
be a member including a refusal under sub-section (1)”The<br />
person aggrieved, or any member of the company, or the company,<br />
may apply to the Tribunal for rectification of the register.<br />
(5) The Tribunal while dealing with an appeal preferred<br />
under sub-section (2) or an application made under sub-section (4)<br />
may, after hearing the parties, either dismiss the appeal or reject the<br />
application, or by order ---<br />
(a) direct that the transfer or transmission shall be registered by the<br />
company and the company shall comply with such order within ten<br />
days of the receipt of the order; or<br />
(b) direct rectification of the register and also direct the company to<br />
pay damages, if any,<br />
sustained by any party aggrieved.<br />
(6) The Tribunal, while acting under sub-section (5) may, at<br />
its discretion, make ----<br />
(a) such interim orders, including any orders as to injunction or<br />
stay, as it may deem fit and just;
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(b) such orders as to costs as it thinks fit;and<br />
(c) incidental or consequential orders regarding payment of<br />
dividend or the allotment of bonus or rights shares.<br />
(7) On any application under this section, the Tribunal ----<br />
(a) may decide any question relating to the title of any person who<br />
is a party to the application to have his name entered in, or omitted<br />
from the register;<br />
(b) generally, may decide any question which it is necessary or<br />
expedient to decide in connection with the application for<br />
rectification.<br />
(8) The provisions of sub-sections (4) to (7) shall apply in<br />
relation to the rectification of the register of debenture holders as<br />
they apply in relation to the rectification of the register of members.<br />
(9) If default is made in giving effect to the orders of the<br />
Tribunal under this section, the company and every officer of the<br />
company who is in default shall be punishable with fine which may<br />
extend to ten thousand rupees and with a further fine which may<br />
extend to one thousand rupees for every day after the first day after<br />
which the default continues.<br />
(10) Every appeal or application to the Tribunal under subsection<br />
(2) or sub-section (4) shall be made by a petition in writing<br />
and shall be accompanied by such fee as may be prescribed.<br />
(11) In the case of a private company which is not a<br />
subsidiary of a public company where the right to any shares or<br />
interest of a member in or debentures of, the company is transmitted<br />
by a sale thereof held by a court or other public authority, the<br />
provisions of sub-sections (4) to (7) shall apply as if the company<br />
were a public company;<br />
Provided that the tribunal may, in lieu of an order under sub-section<br />
(5) pass an order directing the company to register the transmission<br />
of the right unless any member or members of the company<br />
specified in the order acquire the right aforesaid within such time as<br />
may be allowed for the purpose by order, on payment to the<br />
purchaser of the price paid by him therefor or such other sum as the<br />
Tribunal may determine to be a reasonable compensation for the<br />
right in all the circumstances of the case<br />
(12) If default is made in complying with any of the provisions<br />
of this section, the company and every officer of the company who is<br />
in default, shall be punishable with fine which may extend to five<br />
hundred rupees for every day during which the default continues;<br />
(13) Nothing in this section and section 108, 109 or 110 shall<br />
prejudice any power of a private company underits articles to<br />
enforce the restrictions contained therein against the right to
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transfer the shares of such company;<br />
(14) In this section “company” means a private company and<br />
includes a private company which had become a public company by<br />
virtue of section 43A of this Act.”<br />
121) A bare perusal of the entire section would denote that by<br />
virtue of Act 22 of 1996 section 111(14) was inserted with effect<br />
from 20 th September 1995. By insertion of this provision it has been<br />
clarified that section 111 applies to a company which is a private<br />
company and includes a private company which had become public<br />
company by virtue of section 43A of the Act. Once section 43A<br />
ceases to apply in the present case to GCL, then, there is substance<br />
in the argument of Mr.Bobde that Section 111 is inapplicable. In this<br />
behalf it must also be noted that sub-section 14 was added to<br />
section 111 by way of consequential amendment introduced by the<br />
Depositories Act, 1996. The effect of amendment is that in case of<br />
public companies to which Depositories Act would apply, instead of<br />
section 111, section 111A of the Companies Act, 1956 would apply<br />
which has also been introduced as consequential amendment by the<br />
Depositories Act, 1996.<br />
122] Section 111A deals with rectification of Register of Transfer<br />
and sub-section 1 of this section states that the word “company”,<br />
unless the context otherwise requires means a company other than a<br />
company referred to in sub-section 14 of section 111 of the<br />
Companies Act and immediately by sub-section 2 clarifies that<br />
subject to the provisions of section 111A the shares or debentures<br />
and any interest therein of a company shall be freely transferable.<br />
123] To my mind once the statutory scheme is noticed, then, there<br />
is no difficulty in turning down the contentions of Mr.Samdani.<br />
There is no question, therefore, of any preemptive right being<br />
recognised. The articles of association that are referred to by<br />
Mr.Samdani are that of a company which was a private company.<br />
After 17th August 1988 and in any event after dated 13th December<br />
2000, the position has undergone a change and Article 57<br />
appearing in the Articles of Association would no longer be the<br />
governing article. It is not necessary to then consider the argument<br />
as to whether the said article is void or not. That article must give<br />
way to the statutory provision. If the shares of public company are<br />
freely transferable, then, the statutory provisions in that behalf will<br />
take such effect notwithstanding anything to the contrary contained<br />
in the Articles of Association of such company. The over-riding
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effect given to the Act by section 9 cannot be ignored and brushed<br />
aside as desired by the appellants. Their alternate argument that<br />
assuming that GCL is public company, its shares being non listed,<br />
there can be a right of preemption, is equally unsound and not<br />
tenable. There is no distinction made in the Act of this nature. That<br />
argument is canvassed only by relying on the definition of the term<br />
“listed public companies” appearing in section 2(23A). The<br />
definition itself clarifies that a public company which has any of its<br />
securities listed in any of the recognised stock exchange will be<br />
termed as listed public company. Nonetheless it remains a public<br />
company and merely because its shares are not listed in any<br />
recognised stock exchange does not mean that there is any<br />
restriction on their transfer. They are and continue to be freely<br />
transferable as they are shares of a public company. The broad<br />
distinction as noticed above, between the term 'Private” and<br />
“Public” company, is enough to turn down this alternate argument.<br />
126) Mr.Bobde, learned senior counsel appearing for respondent<br />
No.2 and Mr.Sen appearing for respondent Nos. 1, 4 and 5 urge that<br />
any wider question or controversy need not be gone into because<br />
the essential difference between a preemptive and restrictive right<br />
conferred by Articles of Association and an agreement between<br />
members inter se or with third parties providing for a preemptive<br />
right must be borne in mind. The inter se agreement conferring<br />
such right is de hors the Articles of Association and is, therefore,<br />
not affected by the character of the company, whereas, what is<br />
impermissible by the Statute is that in case of a public limited<br />
company, the Articles, even if having any such right, the same<br />
stands over-ridden by the statutory provision and enactment and<br />
must, therefore, give way to the same. The Division Bench<br />
judgement does not indicate that such a preemptive right conferred<br />
by the Articles remains intact or not and yet proceeds to over-rule<br />
the Single Judge's judgement in WMDC Vs. Bajaj (supra). The<br />
Division Bench over-rules Single Judge's view to the extent of the<br />
preemptive right conferred by an agreement entered into inter se by<br />
members or by members with third parties. To my mind, the<br />
distinction as pointed out by Mr.Bobde and Mr.Sen will have some<br />
bearing but for the purpose of present case, it is not necessary to<br />
enter into any larger controversy. Any wider question is not required<br />
to be answered because once the statutory scheme is noticed by me<br />
and the character of the company in question being undisputed,<br />
then, the matter can be decided with the aid and assistance of the<br />
statutory provisions and applying them to the peculiar facts of this
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case. Therefore, the agreement between the members inter se or<br />
between members and third parties containing a preemptive clause<br />
or conferring a preemptive right and the ambit and scope thereof<br />
even in case of public limited company is a matter which can be<br />
gone into in an appropriate case. In the present case, it is not<br />
necessary to go into and deal with the question and issues raised.<br />
Therefore, reliance on the Division Bench decision by Mr.Samdani<br />
is of no assistance to the appellants and particularly when I am of<br />
the opinion that the conclusions of the CLB do not rest merely on<br />
the view taken by the learned Single Judge but also on the facts and<br />
circumstances peculiar to the case before me and brought to the<br />
notice of the learned Member, CLB.<br />
127] Mr.Samdani, learned Senior Counsel has contended that even<br />
if GCL is a public company, still going by the definition of the term<br />
“private company” as appearing in the Companies Act, 1956, the<br />
character and nature of such a company is never lost upon<br />
itbecoming a public company or losing its status and identity as a<br />
private company. He has relied upon the requirements that are<br />
stipulated in the Articles of Association of a private company in this<br />
behalf.<br />
128] On the other hand, Mr.Bobde, learned Senior Counsel has<br />
emphasised that there can be only two categories of companies, a<br />
public company and private company. I have in the foregoing<br />
paragraphs dealt with this aspect in great details and accepted<br />
Mr.Bobde's arguments that there cannot be any third category viz.,<br />
“deemed public company”. The arguments of Mr.Bobde are<br />
accepted because on noticing the amendments made to the<br />
Companies Act, 1956 and particularly in the year 2000, the third<br />
category as projected (deemed public company), cannot be carved<br />
out or if existing earlier, cannot be held to be continuing any<br />
further. The arguments of Mr.Samdani that despite this amendment,<br />
the character and fabric of GCL is not altered or changed and it<br />
remains a glorified partnership or a private company or a family<br />
concern, essentially revolves around the same category noted by me<br />
above. For the reasons that have persuaded me not to read into or<br />
add any third category other than a private company and public<br />
company, these arguments must also fail. Once again, it must be<br />
clarified that the categorisation that has been highlighted before me<br />
is in the context of the assertions of the appellants that GCL is a<br />
deemed public company. It must be clarified that I have not held<br />
that the Act does not envisage any company other than a private
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company or public company limited by shares. The act itself points<br />
out that there can be categories and sub-categories within the broad<br />
categorisation pointed out above. Further, a perusal of the section<br />
relating to kinds of share capital and voting rights would reveal that<br />
there can be a company limited by shares, unlimited company, a<br />
foreign company etc. Therefore, it should not be held that this<br />
distinction or categorisation has not been noted by me.<br />
129] Once all these arguments and contentions are dealt with,<br />
then, other part of submissions of Mr.Samdani on oppression of<br />
minority also fail. They are raised on the basis that the preemptive<br />
right is defeated by respondent Nos. 2 to 5 by their several acts of<br />
omission and commission. Once the preemptive right itself is not in<br />
existence by virtue of the statutory provisions in the field, then, there<br />
is no act of oppression. As held above, the plea of mis-management<br />
has been given up and has not been pursued.<br />
130] The other contentions that are raised to support the argument<br />
of oppression are that irrespective of the character of the company,<br />
the majority shareholders have by their acts oppressed the minority.<br />
Several instances of denial of dividend have been brought to my<br />
notice. The CLB in the impugned judgement has not commented on<br />
the same nor rendered any finding but since the contentions have<br />
been exclusively raised and argued, I have dealt with the same. In<br />
this behalf, it must be immediately noticed that the appellants were<br />
parties to Company Petition No.77 of 90. Some of the instances that<br />
have been highlighted before me were part of the pleadings in this<br />
company petition. Further, this company petition was extensively<br />
amended. The original as well as amended petition has been dealt<br />
with by the learned Single Judge of this Court by his judgement and<br />
order dated 14th November 2008. He proceeded to dismiss the<br />
same. While dealing with self same allegations, the learned Single<br />
Judge has observed thus:-<br />
“49. On the other hand, the respondents have not only<br />
denied material grounds and would submit that proper<br />
compliance has been observed. In addition, the respondents<br />
would contend that the petitioners should be non-suited for<br />
having approached this Court with unclean hands. In that<br />
the fact that the petitioners have already entered into a<br />
memorandum of understanding with Godrej Soaps Ltd., to<br />
acquire shares in respondent No.1 company was kept a<br />
secret arrangement till it became known for the first time to
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the respondent in February 2005. It is common ground that<br />
even the present petitioners are signatories to the said<br />
memorandum of understanding. In fact, even the present<br />
petitioners have sold 27 and 66 shares respectively to<br />
Godrej Soaps Ltd., without following the regime of Article<br />
57. On the one hand, the petitioners were questioning the<br />
intention of the 2nd respondent but at the same time, the<br />
petitioners were themselves indulging in act which was not<br />
only illegal but against the interests of the company.<br />
According to the respondents, the petitioners group was<br />
bent upon selling their shares to a person who happens to<br />
be the competitor of respondent company. Besides, it is the<br />
petitioners group who on the one hand were opposed to<br />
increase of authorised share capital resulting in respondent<br />
No.1 not being able to declare bonus shares; and on the<br />
other hand were acting against the interests of the company<br />
by committing themselves to sell their shares to person who<br />
happens to be the competitor of respondent company.<br />
According to the respondents the present petition is a<br />
speculative petition for which reason also the grievance<br />
made at the instance of petitioners with regard to meeting<br />
dated 15th February 1990 cannot be countenanced.”<br />
“ 50. The fact that even the present petitioners were party<br />
to memorandum of understanding and have committed<br />
themselves to espouse the cause of the alleged competitor<br />
of the company and in fact transferred part of the shares to<br />
an outsider, have come to the notice of the respondents only<br />
in February 2005. Those material facts have been<br />
suppressed by the petitioners. For this reason alone, the<br />
petitioners deserve to be non-suited. It is well established<br />
that no indulgence can be shown to a litigant who<br />
approaches the court with unclean hands. In any case, as<br />
observed earlier, after the withdrawal of other petitioners<br />
from the present proceedings unconditionally, thereby<br />
giving up all the allegations and claim against the<br />
respondent company, the issue regarding validity of<br />
meeting dated 15th February 1990 survives only at the<br />
instance of present petitioners. They have less than 7% of<br />
share holding in the respondent company. At their instance,<br />
therefore, the question of overturning the decisions taken in<br />
the said General Meeting particularly having referred to<br />
their conduct does not arise. Even if the matter was to be
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examined on facts, on its own merits, the grievance of the<br />
petitioners in respect of each of the grounds will have to be<br />
stated to be rejected. By no standards, the decision to<br />
convene meeting to consider the eight items stated in the<br />
notice dated 16th January 1990 can be said to be<br />
oppression against minority shareholders. The necessity to<br />
increase borrowing powers was in the context of expansion<br />
plans in relation to which ample explanation has been<br />
offered by the respondent company. Insofar as changing of<br />
name from private limited company to one of public limited<br />
company was also out of necessity. Even the explanation<br />
offered by the respondent company to increase the<br />
authorised capital of the company can, by no standards, be<br />
said to be oppression against the minority shareholders. No<br />
tangible material has been produced to substantiate that<br />
position. Even the amendments suggested to the A.O.A.<br />
were not to favour only the majority shareholders but<br />
would apply across the board and every member would be<br />
benefited by the said amendment. The controversy<br />
regarding deletion of Article 123 as raised is also without<br />
any substance. Besides, it is common ground that the<br />
company has now become a public limited company. Even<br />
on account of this change, it has become redundant to<br />
entertain the grievance of the present petitioners in relation<br />
to the issues concerning extra ordinary general meeting<br />
dated 15th February 1990. More so, when the stand taken<br />
by the present petitioners at the time of arguments plainly<br />
suggests that they are interested in walking out of the<br />
company and sell their shares at a fair price.”<br />
131] In the earlier part of his judgement in para 47 the learned<br />
Judge has dealt with the argument regarding declaration of low<br />
dividend and found no substance in the allegation of oppression<br />
based on the same. My attention is also invited to the earlier paras<br />
of this judgement and in particular paras 35 to 37 wherein this<br />
charge of low dividend has been dealt with extensively.<br />
132] The argument is that the appellants were not parties to this<br />
judgement and, therefore, it does not bind them. However, it is<br />
pertinent to note that the appellants were original petitioners. They<br />
withdrew from Company Petition No.77 of 1990. There is nothing<br />
on record to indicate that they withdrew with liberty to raise the<br />
pleas raised by them again. Once the learned Judge has found that
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the conduct of the remaining petitioners was entirely blameworthy<br />
and they could not substantiate the charge and/or allegation<br />
levelled of being oppressed as minority shareholders, then, I do not<br />
see how the present appellants can on the same material succeed in<br />
proving the said allegation. Apart from finding that they are raising<br />
the same issues based on the same allegations and identical<br />
arguments, I am of the opinion that the observations of the learned<br />
Single Judge would be applicable to the present appellants too. Any<br />
wider controversy, including about applicability of Order XXIII<br />
Rule 1 of CPC to a Company Petition need not be gone into and<br />
decided. Assuming that this provision and/or principles analogous<br />
thereto apply, apart from the appellants not seeking any liberty from<br />
the learned Single Judge while withdrawing themselves from<br />
Company Petition No.77 of 1990, I find that their arguments in the<br />
present appeal are identical to those raised by the remaining<br />
petitioners in Company Petition No.77 of 1990.<br />
133] Mr.Samdani, learned Senior Counsel has relied upon a<br />
number of decisions and it is not necessary to refer to each one of<br />
them. In the first compilation of the Authorities and Rulings, the<br />
appellants have compiled judgements on the ambit and scope of<br />
section 397 and 398 of the Companies Act and the reliefs that can<br />
be sought and granted thereunder. In my view, each of these<br />
judgements need not be referred to. The principles are too well<br />
settled and I have decided this case by applying them. Therefore,<br />
each of the decisions whether of the Hon'ble Supreme Court, this<br />
Court, other <strong>High</strong> Courts or English Courts need not be referred to<br />
seriatim.<br />
134] Part II of the compilation contains broad questions and<br />
propositions of law which I have already referred to and dealt with.<br />
Suffice it to note that in the latest decision of the Supreme Court in<br />
the case of V.S.Krishnan Vs. West Coast <strong>High</strong>tech Hospital Ltd. &<br />
Ors., (reported in 2008 (3) SCC 363) the Supreme Court has held<br />
that whether an Act is oppressive or not is fundamentally and<br />
basically a question of fact. Its answer must depend upon<br />
circumstances in each case. However, the broad tests have been<br />
indicated by the Hon'ble Supreme Court and they have been<br />
summarised in para 14 of this decision.<br />
135] After carefully perusing this paragraph and earlier<br />
authorities, I am of the view that the judgement rendered by the<br />
Hon'ble Single Judge, Justice A.M.Khanwilkar, J dated 14th
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November 2008 in Company Petition No.77 of 1990 applies to the<br />
appellants as well. I have indicated the reasons for this conclusion<br />
in the foregoing paragraphs. Therefore, it is not necessary for me to<br />
decide any wider controversy and particularly whether the<br />
judgement of the learned Single Judge (Khanwilkar, J) could be said<br />
to be a judgement in rem and or whether the Civil Procedure Code<br />
and particularly Order XXIII of the same applies to the present<br />
proceedings or not. The submission of Mr.Samdani is that this<br />
judgement cannot be a judgement in rem. Assuming it is not so, yet,<br />
it binds the appellants for the reasons indicated above. The<br />
appellants may have withdrawn from Company Petition No.77 of<br />
1990 but in their independent proceedings before the CLB on which<br />
the impugned order has been passed, they relied on the same<br />
material and same circumstances as were set out in Company<br />
Petition No.77 of 1990. They relied upon the same amendments<br />
which were to Company Petition No.77 of 1990. There allegations<br />
are also the same viz., of low dividend and unjust enrichment so<br />
also diversion of funds by respondent No.2. These were the grounds<br />
raised in Company Petition No.77 of 1990. Having found no<br />
substance therein, for the reasons, which have been given by<br />
Hon'ble Mr. Justice Khanwilkar, and finding them to be fully<br />
applicable to the present facts as well, I see no justification for<br />
taking a different view. If the appellants had placed any material<br />
other than what has been referred to by Khanwilkar, J or had they<br />
pointed out even during the course of arguments before me by<br />
referring to the available record, anything in addition to what has<br />
been noted by the learned Single Judge, possibly, they could have<br />
urged that I should take a different view or that a further probe and<br />
investigation into the matter was called for. Having found that they<br />
placed no such material and that the available record does not<br />
furnish substantial proof of the allegations of oppression of the<br />
appellants, I am of the view that the judgement of Justice<br />
Khanwilkar in Company Petition No.77 of 1990 binds the<br />
appellants.<br />
136] Once this view is taken, then, strictly it is not necessary to<br />
refer to the judgements cited by Mr.Samdani on the applicability of<br />
Order XXIII of the CPC and particularly Rule 1 thereof. Therefore,<br />
the judgements in compilation III on this point need not be referred<br />
in further details. Equally in the view that I have taken, it is not<br />
necessary to refer to the judgement of the Supreme Court reported<br />
in 2006(1) SCC 212 (S.Vijayarama Raju Vs. Immakka Jaya Raj &<br />
Ors.). Lastly, the reliance placed on the judgement of the Supreme
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Court and other courts on the right of preemption is misplaced in<br />
the view that I have taken. The nature of the right is not in dispute.<br />
In the present case the question is of its availability. I have<br />
proceeded on the basis that the Articles of Association of respondent<br />
No.1 did contain a clause giving preferential or preemptive rights as<br />
claimed by the appellants. However, upon the status of the company,<br />
undergoing a change as noted above, this clause could not have<br />
been invoked.<br />
137] It is in the light of this view that I have not entered into the<br />
controversy as to whether the view taken by the learned Single<br />
Judge in WMDC Vs. Bajaj (supra) is correct and whether the<br />
overruling of that view by the Division Bench was called for at all. I<br />
have carefully perused both judgements with the able assistance of<br />
Mr.Samdani and Mr.Bobde. In WMDC's case, the challenge was to<br />
an arbitration award rendered by a sole arbitrator. The arbitration<br />
covered a dispute between two public companies. The WMDC, a<br />
Government of Maharashtra undertaking held 27% of shares of<br />
Maharashtra Scooters Ltd. (MSL), a public limited company<br />
whereas the respondent – Bajaj Auto held 24% shares. The balance<br />
49% is held by public. The dispute as noted by the learned Single<br />
Judge between the parties was whether clause 7 of the agreement<br />
could form a valid basis for the conclusion of the arbitrator or not.<br />
The learned Judge held that the shares in question are of a public<br />
limited company. Those shares are freely transferable. The<br />
stipulation in clause 7, therefore, is inapplicable and reliance was<br />
placed on the provisions of the Companies Act in this behalf so also<br />
the judgements of the Supreme Court. The learned Judge concluded<br />
that section 111A applies to public companies and noticing the<br />
difference between private company and public company, he<br />
concluded that the effect of clause 7 is to create a right of<br />
preemption between the petitioner and respondent before me in the<br />
event either of them seeking to part with or transfer its shareholding<br />
in MSL. The learned Single Judge concluded that a clause of<br />
preemption is to impose restriction on free transferability of shares<br />
and that is impermissible because the provisions of the Companies<br />
Act have been given a over-riding effect. On such conclusion, he set<br />
aside the Award and allowed the petition.<br />
138] This view of the learned Judge was noted by the Division<br />
Bench in Messers Holdings Vs. Shyam Madan Mohan Ruia. There<br />
the issue was whether the defendant No.2 which is a public limited<br />
company and having its shares listed on the stock exchange could
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resist a transfer of shares under share purchase agreement dated<br />
23rd June 1997 between plaintiffs before Division Bench and the<br />
defendant No.1. A suit was filed being Suit No.2494 of 1999 by the<br />
plaintiffs for a declaration that the acquisition of the shares by<br />
defendant No.3 under an agreement dated 12th May 1995 is illegal,<br />
null and void ab initio and of legal effect. In other words, its 30,000<br />
shares were the subject matter of the June 1997 Agreement between<br />
plaintiffs and defendant No.1 and the attempt by defendant Nos. 1<br />
and 3 to defeat that by relying upon prior agreement is not<br />
permissible, was the issue. The Division Bench noted the arguments<br />
of both sides during the course of which its attention was invited to<br />
the view taken by the learned Single Judge in WMDC (Supra). The<br />
Division Bench concluded that the consensual agreements between<br />
particular shareholders relating to their shares can be enforced like<br />
any other agreements. It is not required to be embodied in the<br />
articles of association. In para 56 the Division Bench referred to the<br />
view taken by the learned Single Judge in WMDC and in the paras<br />
which I have reproduced above, the judgement of the learned Single<br />
Judge is over-ruled. A proper and complete reading of this para<br />
would reveal that the Division Bench proceeded to reverse the<br />
view taken by the learned Single Judge essentially because of the<br />
conclusion reached by it and noted above. Additionally, it reversed<br />
it because an agreement of preemption even if willingly and<br />
consensually entered into by a shareholder and third party or<br />
between shareholders, imposes a restriction on the free<br />
transferability of shares. Before me reliance is placed only on<br />
Article 57 of the Articles of Association of GCL when it was a<br />
private company and the wording thereof to urge that the<br />
respondent No.2 cannot transfer the shareholding to any third party<br />
and the shares must be first offered to the appellants in terms of this<br />
Article. Whether this article and the right of preemption recognised<br />
therein is itself applicable after the status of the company has been<br />
altered and changed is the only issue before me. Therefore, the<br />
controversy with regard to the judgement rendered by the learned<br />
Single Judge in WMDC and whether it is rightly over-ruled or not<br />
cannot be taken note of in the peculiar facts of this case. However, it<br />
must be immediately noted that the Agreement or a consensual<br />
arrangement relating to their own shares between shareholders<br />
would bind them or not or whether that is void as not surviving in<br />
the teeth of Section 9 or Section 111A of the Companies Act, 1956,<br />
was the core issue in Messer Holding (supra) (see paras 48 to 57).<br />
139] Mr.Samdani is in error in urging that the CLB has
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based its conclusion in the present case only on the view taken by<br />
the learned Single Judge in WMDC's case. A complete reading of<br />
the judgement of the CLB would show that the conclusion is with<br />
regard to the status of GCL and merely to support it, that it referred<br />
to the judgement of the Single Judge. The view taken by CLB is,<br />
therefore, not founded only on the single Judge's judgement as<br />
erroneously urged by Mr.Samdani.<br />
140] For the reasons that persuaded the learned Single Judge<br />
(A.M.Khanwilkar, J), I am also of the opinion that the appellants<br />
have failed to substantiate their charge of oppression of minority. In<br />
my view, these allegations being serious, the appellants ought to<br />
have brought adequate and substantial proof. On the basis of the<br />
materials produced, it cannot be held that there is any oppression of<br />
minority. The conduct of the appellants in withdrawing from the<br />
proceedings and settling their disputes with respondent No.2 is also<br />
a relevant factor in denying them any relief. Now, their argument is<br />
that the understanding and agreement between them has not been<br />
adhered to and breached by respondent No.2. However, when they<br />
talk of such breach and allege as such, they rely upon the very<br />
events which have been made subject matter of Company Petition<br />
No.77 of 1990 by the other petitioners therein. Therefore, there<br />
being no independent proof and considering that the broad<br />
principles enshrined in law and referred to by the learned Single<br />
Judge would prevent the parties from raising same pleas again and<br />
again, the arguments insofar as oppression of minority concerned,<br />
also fail.<br />
141] Having dealt with the submissions of parties, as noted above<br />
and finding that the appellants have failed to make out any case for<br />
intervention by this Court on the questions of law formulated above,<br />
there is no alternative but to hold that the company Appeal fails.<br />
Accordingly, it is dismissed but without any order as to costs.<br />
142] At this stage, Mr.Samdani, learned Senior Counsel<br />
appearing on behalf of the appellants submits that there is an<br />
interim order which is made by this Court in Company Application<br />
No.25 of 2010 which has been in force from 11th December 2009.<br />
That order has been continued on 28th June 2010 by learned Single<br />
Judge of this Court. Therefore, the interim order in terms of prayer<br />
clause (iii) be continued till the appellants impugn this order in<br />
Appeal. His request is that the order may be continued for a<br />
reasonable period so as to enable the appellants to adopt
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143] This request is opposed by Mr.Sen who appears for<br />
respondent Nos. 1, 5 and 6 and Mr.Tulzapurkar and<br />
Mr.Subramanian, learned Senior Counsel appearing for respondent<br />
Nos.2 and 3.<br />
144] After having heard the learned Counsel at some length on this<br />
issue, I am of the opinion that interest of justice will be served if this<br />
interim order in terms of prayer clause (iii), is continued for a<br />
period of six weeks from today, save and except, the bracketed<br />
portion. The grant and continuation of interim order is without<br />
prejudice to the rights and contentions of all parties. The prayer<br />
clause (iii) after deleting bracketing portion reads as under:-<br />
“(iii) that pending the hearing and final disposal of the<br />
appeal, this Hon'ble Bench be pleased to restrain the 2nd/<br />
3rd respondents by themselves and/or through their<br />
servants and or agents from in any manner howsoever,<br />
directly or indirectly, from selling, transferring,<br />
alienating, pledging, encumbering or in any manner<br />
creating any third party rights in to over or upon or in<br />
respect of the shares held, directly or indirectly, by the<br />
2nd/3rd respondents in the company.”<br />
95. The learned counsel appearing for the respondent No. 2 submits that by<br />
order dated 22 nd July, 2011 and 27 th July, 2011, the Supreme Court has issued<br />
notice and passed interim inunction against respondent nos. 2 and 3 and not<br />
against the company and has not admitted the Special Leave Petition so far.<br />
The learned counsel submits that there is no effect of the proceedings in<br />
Company Application (73 of 2012) and Company Application (85 of 2012) in<br />
Company Petition (87 of 2010) on the proceedings pending in the Supreme<br />
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<br />
Appellants to restrain sale of shares held by Respondent Nos. 2 and 3 because<br />
of the apprehension, based on newspaper reports, that the sale was imminent.<br />
The main question decided was whether the company is a public company or a<br />
private company which was deemed to be a public company under Section 43-<br />
A. The answer of the CLB was that on and after 5.5.2001 the company<br />
became a public company and that Article 57 was void in view of Section 9 of<br />
the companies Act, 1956. This Court took the same view and held that Article<br />
57 does not exist as it must give way to the law. The question before the<br />
Supreme Court is whether Article 57 has ceased to operate by reason of law or<br />
remained validly in the Articles even after 5.5.2001. The findings on law<br />
rendered in the said judgments therefore operate with full force. No injunction<br />
was sought to restrain the Company from deleting Article 57 in accordance<br />
with law. If sought, it is reasonable and respectful to assume that it would not<br />
have been granted by the Supreme Court. In any case, even if stay had been<br />
granted of the operation of the impugned orders, the stay would not prevent the<br />
company from holding duly requisitioned extraordinary general meeting and<br />
resolving to delete Article 57.<br />
97. The submission of the respondents is that the result of the SLP before the<br />
Supreme Court will have no bearing on the present proceedings because if the<br />
Supreme Court allows the appeal of the present appellants, the only result
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would be that Article 57 continued to be in the Articles of Association until it<br />
was deleted in the EOGM of 22-5-2012. If the Supreme Court dismisses the<br />
SLP, the result will be that Article 57 ceased to be legally operative from<br />
5-5-2001 but has been formally deleted in the EOGM of 22-5-2012. Thus<br />
either way the present proceedings do not touch or impinge upon the<br />
proceedings before the Supreme Court and the S.L.P. Is not rendered<br />
infructuous. The CLB was clearly right in holding after careful consideration,<br />
that the proceedings in the Supreme Court are not being pre-empted or<br />
interfered with. It is submitted that the finding that the company is a public<br />
company is clearly a judgment in rem and decides the status of the company, a<br />
juristic person, and binds everyone generally; it is ‘conclusive against all the<br />
world”. Similarly, the finding that the status of property viz. shares of the<br />
shareholders, is that they are freely transferable, is equally binding and<br />
conclusive. The effect of the judgment in rem is, firstly, to declare finally the<br />
status of the company as being a public company and make it binding on the<br />
Company, its members and all other generally, secondly, to declare the status<br />
of the property viz. shares in such company as being freely transferable, and<br />
thirdly, to preclude every member of the Company or any outsider, including a<br />
transferee of shares from re-agitating the same issues again. The judgment of<br />
this Hon’ble Court dated 14-11-2008 precludes all argument from anyone<br />
about the status of the company as a public company and the free<br />
transferability of shares.
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98. It is submitted that it is of no consequence that the Appellants herein had<br />
withdrawn from Company Petition NO. 77/90 before it was heard or that the<br />
judgment can be said to have proceeded on the basis of admission by the two<br />
petitioners who continued with the petition. The withdrawal by the Appellants<br />
herein precludes them from reagitating the questions raised in C.P. NO. 77/90,<br />
as already held by this Hon’ble Court in judgment dated 14-11-2008.<br />
Moreover, the finding on Respondent No.1 being a public company with effect<br />
from 5-5-2001, even if it considered as being based on admission, operates as<br />
an estoppel by judgment. The learned counsel relied upon the views of the<br />
Privy Council in Hoystead’s case as under :<br />
“Very numerous authorities were referred to. In<br />
the opinion of their Lordships it is settled, first,<br />
that the admission of a fact fundamental to the<br />
decision arrived at cannot be withdrawn and a<br />
fresh litigation started with a view to obtaining<br />
another judgment upon a different assumption of<br />
fact; secondly, the same principle applies not only<br />
to an erroneous admission of a fundamental fact,<br />
but to an erroneous assumption as to the legal<br />
quality of that fact. Parties are not permitted to<br />
begin fresh litigation because of new view they<br />
may entertain of the law of the case, or new<br />
versions which they present as what should be a<br />
proper apprehension by the court of the legal result<br />
either of the construction of documents or the<br />
weight of certain circumstances. If this were<br />
permitted, litigation would have no end, except<br />
when legal ingenuity is exhausted....”<br />
99. The learned counsel appearing for the respondent nos. 4 and 5 submits<br />
that the issues raised by the appellant in the present proceedings are governed
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by order dated 14 th June, 2011 passed by this court i.e. whether company<br />
became public company in 2001 and whether Article 57 will certify<br />
transformation of the first respondent company into public company. It is<br />
submitted that the issue in Special Leave Petition is not larger than this. It can<br />
never decide that the respondent no. 1 company can never in future resolve to<br />
become a public company or amend its articles even if appellants were to<br />
succeed in SLP. It is submitted that as on the date, the judgment dated 14 th<br />
June, 2011 passed by Shri Justice S.C. Dharmadhikari in Company Appeal (24<br />
of 2010) holds the field and the first respondent company is declared to be<br />
public company and Article 57 is declared void in view of section 9 of the<br />
Companies Act, 1956. The said judgment also covers the issue in this appeal.<br />
It is submitted that in the said order and judgment dated 14 th June, 2011, it is<br />
submitted that the resolution being in consonance with the binding precedent<br />
can never be oppressive which foreclosed the primary issue in the petition<br />
itself. The learned counsel further submits that the findings recorded by this<br />
court in the order and judgment dated 14 th November, 2008 in Company<br />
Petition (77 of 1990) are not based on concession. It is submitted that even if<br />
it is assumed that it is based on concession, respondent no. 1 company has<br />
invited the finding from this court on the basis that the first respondent<br />
company is a public company and are bound by it, first respondent will have to<br />
comply. The appellants have invited the findings from this court on the basis<br />
that the respondent company is a public company. The learned counsel
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submits that even in the said judgment this court has held that the appellants<br />
who withdrew from the said petition are also bound by the company's stand<br />
and that the decision is final. It is not open to the appellants to claim that they<br />
are not bound by the said order and judgment so long as the said judgment is<br />
not set aside or modified. It is submitted that 17% minorities view cannot<br />
prevail over the majority nor it can overrule the binding judgments. It is<br />
submitted that the present proceedings filed by the appellants are hindrances<br />
in functioning and abuse of process of court.<br />
100. Mr.Kadam, the learned senior counsel appearing for respondent no.1<br />
submits that first respondent company is bound by the judgments of this<br />
court delivered on 14 th November, 2008 and 14 th June, 2011 by which it has<br />
been held that Article 57 is void. The articles thus stood amended by virtue of<br />
section 404 and only formal compliance was required i.e. filing with the<br />
Registrar of Companies and the ministerial act of deletion. The learned<br />
counsel relied upon the judgment of this court in the case of Gurudas s/o.<br />
Dhondba Dadmal Vs. Scheduled Tribe Caste Certificate Scrutiny<br />
Committee and others, 2005(3) Mh.L.J. 607 in support of the plea that since<br />
the judgment of this court delivered on 14 th June, 2011 is not stayed by the<br />
Supreme Court, it is binding on parties as well as this court. Paragraphs 7 to<br />
9 of the said judgment reads thus :<br />
“7. Smt. S. W. Deshpande and Shri Charpe, the learned counsel
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appearing on behalf of respondents 1 and 2 respectively submit that<br />
the judgment of this Court cited supra is challenged before the<br />
Apex Court and the Apex Court is seized with the matter. Smt.<br />
Deshpande and Shri Charpe, therefore, requests that this matter<br />
should be adjourned until the Apex Court decides the issue.<br />
8. We have enquired from the learned counsel for respondents 1<br />
and 2 as to whether the judgment of this Court is stayed by the<br />
Apex Court or not. It is brought to our notice that only the matter is<br />
admitted and no stay is granted.<br />
9. In that view of the matter, we find that the judgment of this<br />
court in the case of Mana Adim Jamat Mandal v. State of<br />
Maharashtra, cited supra holds the field. Once the person proves<br />
that he belongs to 'Mana Tribe', it is not necessary to prove that the<br />
said 'Mana' has an affinity with 'Gond Tribe'. In that view of the<br />
matter, the impugned order passed by the Scrutiny Committee dated<br />
29 10-2001 is not sustainable in law and, therefore, will have to be<br />
quashed and set aside. Since the termination of the petitioner is a<br />
consequence of the order of the Scrutiny Committee, the<br />
termination order dated 24-1-2002 will also have to be quashed and<br />
set aside.”<br />
101. The learned counsel relied upon the Judgment reported in (2005) 11<br />
SCC 723 para 23 to 27 in support of the plea that any action contrary to law<br />
is ultra vires.<br />
102. The learned counsel for respondent no.2 submits that the order passed<br />
by this court on 14.11.2008 in Company Petition No. 77 of 1990 operates in<br />
rem and is binding also on the appellants, respondents, CLB and this court. The<br />
learned counsel placed reliance on the following paragraphs of the said order<br />
which read thus :<br />
“ 6. As aforesaid, the original Petitioner Nos.1, 2, 3, 6 and 7<br />
have withdrawn from the present proceedings unconditionally. As<br />
per their request, they have been deleted from the array of
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Petitioners. The effect of unconditional withdrawal from the<br />
proceedings by the said Petitioners is that they have given up<br />
their challenge with regard to the alleged acts of oppression and<br />
mismanagement. In that, those Petitioners have consciously<br />
acquiesced in the acts complained of. It is further significant to<br />
note that during the arguments, the Counsel appearing for the<br />
present Petitioners, in all fairness, stated that although earlier<br />
the ground regarding mismanagement was given up, but has been<br />
once again introduced by way of amendment; nevertheless, the<br />
present Petitioners shall confine to the ground of oppression of<br />
minority. Indeed, learned Counsel had stated that the facts which<br />
are pressed into service in the context of ground of oppression of<br />
minority would, by itself, indicate mismanagement and be viewed<br />
accordingly.<br />
7. The present Petitioners have filed elaborate written<br />
submissions besides making oral arguments through Counsel.<br />
During the submissions, the thrust of reliefs pressed on behalf of<br />
the present Petitioners was that to meet the ends of justice, this<br />
Court should pass appropriate order under Section 402 directing<br />
the majority shareholders to buy out the shares held by them at<br />
such value as the Court may deem fit. In the alternative, the Court<br />
may consider granting relief in terms of prayer clauses (c) to (f),<br />
(h) to (hhh) (v); (hhh) (xix); (xx); (xxii) and (xxiii) and prayers (i)-<br />
(i) to (5). This position is restated even in the concluding part of<br />
the written submissions filed on behalf of the present Petitioners.<br />
8. I would, therefore, think it apposite to consider the entire<br />
matter only in the context of reliefs pressed on behalf of the<br />
present Petitioners and in particular the grounds referred to in the<br />
written submissions, while dealing withindividual instances<br />
referred to in the Petition as amended.<br />
9. Ordinarily, as the allegation is one of oppression of<br />
minority, the Court is bound to decide that aspect one way or the<br />
other on its own merits. Dependent on the finding reached on the<br />
said issue, the Court can proceed to pass appropriate order in<br />
equity or otherwise. Significantly, in the present case, the present<br />
Petitioners have made it more than clear that the principal relief<br />
pressed by them is to issue direction to the majority shareholders<br />
to buy out the shares held by the Petitioners at such valuation as<br />
the Court may determine. Even if this relief is to be granted to the<br />
Petitioners, in the first place, the same will have to be confined
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only to the present Petitioners (original Petitioners 4 and 5). For,<br />
the other Petitioners (original Petitioners 1,2,3,6 & 7) have<br />
consciously withdrawn from the proceedings unconditionally.<br />
Insofar as the present Petitioners are concerned,as a matter of<br />
fact they are free to deal with the shares held by them. In that, the<br />
shares are now freely transferable. Indeed, when the Petition was<br />
presented at the relevant time, the Respondent No.1 Company was<br />
a Private Limited Company. As a result, there was restriction in<br />
the transfer of shares. However, it is common ground that now the<br />
Respondent No.1 Company has become a Public Limited<br />
Company-as a result of Special Resolution moved in the Extra<br />
Ordinary General Meeting dated 5th May 2001 having been<br />
defeated. Having acquired the status of a Public Limited<br />
Company, the restriction on the right to transfer the shares which<br />
was applicable to Private Limited Company, would naturally get<br />
diluted. That however, does not mean that there would be no right<br />
in the Board of Directors to consider the transfer request on case<br />
to case basis on its own merit, keeping in mind the best interests<br />
of the Company so as to prevent any undesirable person becoming<br />
its member and if enrolment of such person as a member, is likely<br />
to be prejudicial to the Company. In other words, the Board of<br />
Directors would be justified in declining to register a given<br />
request for transfer of shares keeping in mind the paramount<br />
interests of the Company, if so required. The only other<br />
apprehension of the present Petitioners is that as has been cited in<br />
the past in respect of some of the transfer request that the<br />
maximum number of members provided in the A.O.A. (as 50<br />
members) has already been exhausted. As a matter of fact, this<br />
restriction will have no relevance after the Respondent No.1<br />
Company has admittedly become a Public Limited Company. For,<br />
restriction of maximum number of 50 members which may apply<br />
to a Private Limited Company, will be of no relevance any more.<br />
Notably, even in respect of a Private Company which limits the<br />
number of its members to 50, as provided in the definition of<br />
"Private Company" in Section 3(1)(iii) of the Act, it would not<br />
include persons who are in the employment of the Company and<br />
persons who, having been formerly in the employment of the<br />
Company were members of the Company while in that<br />
employment and have continued to be member after the<br />
employment ceased. Indubitably, the Company will be bound to<br />
process the share transfer request of the present Petitioners<br />
keeping in mind the regulations on the subject applicable at the<br />
relevant time as and when occasion arises.
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10. Suffice it to observe that even if the present Petitioners were<br />
to succeed in establishing that it is a case of oppression and<br />
mismanagement, direction that could be issued against the<br />
majority of the members, is to buy out the shares held by the<br />
present Petitioners at a fair value, keeping in mind parameters<br />
provided in Article 57 (g) itself. At best, it could be further<br />
ordered that in the event, the majority shareholders were<br />
disinclined to buy out the shares held by the present Petitioners<br />
within a reasonable time after the offer is made by the present<br />
Petitioners in that behalf, it would be open to the present<br />
Petitioners to sell the said shares to any outsider as per the price<br />
finalised with them interse. Indeed, enrolment of the outsider<br />
transferee as member of the Respondent No.1 Company would be<br />
subject to scrutiny to be done by the Board of Directors in the best<br />
interests of the Company for preventing any undesirable person<br />
becoming a member of the Company. The Board of Directors will<br />
have to assign tangible and legally sustainable reason to reject<br />
the request to register the transfer of any share. In my opinion, the<br />
principal relief claimed by the present Petitioners would stand<br />
addressed with the above arrangement.<br />
11. I shall now proceed to consider the alternative reliefs<br />
pressed during the course of arguments by the Counsel for the<br />
present Petitioners. Indeed, although the present Petitioners have<br />
submitted that the reliefs to be presently reproduced are<br />
alternative reliefs, the same in fact, are the substantive reliefs. I<br />
would straightaway refer to the said reliefs pressed by the present<br />
Petitioners, which read thus: "(c) That the 2nd Respondent be<br />
restrained by an order of permanent injunction from exercising<br />
any rights or receiving any dividends or any rights or bonus<br />
shares or any accretions in respect of the said 3000 share<br />
purportedly registered in the name of the 2nd Respondent and the<br />
1 st Respondent;<br />
(d) For orders and directions directing Respondents 1 & 2<br />
to offer the said 3000 equity shares of the face value of Rs.100/-<br />
each (together with all accretions thereto) to the Petitioners in<br />
accordance with Article 57 of the Articles of Association at the<br />
value determined in accordance therewith and directing the 1 st<br />
Respondent to register the same in the name of the Petitioners and<br />
make consequential notings on the 1 st Respondent’s records;<br />
(e) For a declaration that the purported Extra Ordinary<br />
General Meeting purportedly held on 15/10/1988 is null and void
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and of no effect.<br />
(f) For a declaration that the purported Annual General<br />
Meeting purportedly held on 29/12/1989 is null and void and of<br />
no effect.<br />
(h) Holding the Extra Ordinary General Meeting on<br />
15-2-1990 and/or transacting any business thereat whether as set<br />
forth in the said notice dated 16-1-1990 (Ex.‘S’hereto) or<br />
otherwise.<br />
(hh):(i) that it may be ordered anddeclared that the purported<br />
transfer of the said 4 shares described in Exhibit Q-42 hereto<br />
from the name of Respondent Nos.11 & 12 to the name of<br />
Respondent No.13 is contrary to the Articles of Association of the<br />
1st Respondent Company and therefore, illegal, null and void and<br />
is liable to be set aside;<br />
(h):(ii) that the register of the members of the 1st Respondent<br />
Company be rectified by deleting the name of Respondent No.13<br />
from the register of members in respect of the said 4 shares<br />
described in Exhibit Q-42 hereto and by restoring the names of<br />
Respondent Nos.11 and 12 in respect of the said 4 shares.<br />
(h):(iii) that Respondent No.1 and Respondent Nos.11 and 12 be<br />
ordered and directed to take all such steps as may be necessary,<br />
including the execution of transfer forms etc. in order to transfer<br />
the said four shares from the names of Respondent Nos.11 and 12<br />
to the name of the Petitioners or any of them.<br />
(hhh)(i) This Hon’ble Court be pleased to declare that the<br />
petitioner No.2 was and in a willing member/share holder of the<br />
Company as per the Articles of Association of the Company in<br />
respect of the 22 shares offered by Respondent No.5 and 6<br />
referred to in para 14(a)(vii) above;<br />
(hhh)(ii) that Respondent Nos.1, 5 and 6 be ordered and directed<br />
to take all such steps as may be necessary including the execution<br />
of transfer forms etc. in order to transfer the said 22 shares from<br />
the names of Respondent Nos.5 and 6 to the name of original<br />
Petitioner No.2 and the Register of members of the Company be<br />
ordered to be rectified accordingly forthwith;<br />
(hhh)(iii) that pending the hearing and final disposal of the<br />
Petition, Respondent No.1 be ordered and directed not to register
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the transfer of the said 22 shares from the name of Respondent<br />
No.5 and 7 to any outsider non-member of the company;<br />
(hhh)(iv) that this Hon’ble Court be pleased to declare that the<br />
purported sale or transfer of shares from Respondent Nos.33 to 36<br />
in favour of Respondent No.27 to 32 and the Respondent No.1<br />
Company’s registration of such transfers as per particulars set out<br />
in Exhibit-QQ20 hereto is void, invalid and illegal;<br />
(hhh)(v) that this Hon’ble Court be pleased to order and declare<br />
that the purported sale or transfer of the said shares in favour of<br />
Respondent Nos.27 to 32 by Respondent Nos.33 to 36 and the<br />
registration of the transfer of the said shares in the Register of<br />
Members of the Respondent No.1 Company be cancelled and set<br />
aside and the Register of Members of Respondent No.1 Company<br />
be rectified accordingly;<br />
(hhh)(xix) that it may be ordered and declared that the purported<br />
transfer of the said 5 shares referred to in paragraph 16(S)(1)<br />
(xiii) hereto from the names of Respondent Nos.2 & 4 to the name<br />
of Respondent no.44 is contrary to the Articles of Association of<br />
the 1 st Respondent Company and therefore illegal null and void<br />
and is liable to be set aside;<br />
(hhh)(xx) that the Register of Members of the 1st Respondent<br />
Company be rectified by deleting the name of Respondent No.44<br />
from the Register of members in respect of the said 5 shares and<br />
by restoring the names of Respondent Nos.2 & 4 in respect of the<br />
said 5 shares;<br />
(hhh)(xxii) that it may be ordered and declared that the purported<br />
transfer of the said 5492 shares in favour of Respondent No.39<br />
(Gharda Consultants Private Limited) is contrary to the Articles<br />
of Association of the 1 st Respondent Company and contrary to the<br />
Companies Act, 1956 and is illegal null and void and is liable to<br />
be set aside;<br />
(hhh)(xxiii) that the Register of Members of the 1st Respondent<br />
Company be rectified by deleting the name of Respondent No.39<br />
(Gharda Consultants Private limited) from the Register of<br />
members in respect of the said 5492 shares and by restoring the<br />
names of the respective transferors in respect of the said 5492<br />
shares; [the aforesaid numbering is given on the basis that the
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prayers proposed in Company<br />
application No.130 and as communicated vide letter dated 26th<br />
July, 1993 will be sanctioned.]<br />
3. in the alternative to prayers (a) and (b) above(i) for<br />
appropriate orders and directions under sections 397, 398 and<br />
402 of the Companies Act, 1956 including appointment of an<br />
Administrator or Special Officer of the 1st Respondent with all<br />
powers of the Board of Directors for a period of 5 years or for<br />
such other period as this Hon’ble Court may deem fit and proper<br />
for managing the affairs of the 1st Respondent and the Board of<br />
Directors of the 1st Respondent be displaced during such period;<br />
(d) the 1st Respondent be ordered to issue and allot to the<br />
Petitioners such number of equity shares of the nominal value of<br />
Rs.100/- each in the capital of the 1st Respondent as is requisite<br />
to give to the petitioners a majority on the issued and paid up<br />
equity shares in the capital of the 1st Respondent as per value or<br />
at such premium as may be fixed by the Controller of Capital<br />
Issues, Government of India, or any other competent person as<br />
this Hon’ble Court deem fit and proper and to that intent the<br />
share capital of the Company be increased;<br />
for orders and directions directing the Respondents 1 & 2 to offer<br />
the said 3000 equity shares of the face value of Rs.100/- each<br />
(together with all accretions thereto) to the Petitioners in<br />
accordance with Article 57 of the Articles of Association at the<br />
value determined in accordance therewith and directing the 1 st<br />
Respondent to register the same in the name of the petitioners and<br />
make consequential notings on the 1 st Respondent’s records.<br />
(ii)(1) that it may be ordered and declared by this Hon’ble Court<br />
that the Extra Ordinary General Meeting purported to have been<br />
held on 15th February, 1990 and the business conducted<br />
therein/resolutions purported to have been passed therein are all<br />
null and void and bad in law;<br />
(2) that Respondent No.1 be restrained by an Order and<br />
Injunction of this Hon’ble Court from taking any steps or action<br />
on the basis or in pursuance of the resolutions purported to have<br />
been passed at the said meeting of 15th February, 1990 or from in<br />
any manner whatsoever giving effect thereto.<br />
(3) that it may be ordered and declared that the purported transfer
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of 3,000 equity shares by Respondents No.5 in favour of 2nd<br />
Respondent is illegal, null and void;<br />
(4) that this Hon’ble Court be pleased to rectify the register of<br />
members of the 1 st Respondent by deleting the name of<br />
Respondent by deleting the name of Respondent No.2 and 4 in<br />
respect of 3000 equity shares standing in their name and<br />
substituting the name of Respondent No.5,<br />
(5) that Respondent No.2 be restrained by a permanent order and<br />
injunction of this Hon’ble Court from in any manner whatsoever<br />
exercising any rights of membership whatsoever including the<br />
voting rights in respect of 3000 equity shares standing their<br />
names."<br />
60. What is intriguing is that the principal prayer of the present<br />
Petitioners during the argument was that direction be issued to<br />
the majority shareholders to buy out the shares held by the present<br />
Petitioners. On the one hand, the present Petitioners are keen to<br />
walk out of the Company by selling their shares to the majority<br />
shareholders at a price to be determined by this Court. I have<br />
already adverted to the provisions of the A.O.A. which govern the<br />
procedure for determining fair value of the shares, in the event,<br />
the shares were to be offered to the existing members. In my<br />
opinion, in the fact situation of the present case, there is no<br />
question of issuing direction to the majority members to buy out<br />
the shares of the present Petitioners. If the Petitioners are keen to<br />
walk out of the Respondent Company, it does not stand to reason<br />
as to why the Petitioners are questioning every singular transfer<br />
of share, especially between 1989 to 5th May 2001. After 5th May<br />
2001, as the Company has become a Public Company, the issues<br />
raised on behalf of the Petitioners would become insignificant.<br />
Assuming that the Petitioners were to succeed in their assertion, it<br />
is only the present Petitioners who would be entitled to claim<br />
prorata shares allocable to them (original Petitioners 4 and 5)<br />
and not to invalidate the transfer of 5492 shares in its entirety.<br />
However, as has been found earlier, since the transfer of said<br />
5492 shares was between member-to-member, the same was<br />
legitimate and even consistent with the norms of Article 57.<br />
Accordingly, no relief in terms of prayer clauses under<br />
consideration can be granted to the present Petitioners.<br />
61. The only other reliefs that need to be addressed are the
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alternative reliefs to prayer clauses (a) and (b) being prayer<br />
clause (I) and in particular clauses I(i) to (iii) and II(i) to (v). All<br />
these reliefs are also incidental to the reliefs pressed at the time of<br />
arguments which have already been dealt with in the earlier part<br />
of this decision. For that reason, it is not necessary to separately<br />
deal with the same.<br />
62. Taking overall view of the matter, I have no hesitation in<br />
concluding that no case regarding oppression of minority<br />
shareholders has been established by the present Petitioners.<br />
Assuming I were to hold to the contrary, I would still be inclined<br />
to hold that no tangible grounds are made out to conclude that it<br />
is just and equitable to wind up the Respondent No.1 Company.<br />
For, on this finding as observed in the case of Jaladhar<br />
Chakraborty (supra), no further direction needs to be issued.<br />
However, insofar as the direction pressed by the present<br />
Petitioners against the majority shareholders to buy out the<br />
shares of the present Petitioners, I have already dealt with that<br />
aspect in the earlier part of this Judgment.”<br />
103. The learned senior counsel for respondent no. 2 submits that the order<br />
passed by this court on 14 th November, 2008 in Company Petition No. 77 of<br />
1990 was a judgment in rem and not in action in personam. It is submitted that<br />
the proceedings under Sections 397 and 398 are not personal actions for<br />
enforcing personal rights but are representative actions on behalf of the<br />
shareholders and the public at large since public interest is a factor for<br />
consideration under these sections. The learned counsel placed reliance on<br />
Section 399(3) of the Companies Act and submits that the said proceedings<br />
reinforces the view that they are representative actions on behalf of<br />
shareholders. It is thus submitted that the petition was thus as action “in rem”<br />
and therefore the judgment dated 14 th November, 2008 is a judgment in rem. It
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is submitted that the judgment in rem determines an issue of right, status or<br />
property in a way and thus binding persons generally. The learned counsel<br />
placed reliance on the Halsbury Laws of England 4 th Edition, paragraphs<br />
970 to 972 which read as under :-<br />
970. Classification of judgments; in general.<br />
Final judgments which give rise to an estoppel are<br />
divided into two classes: judgments determining<br />
status, known as ‘judgments in rem’ and judgments<br />
determining the rights of parties, known as<br />
‘judgments in personam’ or ‘judgments inter<br />
partes’. The distinction is important because, as is<br />
discussed below, it affects the parties who will be<br />
bound by the judgment.<br />
971. Importance of distinction between<br />
judgments in rem and judgments in personam<br />
or inter partes. The most important distinction<br />
between judgments in rem and judgments in<br />
personam or inter partes is that, whereas the latter<br />
are binding only between the parties to them and<br />
those who are privy to them, the judgment in rem<br />
of a court of competent jurisdiction is, as regards<br />
persons domiciled and property situated within the<br />
jurisdiction of the court pronouncing the judgment,<br />
conclusive against all the world in whatever it<br />
settles as to the status of the persons or property, or<br />
as to the right or title to the property, and as to<br />
whatever disposition it makes of the property itself,<br />
or of the proceeds of the sale. In other words, all<br />
persons, whether party to the proceedings or not,<br />
are estopped from averring that the status of<br />
persons or things, or the right or title to property, is<br />
other than the court has by such a judgment<br />
declared or made it to be. A judgment in rem can<br />
have no effect as such, however, beyond the limits<br />
of the state within which the court delivering the<br />
judgment exercises jurisdiction, unless the thing
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affected is situated or the person affected is<br />
domiciled within those limits.<br />
972. Meaning of ‘judgment in rem’. The term<br />
‘judgment in rem’ has been judicially described as<br />
‘a specialised and somewhat misleading term of art<br />
limited to judgments concerned with status. A<br />
judgment in rem may be defined as the judgment<br />
of a court of competent jurisdiction determining<br />
the status of a person or thing, or the disposition of<br />
a thing, as distinct from the particular interest in it<br />
of a party to the litigation. Apart from the<br />
application of the term to persons, it must affect the<br />
subject matter of the proceedings in the way of<br />
condemnation, forfeiture, declaration of status or<br />
title, or order for sale or transfer.<br />
COAPPL41.12<br />
104. Mr.Bobde, the Learned Senior Counsel appearing on behalf of the<br />
respondent no.2 distinguishes the judgment of this court in case of<br />
M/s.Holdings Ltd. vs. Shyam Madanmohan Ruia & Ors. Reported in 2010<br />
Vol. 112 (9) Bom.L.R. 4005 on the ground that the said judgment has been<br />
considered and dealt with in the judgment and order dated 14 th June, 2011<br />
passed by this Court. It is submitted that ratio in the said case has no<br />
application to the facts of this case. He submits that the said judgment in case<br />
of M/s.Holdings Ltd. (supra) case reported only deals with a scenario where a<br />
restriction on transfer of shares by way of pre-emptive rights is included in a<br />
shareholders agreement i.e. an agreement inter se shareholders and effectively<br />
holds that such an agreement is an imposition of a restriction by the<br />
shareholders upon themselves and is in furtherance of the principle of free<br />
transferability of shares. The said judgment does not deal with a blanket
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restriction on the transferability of shares which is imposed upon a<br />
shareholder through a pre-emptive right contained in the articles of association<br />
of the company. It is submitted that in the present case there is no agreement<br />
inter se the appellants and the respondents and the blanket pre-emptive rights<br />
as contained in the articles of association are therefore found to be<br />
unenforceable and void.<br />
105. The learned counsel appearing on behalf of the appellants submit that<br />
the 1 st respondent was and is a private company by incorporation that became a<br />
deemed company under section 43A and at best, it would be unlisted public<br />
company. It is submitted that by defeat of resolution dated 5 th May, 2001<br />
and/or the amendment to the Companies Act, status of the 1 st respondent does<br />
not change and it continue to remain what it was prior thereto. It is submitted<br />
that in any event, the issue is pending in the Supreme Court. It is submitted<br />
that the effect of Articles of Association of pre-existing private limited not<br />
having clause (d) is the question of law. By voting against such amendment,<br />
the appellants cannot be estopped. In so far as letter dated 6 th June, 2001<br />
addressed by the appellants is considered, it is submitted that said letter was in<br />
reply to the 1 st respondent circulating notice under Article 57. It is submitted<br />
that the 1 st respondent should be estopped from contending that Article 57 is<br />
invalid after 5 th May, 2001. It is submitted that in any event, there can’t be any<br />
estoppel against the statute. If in future, Article 57 can remain in the articles in
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the company, then any stand taken in letters cannot operate as an estoppel.<br />
COAPPL41.12<br />
106. Mr.Samdhani, the learned senior counsel appearing for the appellants on<br />
the other hand made following submissions on these issues :-<br />
(a) The judgment of Shri Justice A.M.Khanwilkar dated November<br />
14, 2008 did not declare Article 57 as void. In the said Judgment, no order is<br />
passed under Section 402 of the Companies Act to delete Article 57. On the<br />
contrary, it is held that Article 57 is a complete code. Further, that judgement<br />
is based on a consensual arrangement between the Petitioners in CP 77 and the<br />
Respondents and as such it is a judgement by concession by parties. Relying<br />
upon the judgment of Supreme Court reported in AIR 2001 SC 1273 it is<br />
submitted that the judgment obtained by concession is not a binding precedent.<br />
In the alternative it is submitted that it is a consensual judgment and therefore<br />
cannot bind persons who are not parties thereto. The Appellants names in the<br />
said Petition had been deleted. The appellants placed reliance on Halsbury<br />
laws of England, 3 rd Edition, para 370 which reads thus :-<br />
370 Consent judgment in rem. Although a<br />
judgment by consent may well create an<br />
estoppel between the parties (m), it is at least<br />
doubtful whether a judgment in rem obtained by<br />
consent of parties (o) can ever be conclusive<br />
against persons who were not and do not claim<br />
through the parties to it, except so far as may be<br />
necessary to protect the title of a person who
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purchases the res on the faith of the judgment.<br />
It has been laid down that a judment by consent<br />
cannot effect a res judicata so as to bind the<br />
public or absent parties (p), and that a judgment<br />
by consent establishing a will in solemn form<br />
does not bind a party who, though served with a<br />
citation to see proceedings, has not appeared or<br />
been represented at the hearing, so as to prevent<br />
him from taking proceedings to revoke probate<br />
(q).<br />
COAPPL41.12<br />
(b) If Shri Justice A.M.Khanvilkar had already decided the issue as to<br />
whether Article 57 was invalid or void as is sought to be contended by the<br />
respondents then there was no requirement for Shri Justice Dharmadhikari to<br />
go into the said question and render a finding to that effect. It is significant that<br />
in CP 77 the parties were not at issue on the validity of Article 57. Neither<br />
were any arguments advanced nor recorded nor decided by Shri Justice<br />
A.M.Khanvilkar on that point.<br />
(c) In law or under the Companies Act, there is no prohibition on a<br />
public company from having a right of pre-emption. This is more so in view of<br />
a company that has become a deemed public company under Section 43A of<br />
the Companies Act and equally so for a company that is an unlisted public<br />
company.<br />
(d) Section 111A is the only provision shown by the respondents to
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submit that a public company cannot have a right of pre-emption is<br />
inapplicable to the 1 st respondent. The said section does not apply to a<br />
company defined under Section 111(14). Section 111(14) of the Companies<br />
Act states as under:<br />
“In this section company means a private<br />
company and includes a private company<br />
which had become a public company by<br />
virtue of section 43A of this Act.”<br />
It is submitted that admittedly, the 1 st Respondent had become a public<br />
company by virtue of S. 43A, and thus the provisions of S. 111A would be<br />
inapplicable.<br />
(e) The question whether the amendment to S. 3(1)(iii) is prospective,<br />
the question whether the abrogation of S. 43A of the Companies Act is<br />
prospective, the question whether the absence of article (d) in pre-existing<br />
private companies would denude them their status of a private company etc are<br />
all questions that are presently pending in the Supreme Court. The question<br />
whether a public company can validly provide a right of pre-emption is also<br />
pending in the Supreme Court.<br />
(f) The Judgment of Shri Justice Dharmadhikari whilst holding<br />
Article 57 to be void does not order its deletion. The said Judgment also does<br />
not hold that Article 57 may be deleted without properly conducting an EOGM<br />
or in a manner contrary to S. 31 and S. 189 of the Companies Act, 1956.<br />
(g) The grievance of the appellants against the attempt of the majority
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shareholders to remove Article 57 from the Articles of Association on the<br />
ground that it has been declared as void cannot amount to defiance of the<br />
Order of this Court when the correctness of the judgment is presently pending<br />
in the Supreme Court.<br />
(h) It is true that the said Judgment dated 8 th August, 2011 is not<br />
stayed. However, by Order dated August 8, 2011 Shri Justice Dharmadhikari,<br />
has given liberty to adopt appropriate proceedings to challenge a fresh EOGM<br />
if convened for the purpose of deleting Article 57. This order was passed after<br />
the learned Judge was informed of the fact that an SLP had been filed against<br />
his earlier Order dated June 14, 2011 in which the Supreme Court had issued<br />
notice and granted injunction. The learned Judge has also stated that the said<br />
fresh proceeding would be decided uninfluenced by “the earlier order”.<br />
Whether “earlier order” means the Order of CLB dated November 9, 2010 or<br />
the Order of <strong>High</strong> Court dated June 14, 2011 – the effect is the same – that the<br />
fresh proceedings should be decided uninfluenced by the earlier finding that<br />
Article 57 is void. It is submitted that the very issue itself is pending in the<br />
Supreme Court.<br />
(i) The Judgment and Order dated November 14, 2008 does not hold<br />
that Article 57 is void. In that case, this issue was not even considered and in<br />
fact the parties proceeded on the basis of a concession that the 1 st respondent<br />
has become a full fledged public company. In any event the Appellants were<br />
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 1 st<br />
respondent has become a full fledged public company and consequently<br />
Article 57 is void. The question of the status of the 1 st Respondent and the<br />
validity of Article 57 is to be adjudicated by the Supreme Court.<br />
(k) The Judgment and order dated 14 th June, 2011 was challenged in<br />
Supreme Court and SLP against the said order is pending wherein not only<br />
the Supreme Court has issued notice but has also granted injunction<br />
restraining second and third respondent from transferring the shares directly<br />
or indirectly held by them so as to protect the appellant's pre-emptive right<br />
under Article 57. It is submitted that the conduct of EOGM dated 22 nd May,<br />
2012 by which the respondent contended that the resolution for deleting<br />
article 57 was allegedly passed is the subject matter of substantive challenge<br />
in Company Application No. 91 of 2012 which is still pending. The learned<br />
counsel submits that the submission of the respondents that even if the<br />
Supreme Court dismissed the SLP, Article 57 would be finally declared to be<br />
invalid and even if the Supreme Court allows Special leave Petition, Article<br />
57 would be valid until 22 nd May, 2012 and thereafter will cease to exist is<br />
self-defeating argument. It is submitted that the entire purpose of deleting<br />
Article 57 by the respondent is to interfere with the matter pending in<br />
Supreme Court and is an attempt to render it infructuous and academic. It is<br />
submitted that if Supreme Court holds that article 57 is valid, the said article<br />
would be valid for all time unless lawfully deleted. Even if the Supreme
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Court holds that article 57 is invalid, it will have to be deleted in accordance<br />
with law and at properly convened EOGM. It is submitted that if respondents<br />
are allowed to delete article 57 now and the Supreme Court subsequently<br />
holds that it was valid or if the appellant succeeds in their contention that<br />
the resolution was wrongfully passed on 22 nd May, 2012, it would give rise to<br />
innumerable complications and multiplicity of proceedings to set the clock<br />
back. It is submitted that it would be impossible to set the clock back as<br />
several third party rights may have been created on the basis that there there<br />
is no right of pre-emption.<br />
107. In my view the proceedings filed under section 397 and 398 are not<br />
personal action in personal rights but are representative actions on behalf of<br />
the shareholders and public at large in view of the fact that the public<br />
interest is the factor for consideration in these sections. In my view learned<br />
counsel Mr. Bobde is right in his submission that the petition filed under<br />
section 397 and 398 (Company Petition No. 77 of 1990) was an action in rem<br />
and therefore, the judgment dated 14 th November, 2008 passed therein by this<br />
court is a judgment in rem. Shri Justice A.M. Khanwilkar in the said<br />
judgment has given categorical finding that respondent no. 1 company is a<br />
public limited company. The present appellants who are parties to the said<br />
petition filed under section 397 and 398 had not obtained any leave to file the<br />
proceedings again on the basis of the same cause of action in future. I am not
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inclined to accept the submissions made by Mr. Samdani, the learned senior<br />
counsel that the order dated 14 th November, 2008 passed by this court in<br />
Company Petition No.77 of 1990 is based on concession and is not binding on<br />
the appellants. In my view, in the said judgment dated 14 th November, 2008<br />
this court has decided after considering all the facts that the first respondent<br />
company is a public limited company. This court has thus decided the status<br />
of the company which is juristic person and thus in my view, the said judgment<br />
has attained finality not having been challenged by the petitioners and thus<br />
operates in rem and binds every one generally inclusive of the appellants.<br />
In my view the said judgment is also biding on the single judge of this court.<br />
The finding of this court rendered in the said judgment that the shares of the<br />
first respondent company are freely transferable is also in my view equally<br />
biding and conclusive not only on the parties thereto but also this court.<br />
108. The learned author says that the judgment in rem may be defined as<br />
judgment of the court of competent jurisdiction determining the status of the<br />
persons or thing or disposition of the thing as distinct from the particular<br />
interest in it of the party to the litigation. Apart from the application of the<br />
term to persons it must affect the subject matter of the proceedings in the<br />
way by condemnation, forfeiture, declaration of status or title. In my view,<br />
such declaration rendered by this court in the said judgment that the first<br />
respondent company is a public limited company and its shares are freely
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transferable declares the status and purport of the first respondent company<br />
and thus in my view the said judgment operates in rem and is binding on all<br />
the parties. In my view these appellants are estopped from challenging the<br />
status of the first respondent company as public limited company and also the<br />
finding that the shares of the first respondent company are freely transferable.<br />
In my view CLB in the impugned order in Para 13 has rightly followed the<br />
judgment of this court in Company Petition No.77 of 1990 by holding that the<br />
said decision is binding on the petitioners who had unconditionally withdrawn<br />
from the said petition filed under section 397 an 398 of the Act. It is further<br />
held that the decision is also binding on CLB. In my view the said decision of<br />
this court has been rightly followed by CLB. There is no substance in the<br />
submission made by Mr. Samdani that if this court had already decided the<br />
issue as to whether Article 57 was invalid or void, there was no requirement<br />
for this court to decide the said judgment again and render finding to that<br />
effect. Shri Justice S.C. Dharmadhikari has followed the judgment of this<br />
court delivered by Shri Justice A.M. Khanwilkar.<br />
109. I shall now decide as to whether the judgment dated 14 th June, 2011<br />
passed by this court in Company Appeal No. 24 of 2010 was binding on the<br />
CLB and also this court, not having been stayed by the Supreme Court and as<br />
to whether the appellant can agitate the issues which are already decided by<br />
this court in order dated 14 th June, 2011 in the present proceedings.
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110. Apart from the fact that in the present proceedings, I have already taken<br />
a view after considering the pleadings documents and arguments advanced by<br />
the parties that respondent no.1 company is a public limited company and<br />
shares are freely transferable and that the resolution passed by the first<br />
respondent company in its EOGM held on 22.5.2001 can not be construed as<br />
the act of oppression but shall consider whether the order and judgment<br />
delivered by Shri Justice S.C. Dharmadhikari is binding on this court in the<br />
absence of stay to the said judgment by the Supreme Court.<br />
111. On perusal of the order and judgment dated 14 th June, 2011 it is clear<br />
that the issue as to whether respondent no. 1 company has become public<br />
limited company, whether shares are freely transferable or not, whether article<br />
57 has become void or not, amongst several other issues were subject matter of<br />
the said appeal decided by this court. The appellants had canvassed<br />
proposition that the breach of articles would be ultra vires and breach of<br />
right of pre-emption constitutes act of oppression. It was submitted by the<br />
appellants that the power to amend the articles could not be used to oppress<br />
minority and take away their vested rights. In the said judgment various<br />
questions of law formulated by the appellants were summarized in para 84 of<br />
the judgment. Para H reads as under :
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“(h) whether taking away or cancelling a right of<br />
preemption by amending the Articles will also amount to<br />
oppression and will be actionable.”<br />
COAPPL41.12<br />
112. On these issues this court has rendered finding that on 13 th December,<br />
2000 the first respondent became the public limited company but the public<br />
company and the argument of the appellant that it continued to retain its<br />
fundamental and basic character as private company was negatived. This court<br />
has also considered the fact that the amendment to insert additional clause (d)<br />
was defeated by the appellants. This court has held that once preemption<br />
alleged itself not in existence by virtue of statutory provisions then there is no<br />
act of oppression. In so far issue as to whether the order passed by Shri Justice<br />
A.M.Khanwilkar in Company Petition No. 77 of 1990 would operate in rem<br />
is concerned, this court considered the same and has rendered finding that the<br />
arguments in the proceedings in C.P. No. 132 of 2009 and the arguments in<br />
Company Petition No. 77 of 1990 were identical. This court held that the<br />
observations made by this court in the order passed in Company Petition No.<br />
77 of 1990 would be applicable to the appellants also. This court also<br />
observed that once this court in the said proceedings had found that the<br />
conduct of the remaining petitioners was entirely blameworthy and they<br />
cannot substitute the charge and/or allegations leveled of having oppression,<br />
the minority shareholders other than present appellant can not on the same
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material succeed in pursuing the said allegations. This court also observed that<br />
the appellants were raising the same issues based on the same allegations and<br />
identical arguments. This court after considering the arguments of the parties<br />
and the order and judgment delivered by Shri Justice A.M. Khanwilkar in<br />
Company Petition No. 77 of 1990 held that the finding rendered in the said<br />
judgment were fully applicable to the facts in the said Company Appeal No.<br />
24 of 2010 and there was no justification for taking a different view. This<br />
court rendered a finding that the appellants had failed to substantiate their<br />
charge of oppression of minority and the allegations being serious, the<br />
appellants ought to have brought adequate and substantial proof which the<br />
appellants had failed. This court took a view that on the basis of the material<br />
produced it could not be held that there was any oppression of minority. This<br />
court also took into consideration the conduct of the appellants in withdrawing<br />
from the proceedings of Company Petition No. 77 of 1990 and settling their<br />
disputes with respondent no. 2 while denying any relief in their favour in<br />
Company Appeal No. 24 of 2010.<br />
113. The orders passed by the Supreme Court in the pending SLP, filed by<br />
the appellants, indicate that the judgment delivered by this court has not been<br />
stayed. From the perusal of the record, it is clear that the appellants have not<br />
even applied for stay of the judgment delivered by Shri Justice S.C.
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Dharmadhikari. In my view, since the said judgment has not been stayed<br />
admittedly by the Supreme Court, I am bound by the view taken by this court<br />
in the said judgment delivered in Company Appeal No. 24 of 2010. Even<br />
otherwise, from the facts examined independently, I am of the view that no<br />
case is made out for taking a different view than that has been already taken by<br />
Shri Justice S.C. Dharmadhikari.<br />
114. Shri Justice S.C. Dharmadhikari in the said judgment has also<br />
considered the judgment of this court in the case of Western Maharashtra<br />
Development Corporation Ltd. Vs. Bajaj... (2010) 154 Company Cases 593<br />
and the judgment of the division Bench rendered on 1 st September, 2010 in the<br />
case of M/s. Holdings Vs. Shyam Madanmohan Ruia (2010), 159 Company<br />
Cases 29. After considering the judgment of the Division Bench, this court<br />
has already rendered finding that the shares of the first respondent company<br />
are freely transferable. In my view, the facts before the Supreme Court in the<br />
case of Vodaphone Vs. Union of India are clearly distinguishable and the ratio<br />
in the said judgment does not apply to the facts of this case. The Supreme<br />
Court was not dealing with the similar clause. The issue in the said judgment<br />
was totally different. The validity of article 57 in my view has been already<br />
decided by this court in the judgment of Shri Justice A.M. Khanwilkar and<br />
Shri Justice S.C. Dharmadhikari and thus these two judgments relied upon by
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the respondents in my view are binding on this court in the present<br />
proceedings.<br />
115. In my view, there is no merit in the submission of Mr.Samdhani, that<br />
there is prohibition on a public limited company from having a right of<br />
preemption. In the order and judgment delivered by Shri Justice<br />
S.C.Dharmadhikari, this court has already decided that in view of the 1 st<br />
respondent company being a public limited company, Article 57 has become<br />
redundant.<br />
116. In so far as submission of Mr.Samdhani, the learned senior counsel that<br />
this court shall not consider the finding rendered by Shri Justice<br />
S.C.Dharmadhikari in view of the pendency of special leave petition is<br />
concerned, it is common ground that the said judgment has not been stayed by<br />
the Supreme Court so far. The appellants are not even able to show that the<br />
appellants had prayed for stay of the said judgment before the Supreme Court.<br />
The CLB in para 30 of the impugned order has dealt with the interim order<br />
passed by the Supreme Court in the Special Leave Petition arising out of the<br />
order dated 14 th June, 2011 passed by this court. The CLB has held that the<br />
Supreme Court has denied the modified relief sought by the appellants and the<br />
special leave petition has not been admitted as yet. The CLB has also rendered<br />
a finding in para 33 of the impugned order and has held that the petitioners
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were not claiming that any of the action of the respondents amounted to the<br />
breach of the order of the Supreme Court or that it gave rise to any matter in<br />
the nature of contempt of any court and on the contrary the petitioners elected<br />
to approach CLB impugning EOGM as none of the legal issues raised in the<br />
special leave petition transgraced to the corporate democracy and shareholders’<br />
right to take corporate action including amendment of articles in accordance<br />
with the provisions of the Act. In my view, there is no infirmity in this view<br />
taken by the CLB and thus decision of the CLB permitting the 1 st respondent to<br />
implement the resolution to delete Article 57 on the ground that it was invalid<br />
during the pendency of special leave petition cannot be faulted. In my view,<br />
there is no question of law arising in this appeal as formulated by the<br />
appellants and setout in para 2J of this order.<br />
117. In my view, it is far too obvious that if the Supreme Court sets aside the<br />
order of this court or takes some different view, the parties shall be bound by<br />
the law declared by the Supreme Court. It is, therefore, neither necessary nor<br />
desirable to say anything more on this issue.<br />
118. This court has already decided in para 123 of the judgment in Company<br />
Appeal No. 24 of 2010 that merely because its shares are not listed in any<br />
recognised stock exchange, does not mean that there is any restriction on<br />
transfer. Such shares are freely transferable as they are shares of the public
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company. In my view, appellants are not allowed to agitate the same issue<br />
again in the present proceedings. Similarly the appellants cannot be permitted<br />
to agitate the issue that the provisions of section 111A would be in applicable<br />
to the 1 st respondent company. In my view, there is no merit in the submission<br />
of the appellant that in the order passed on 14 th June, 2011 by Shri Justice<br />
S.C.Dharmadhikari there is no specific direction to delete Article 57 and thus<br />
conducting an EOGM was contrary to Sections 31 and 189 of the Companies<br />
Act, 1956. In my view, even if no such directions are given in the said<br />
judgment dated 8 th August, 2011, once this court having declared that the said<br />
article became redundant, 1 st respondent company was fully justified in passing<br />
a resolution to delete such redundant and void Article 57 so as to make it in<br />
conformity with the provisions of Companies Act, 1956. There is no merit in<br />
the submission made by the appellants that the company law board or this<br />
court cannot consider the findings rendered by this court in the order dated 8 th<br />
August, 2011 in view of the liberty granted in the said order to the appellants<br />
to adopt appropriate proceedings to challenge fresh EOGM in continuity for<br />
the purpose of deleting article 57 and in observing that the fresh proceedings<br />
would be decided influenced by the earlier order. In my view, the record<br />
produced by the parties in the present proceedings read with order dated 8 th<br />
August, 2011 passed by this court makes it clear that this court was referring to<br />
the earlier order passed by CLB dated 9 th November, 2010 which was<br />
impugned therein and not the order passed by this court. In view of the fact
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that the judgment delivered by this court is not stayed. I am bound by the<br />
decision of this court unless I take a different view and refer the matter to<br />
larger bench which I don’t propose to do.<br />
119. The CLB has in para 30 of the impugned order has followed the<br />
judgment of this court in Company Appeal No. 24 of 2010 on the issue that the<br />
1 st respondent company is the public company and once it is held to be a public<br />
company, then its shares are freely transferable and article would not hold<br />
good as they are contrary to the status. In my view, the order and judgment<br />
dated 14 th June, 2011 passed by Shri Justice S.C.Dharmadhikari not having<br />
been stayed by the Supreme Court is binding on the CLB as well as on single<br />
judge of this court. The CLB has thus rightly followed the said judgment and<br />
has allowed the application filed by respondent nos. 1 and 2 for vacating<br />
and/or modifying the order dated 21 st May, 2012. In my view, the order passed<br />
by Shri Justice S.C.Dharmadhikari operates in rem and is binding on the<br />
parties to the present proceedings. In my view, the appellants are estopped<br />
from re-agitating the issues which are already decided by this court in<br />
Company Petition No. 77 of 1990 and in Company Appeal No. 24 of 2010 in<br />
the present proceedings.<br />
120. In so far as the question E and F formulated by the appellants as setout<br />
in para 2 are concerned, it is common ground that by an order dated 21 st May,<br />
2012, the CLB had permitted the 1 st respondent to hold EOGM on 22 nd May,
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2012 and had kept the matter pending. It is also not in dispute that on 22 nd<br />
May, 2012, a resolution came to be passed in the said EOGM resolving to<br />
delete Article 57. It is thus clear that CLB was fully conscious of the fact that<br />
the resolution would be passed in the meeting allowed to be held on 22 nd May,<br />
2012. It is common ground that the appellants did not challenge the said order<br />
dated 21 st May, 2012 passed by CLB allowing 1 st respondent to hold meeting<br />
on 22 nd May, 2012. The CLB could not have granted any injunction against<br />
the 1 st respondent from requisitioning or holding EOGM as the same was<br />
requisition in accordance with law.<br />
121. In so far as contention of the appellants that the CLB could not have<br />
permitted the 1 st respondent to implement the resolution in view of the order<br />
passed by CLB itself having allowed the appellant to amend the company<br />
petition questioning the conduct at the impugned EOGM and that the said<br />
conduct was under serious dispute is concerned, in my view, this submission<br />
does not survive in view of the fact the appellants having argued the issue<br />
raised by the appellants in Company Application No. 91 of 2012 and 73 of<br />
2012 in the present proceedings. In my view, the CLB was fully justified in<br />
considering the effect of resolution passed in the meeting permitted to be hold<br />
by order dated 21 st May, 2012 in the impugned order. In my view, no question<br />
of law arises as formulated and setout by the appellants in para 2E and F of the<br />
judgment.
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122. In so far as question formulated by the appellants in paragraphs 2G and<br />
2H are concerned, in view of this court having taken a view that the 1 st<br />
respondent company being a public limited company and its shares are freely<br />
transferable, in my view the question of exercise of right of preemption in such<br />
situation does not arise. The resolution thus passed by the 1 st respondent<br />
company in deleting Article 57 with a view to give effect to the said position in<br />
accordance with law does not amount to an act of oppression. The CLB in<br />
para (40) of its order has rendered finding that passing of resolution by the<br />
share holders of the company in exercise of their democratic rights in extra<br />
ordinary general meeting requisitioned by the shareholders of the company<br />
does not in any manner amount to oppression and mismanagement and cannot<br />
form a subject matter of the petition under sections 397 and 398 of the<br />
Companies Act and there is no reason to interfere with the internal democracy<br />
of the company. The CLB has also rendered a finding that keeping in view the<br />
rights of the shareholders the principles of corporate democracy in the absence<br />
of prima facie case shareholders’ decision is prejudicial to the public interest or<br />
at large CLB has no justification in restraining the first respondent company<br />
from implementation of the special resolution passed and from filing of the<br />
requisite forms with R.O.C. in that regard. In my view, the findings rendered<br />
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<br />
resoluton to delete Article 57 as the same in my view is not oppressive to the<br />
minority shareholders. In my view, no such question of law as formulated by<br />
the appellants in para 2G and 2H thus arise in the present appeal.<br />
124. Both parties have addressed this court at length on the issue whether<br />
order passed by Shri Justice A.M.Khanwilkar on 14 th November, 2008 in<br />
Company Petition No. 77 of 1990 operates in rem or not and is binding also on<br />
the appellant or not.<br />
125. Company Petition No. 77 of 1990 was filed by the appellants and also<br />
few other parties under sections 397 and 398 of the Companies Act against the<br />
1 st respondent company. The appellant who were parties to the said petition<br />
sought liberty to withdraw from the said proceedings unconditionally and<br />
requested this court to delete their names from the array of the petitioners.<br />
This court granted leave to the appellant herein who were petitioners alongwith<br />
other parties to withdraw from the said proceedings unconditionally and<br />
allowed their names to be deleted from the array of the petitioners. While<br />
granting that liberty, this court observed that appellants herein and their names<br />
have been deleted form the arrays of the petitioners. The effect of<br />
unconditional withdrawal from the proceedings by the said Petitioners is that<br />
they have given up their challenge with regard to the alleged acts of oppression
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and mismanagement. In that, those Petitioners have consciously acquiesced in<br />
the acts complained of. This court also recorded that the appellant herein had<br />
consciously withdrawn from the proceedings unconditionally. After recording<br />
these facts, Shri Justice A.M.Khanwilkar considered the matter on merits<br />
which was pursued by remaining two petitioners therein and held that there<br />
was no case regarding oppression of minority. This court also held that the 1 st<br />
respondent company had become public limited company as a result of special<br />
resolution moved in the Extra Ordinary General Meeting dated 5 th May, 2001<br />
having been defeated. It is held that first respondent having status of public<br />
limited company, a restriction on the right to transfer the shares which was<br />
applicable to the private limited company would naturally get diluted. It is<br />
held that restriction under Article 57 shall have no relevance after the 1 st<br />
respondent company had admittedly become public limited company. It is held<br />
that minimum of 50 members may apply to the private limited company will<br />
have no relevance any more.<br />
126. It is common ground that the order passed by Shri Justice<br />
A.M.Khanwilkar in the said Company Petition No. 77 of 1990 was not<br />
challenged by any of the parties. It is also not in dispute that the present<br />
appellant did not obtain leave while seeking liberty to their withdrawal from<br />
the said proceedings unconditionally and for deleting their names from the<br />
array of the petitioner. In the order passed by this court, it has been clearly
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recorded that the appellant herein have consciously withdrawn from the<br />
proceedings unconditionally and have given up their challenge with regard to<br />
the alleged act of oppression and mismanagement. Thus in my view the said<br />
judgment delivered by Shri Justice A.M.Khanwilkar is binding on the<br />
appellants and other parties to the said proceedings, CLB and this Court and<br />
also operates in rem.<br />
127. The next submission of Mr.Samdhani, the learned senior counsel for the<br />
appellants is that without prejudice to the rights of the appellants that the 1 st<br />
respondent company is not the public limited company and the order passed by<br />
this court in Company Petition No. 77 of 1990 and Company Appeal No.24 of<br />
2010 are not orders in rem and are not binding on the appellants on the<br />
submissions already made and respondent company thus could not pass any<br />
resolution so as to delete Article 57, it is submitted that majority shareholders<br />
had grossly misconducted in requisitioning EOGM and in passing resolution<br />
therein and the same is totally contrary to the provisions of the Companies Act<br />
and Articles of Association. It is submitted that the procedure followed in<br />
conducting the meeting by the chairman was totally illegal and against the<br />
interest of minority shareholders. The learned counsel submits that though<br />
these allegations were forming part of Company Application No. 91 of 2012<br />
filed by the appellants and is pending before the CLB, this court shall consider<br />
the same in the present proceedings as the said issue could not be kept pending
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by CLB while deciding the challenge to the validity of convening of the<br />
meeting and passing a resolution therein by first respondent. The learned<br />
counsel submits that both proceedings ought to have been decided by CLB and<br />
thus by granting adjournment of the Company Application Nos. 91 of 2012<br />
and 73 of 2012 pending before CLB and only proceeding with and deciding<br />
the Company Application No. 85 of 2012 filed by the 1 st and 2 nd respondents,<br />
the pending proceedings filed by the appellants have become infructuous. At<br />
the request of the appellants and in view of the fact that the parties have<br />
addressed this court on all such issues which were pending before the CLB in<br />
Company Application Nos. 73 of 2012 and 91 of 2012, pertaining to the<br />
procedure followed by the respondent no.1 and majority shareholders in<br />
requisitioning the meeting and passing a resolution therein. I shall now deal<br />
with the issue as to whether there was any illegality in requisitioning the<br />
meeting and as to whether procedure followed by the majority shareholders in<br />
the said meeting held on 22 nd May, 2012 was illegal or any of such acts<br />
amounted to any misconduct.<br />
128. I shall first decide as to whether the 1 st respondent company was<br />
justified and was right in convening EOGM and also as to whether such<br />
meeting could be held though one of the requisitionist had alleged to have<br />
withdrawn her consent before such meeting came to be held on 22 nd May,<br />
2012. It is not in dispute that respondent nos. 6 to 8 collectively holding
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12.5% of the paid up share capital issued by the 1 st respondent company issued<br />
a notice on 31 st March, 2012 under section 169 of the Companies Act read with<br />
Article 76 of the Articles of Association to convene EOGM of the members of<br />
the company to transact the business by special resolution “amendment of<br />
Articles of Association of the company for deletion of Article 57 of the Articles<br />
of Association of company”. It is not in dispute that the said notice issued by<br />
respondent nos. 6 to 8 was received by the 1 st respondent company on 20 th<br />
April, 2012. It is also not in dispute that when the said notice was received by<br />
the 1 st respondent company to requisition a meeting, the notice was issued by<br />
such members having not less than 1/10 th of paid up capital of the 1 st<br />
respondent company and had right of voting in that regard to the matter.<br />
Pursuant to the receipt of such notice under section 169 of the Companies Act<br />
read with Article 76 of the Articles of Association, the 1 st respondent company<br />
issued a notice on 25 th April, 2012 proposing to hold EOGM on 22 nd May, 2012<br />
at 11.00 a.m. to pass a resolution pursuant to section 31 of the Companies Act,<br />
1956 and other applicable provisions by deleting then existing Article 57 of the<br />
Articles of Association. It was made clear that a member entitled to attend and<br />
vote in the meeting was entitled to appoint a proxy to attend and vote instead<br />
of himself and the proxy need not be a member.<br />
129. On 19 th May 2012, one of the requisitionist Ms Mahrukh Oomrigar<br />
respondent No.6 herein holding 6% shares addressed a letter to her Advocates<br />
and Solicitors instructing to support the C.A.(73 of 2012) filed by the
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appellants and to concede to the injunction prayed for in the said application.<br />
The sixth respondent instructed her advocate that she did not propose to move<br />
or support the proposed resolution for deletion of Art.57. Based on this letter,<br />
the submission of the appellants is that no such meeting could be requisitioned<br />
by the 1 st respondent company at all as the judgment delivered by Shri Justice<br />
S.C.Dharmadhikari was impugned in the Supreme Court, one of the<br />
requisitionist holding 6% shares had already withdrawn her consent and thus<br />
there was no requisite number of members as per Section 169(4) available out<br />
of the members who had requisitioned meeting on the date of the EOGM.<br />
130. On conjoint reading of Section 169 and Article 76 of the Articles of<br />
Association, it is clear that Extra Ordinary General Meeting has to be<br />
conveyed by a company if it is requisitioned by the members of the company<br />
of having not less than 1/10 th of the paid up capital of the company and had<br />
right of voting in that regard to that matter.<br />
131. The company is under obligation and it is mandatory for a company to<br />
convene the meeting on receipt of such notice issued by such number of<br />
members. Section 169(6) of the Act provides that if within 21 days from the<br />
date of deposit of valid requisition, if the company does not proceed or call a<br />
meeting for consideration of these matters on a day not later than 45 days<br />
from the date of deposit of requisition, the meeting may be called by the
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requisitionist themselves. It is thus clear that there was no option available to<br />
the 1 st respondent company but to call EOGM in compliance with the<br />
provisions of law. Perusal of the letter dated 9 th May, 2012 addressed by Ms.<br />
Mahrukh Oomrgar, respondent no.6 holding 6% shares to her advocates and<br />
solicitors instructing to support the Company Application (73 of 2012) filed by<br />
the appellants and to concede to the injunction prayed for in the said<br />
application, in my view does not amount to withdrawal of consent by the 6 th<br />
respondent in holding EOGM. In any event, once a valid requisition was<br />
received by the company from its members having requisite numbers in<br />
accordance with section 169 read with Article 76 of the Articles of Association,<br />
even if any of the requisitionist withdraws his consent or such member ceased<br />
to be the member, in my view, the board of directors have no option but are<br />
obliged to call such EOGM. In my view, once required number of members<br />
have requisitioned the meeting in accordance with section 169(4) of the Act<br />
read with Article 76 of the Articles of Association and such notice for<br />
convening EOGM is received by the company, subsequent withdrawal of<br />
consent or that any member ceased to be a member subsequently does not give<br />
any discretion to the board of directors not to call a meeting due to such<br />
change. Mr.A.Ramaiya in his work “Guide to the Companies Act, 1956” Part<br />
II 17 th Edition has commented upon the powers of the board of directors on<br />
similar situation. In my view, the respondents are right in placing reliance<br />
upon the said comment of the learned author on this issue. In my view,
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requisition of a meeting should be by requisite number of members under<br />
Section 169 (a) and such mandatory strength is required on the date when such<br />
notice is received by the company. Subsequent reduction in number after<br />
receipt of such notice by the company, cannot prevent the company from<br />
convening such a EOGM.<br />
132. Without prejudice to the aforesaid submissions, it is submitted by<br />
Mr.Samdhani that irrespective of the nature of the resolution, the impugned<br />
EOGM has been grossly mis-conducted and procedure followed in conducting<br />
EOGM was totally illegal which has vitiated the entire resolution. The<br />
minority shareholders are entitled to independently challenge the said illegal<br />
procedure.<br />
133. Mr.Samdhani, the learned senior counsel appearing on behalf of the<br />
appellants made following submissions on the issue as to whether conduct<br />
of the EOGM by the Chairman was illegal or not :-<br />
(a) That impugned EOGM held on 22 nd May, 2012 had been illegally and<br />
improperly conducted with a view to ensure that the resolution deleting Article<br />
57 is shown as having been passed. The 1 st respondent company delayed and<br />
denied inspection of proxies, proxy register, inward register etc. so as to enable<br />
the 1 st respondent to manipulate the lodgment of proxies. The chairman of the<br />
meeting, who owes allegiance to Dr.Gharda and who himself is a director of
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the 1 st respondent company mis-conducted himself by mala fide disallowing<br />
the 1 st appellant from voting on 1710 equity shares belonging to her and<br />
permitted Godrej to exercise votes on the said shares.<br />
(b) The mala fides and the illegality of permitting Godrej to cast votes in<br />
respect of 1710 equity shares is demonstrable from the following events:-<br />
(i) Rajiv Bakshi could not vote as the 1 st Appellant’s power<br />
of attorney holder under the loan cum pledge power of attorney.<br />
(ii) The loan cum pledge power of attorney was not executed<br />
in favour of Rajiv Bakshi, but was executed in favour of Godrej<br />
Industries Limited. Godrej Industries Ltd. being a body<br />
corporate could have in turn sub-delegated its rights in favour<br />
of Rajiv Bakshi (a) either by passing a board resolution or (b)<br />
by executing a power of attorney. In the present case neither<br />
has been done.<br />
(iii) The loan cum pledge power of attorney could never have<br />
been accepted by the 1 st respondent Company as the same had<br />
already rejected these powers of attorney (Vol VII page 1363) in<br />
the past and had filed a suit for cancellation thereof.
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(iv) These powers of attorney are admittedly not registered<br />
with 1 st respondent and it does not recognize/accept power of<br />
attorney that are not registered.<br />
(v) The record indicates that these Powers of Attorney are<br />
also not lodged 48 hours before the commencement of<br />
impugned EOGM and the entire exercise of introducing the<br />
Godrej documents was ante dated.<br />
(vi) On May 16, 2012 Godrej Industries Ltd. writes to the<br />
minority shareholders to vote for the resolution. This letter<br />
presupposes that Godrej would not be attending the meeting.<br />
(vii) On May 17, 2012 Maharukh Oomrigar – one of the<br />
requisitionists addresses a letter dated May 16, 2012 indicating<br />
that she will oppose the resolution. This would result in<br />
Dr.Gharda’s not having the adequate 3/4 th majority to carry the<br />
resolution.<br />
(viii) all letters lodging a proxy contain the time of receipt and<br />
the inward number. Alleged letter dated May 19, 2012 neither<br />
bears the inward number nor the time of receipt.<br />
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(c) Rajiv Bakshi could not have exercised rights under the power of<br />
attorney dated March 9, 2012.<br />
i. The power of attorney dated March 9, 2012<br />
is not issued in respect of the shares belonging to<br />
the 1 st Appellant in particular 1710 shares.<br />
ii. This power of attorney is not even lodged<br />
with GCL but was produced at the meeting by<br />
Mr.Rajiv Bakshi when his authority to attend and<br />
vote on behalf of Godrej Industries Ltd. was<br />
questioned.<br />
(d) Rajiv Bakshi could not have exercised rights as a proxy :<br />
i. By an alleged letter dated May 19, 2012, one<br />
Mr.Clement Pinto is stated to have issued a letter<br />
of authorization in favour of Mr.Rajiv Bakshi. The<br />
authorization of the said Clement Pinto is however<br />
not available. There is no Board Resolution<br />
accompanying the same.<br />
ii. This purported authorization does not entitle
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Rajiv Bakshi to sign a proxy.<br />
iii. Yet, Mr.Bakshi purports to sign a proxy in<br />
his favour and this is accepted by the Company.<br />
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(e) The impugned EOGM was wholly stage managed and reduced to a<br />
farcical paper meeting with the end result already pre-planned. The 1 st<br />
Appellant hold 2961 shares. The voting slips were pre typed voting slips and<br />
the 1 st Appellant's proxy Mr.Hegde was handed over a pre typed polling slip<br />
for 1251 shares (2961 – 1710) as if the Company knew the Chairman’s ruling<br />
in advance.<br />
(f) By a pre meditated exercise the 1 st Appellant was wrongly denied the<br />
right to vote on 1710 shares and instead Godrej was wrongfully permitted to<br />
vote on these shares. If Godrej was not permitted to vote on these shares and<br />
the 1 st Appellant was permitted to vote, the resolution would not have passed<br />
as the total votes against the resolution would have been thus :<br />
Name No. of shares %<br />
Darius Kavasmaneck 7555 12<br />
<strong>Jer</strong> Kavasmaneck 2961 5<br />
Maharukh Oomrigar 3814 6<br />
Colin Rebello 2640 4
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Total 16970 27<br />
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(g) The Chairman wrongly and illegally did not permit the 1 st Appellant’s<br />
proxy Mr.Hegde to vote in respect of her 1710 shares and permitted and<br />
Godrej to vote on the said shares. This action was mala fide and a part of the<br />
fraudulent oppressive stratagem of Dr.Gharda. By such conduct, the EOGM<br />
and its proceedings stand vitiated and the resolution stated to have been passed<br />
is thus required to be set aside as illegal and bad.<br />
(h) The conduct of the chairman, Dr.Gharda in conducting the EOGM was<br />
totally illegal. It is submitted that the chairman of the meeting holds an<br />
important position and he is responsible for the proper conduct of the meeting.<br />
The chairman must exercise his powers bona fide. It is submitted that where<br />
it is shown that the chairman has acted mala fide or that the chairman has acted<br />
in a manner contrary to law, the affected shareholders are entitled to question<br />
the decision of the chairman. The appellants placed reliance on the judgment<br />
reported in (1943) 2 All ER 567 and judgment of Kolkata <strong>High</strong> Court reported<br />
in AIR 1937 Cal. 645 and unreported judgment of this court dated 7 th April,<br />
1995 in case of Kavasmaneck vs. Gharda.<br />
134. The learned counsel appearing on behalf of the respondent no.2 on the
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other hand submits on these issues as under :<br />
(a) Godrej lodged 11 powers of attorney that<br />
Appellant No.1 has issued in favour of Godrej. Each of<br />
these powers of attorney issued in favour of Godrej<br />
permit Godrej to attend and vote at meetings in respect<br />
of an aggregate of 1710 shares. Each of these powers of<br />
attorney are irrevocable and are coupled with<br />
consideration/interest and shall take precedence over<br />
another power of attorney issued by Appellant No.1.<br />
The 11 powers of attorney by themselves operate as a<br />
proxy entitling Godrej to vote at a meeting and are duly<br />
stamped. Since Godrej being a company cannot itself<br />
attend the meeting it was essential to authorise a person<br />
to attend the meeting as its representative. The letter<br />
dated May 19, 2012 was merely such an authorisation<br />
letter for which no format or requirements are prescribed<br />
under the statute and for which no further stamping is<br />
required. The provisions of section 187 of the<br />
Companies Act do not apply as Godrej is not a<br />
corporation/company which is a member/shareholder,<br />
but is a company which is a power of attorney<br />
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holder/proxy of a shareholder.<br />
(b) The Judgment cited i.e. AIR 1928 Bom 80<br />
therefore has no application in the present case.<br />
(c) In view of the powers of attorney issued in favour<br />
of Godrej, no further proxies were required to be issued<br />
in favour of Godrej or its representatives and Mr.Bakshi<br />
was entitled to attend the meeting only on the basis of<br />
the powers of attorney read with the authority letter<br />
dated May 19, 2012.<br />
(d) In addition to the authority that Godrej had to<br />
attend and vote at the meeting under the 11 PoAs lodged<br />
with Respondent No.1 company, the PoA’s also entitled<br />
godrej additionally to also appoint a proxy on behalf of<br />
Appellant No.1 to attend and vote at the meeting.<br />
Though no further proxies were required to be issued in<br />
favour of Mr.Bakshi, Godrej as constituted attorney of<br />
Appellant No.1, also issued proxies in favour of<br />
Mr.Bakshi in addition to and independent of the letter of<br />
authority dated May 19, 2012. Once the letter of<br />
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authority dated May 19, 2012 read with the 11 PoAs are<br />
considered to be sufficient authority to Mr.Bakshi to<br />
attend and vote at the EOGM on 22.05.2012, the<br />
existence of the proxies lose significance. Whether<br />
Mr.Bakshi had the authority to execute the proxies or<br />
not as a representative of Godrej (which is the<br />
constituted attorney of Appellant No.1 is irrelevant and<br />
an internal matter of Godrej governed by the principles<br />
of indoor management. In any event, admittedly Godrej<br />
has not challenged the authority of Mr.Bakshi to execute<br />
the proxies. Whether the letter dated 19.05.2012 was the<br />
source of the authority of Mr.Bakshi to execute the<br />
proxies or not is also therefore irrelevant.<br />
(e) Appellant No.1 had issued multiple powers of<br />
attorney/proxies. With respect to the 1710 shares, the<br />
chairman pursuant to the powers conferred by the<br />
Articles of Association, has permitted Appellant No.1 to<br />
vote through one such power of attorney holder of<br />
Appellant No.1. The said act cannot be construed as<br />
denial of the right to vote, since votes were in fact cast<br />
in relation to the 1710 shares. Similarly the votes in<br />
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respect of the balance shares of Appellant No.1 other<br />
than the aforementioned 1710 shares have also been<br />
allowed to be cast by Mr.Hegde and have been allowed.<br />
The challenge therefore is not in relation to a denial of a<br />
right to vote of Appellant No.1 since the votes have been<br />
allowed as opposed to rejected.<br />
(f) The letter dated 16.03.2005 did not relate to any<br />
of the 11 powers of attorney issued by Appellant No.1 to<br />
Godrej, but related to the power of attorney issued by<br />
Maharukh Oomrigar (Respondent No. 6 to the present<br />
appeal) and hence the same is irrelevant. Furthermore<br />
the rejection of the power of attorney was in a<br />
completely different context, i.e. with regard to a request<br />
for splitting of shares and hence is irrelevant for the<br />
purposes of the issue at hand.<br />
(g) The mere filing of the suit bearing No. 1170 of<br />
2005 is of non consequence especially when no orders<br />
have been passed in the said suit declaring the said<br />
documents to be void. The facts and circumstances in<br />
which Suit NO. 1170 of 2005 was filed are not relevant<br />
COAPPL41.12
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for the purposes of the present appeal and in any event<br />
that same are not a part of the record in the present<br />
proceedings in which only the prayers in the suit have<br />
been reproduced.<br />
(h) In view of article 107 of the Articles of<br />
Association of the Company Godrej was entitled to<br />
lodge the PoAs with Respondent No.1 Company 48<br />
hours prior to the meeting, which it did, and the<br />
Company bound by its articles of association would<br />
have to accept the same for the purposes of voting. The<br />
mere facts of the existence of the suit No. 1170 of 2005<br />
does not alter that position.<br />
(i) The Power of Attorney dated 09/03/2012 is<br />
entirely irrelevant to the question of voting by Godrej.<br />
This Power of Attorney was submitted by Mr. Rajiv<br />
Bakshi though it was unnecessary to do so as it has<br />
nothing to do with voting in respect of 1710 shares of<br />
Appellant No.1. It is the 11 (eleven) Powers of Attorney<br />
executed under the MOU dated 03/06/1992 which entitle<br />
Godrej to vote in respect of the 1710 shares of Appellant<br />
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No.1. These Powers of Attorney had been submitted<br />
to/lodged with the Company more than 48 hours prior to<br />
the EOGM.<br />
(j) Godrej is not a “member” of the Company and<br />
hence, Section 187 of the Companies Act and Article<br />
104 have no application. It was therefore unnecessary<br />
for Godrej to authorize Mr Rajiv Bakshi by a Resolution<br />
of the Board of Directors nor was it necessary for Mr.<br />
Pinto to be authorized by a Resolution of Board of<br />
Directors. The letter dated 19/05/2012 is sufficient and<br />
clear authority from Godrej in favour of Mr Rajiv<br />
Bakshi to attend, participate in and vote at the EOGM.<br />
It is noteworthy that filling and signing Proxy Form is<br />
for the purpose of voting itself so that an authority to<br />
vote would carry with it the incidental authority to fill<br />
and sign a proxy form and vote. The circumstance that<br />
on 16/05/2012 Godrej wrote to the Appellants to vote in<br />
favour of the Resolution pursuant to its right under the<br />
MOU of 1992 does not prevent Godrej from deciding to<br />
attend the meeting and vote through Mr. Rajiv Bakshi<br />
pursuant to the 11 (eleven) powers of attorney. Godrej<br />
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may not have been confident that the Appellants would<br />
vote as directed by it and hence it may have decided to<br />
attend and vote. It may be noted that disputes between<br />
Godrej and the Appellants arose in March 2012. In<br />
these circumstances, Godrej took the aforesaid steps. It<br />
is the Appellants own case that prior to the year 2012 the<br />
Appellants and Godrej had a common interest and that<br />
seems to be the reason why Godrej may not have<br />
attended earlier meetings or excercised their right to do<br />
so under the powers of attorney. The fact that Godrej<br />
did not attend any earlier meeting is of no consequence.<br />
The allegation that there is not time of receipt or inward<br />
number etc., on the letter is of no consequence since the<br />
letter is on record and Godrej stands by it. The date of<br />
receipt of the letter and the two proxies are clearly noted<br />
as 19/05/2012 and the time does not matter because even<br />
midnight of 19/05/2012 is more than 48 hours before the<br />
EOGM. Mere suspicion cannot be the basis for<br />
doubting the existence and authenticity of the said letter.<br />
There is no averment of material to establish that these<br />
documents are inserted later or that there is any<br />
wrongdoing on the part of a named person. The<br />
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Company in its affidavit in rejoinder dated June 2012 in<br />
Company Application No.85 of 2012 in Vol.VI pages<br />
1187-1190 has fully explained the position with regard<br />
to the filling of the inward register and stamping of date<br />
and time on documents that are received by the<br />
Company. In any case, such an enquiry is impermissible<br />
since the Chairman is the sole judge of validity of votes.<br />
A question of this nature cannot be the subject of<br />
proceedings under Section 397 and 398 and much less<br />
under Section 10F which is limited to appeal on a<br />
question of law, not fact.<br />
(k) The proxy form under Schedule IX was<br />
apparently filed by way of abundant caution more than<br />
48 hours before the EOGM even though it was<br />
unnecessary in view of the authorization in letter dated<br />
19/05/2012 by Godrej. In any case, since Appellant No.<br />
1 had, by Powers of Attorney, authorized Godrej to vote<br />
at meeting and Godrej in turn authorized its<br />
representative Mr Bakshi to vote at the EOGM, Mr<br />
Rajiv Bakshi was fully entitled to act on behalf of<br />
Appellant No.1 through Godrej and sign the proxy form.<br />
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(l) Section 176(1) empowers a member to appoint<br />
another as his proxy. This was done by the 11 (eleven)<br />
Powers of Attorney by Appellant No.1 in favour of<br />
Godrej. Section 176(5) provides that the instrument of<br />
proxy shall be in writing and signed by the appointer.<br />
The Powers of Attorney satisfy this provision. Section<br />
176(6) provides that instruments that are in the Form in<br />
Schedule IX shall not be questioned on the ground that<br />
they fail to comply with Articles. Thus filling a proxy<br />
form is an alternative to any other instrument appointing<br />
a proxy. In the present case, both were done. Hence<br />
when Godrej was empowered by Appellant No.1 to vote,<br />
which it did by letter dated 19/05/2012. Issuance of<br />
authority by a company to vote at a meeting when a<br />
company holds a power of attorney entitling it to vote is<br />
not prohibited either by the Act or by the Articles of the<br />
company.<br />
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135. Mr.Kadam, the learned senior counsel appearing for the 1 st respondent<br />
company on this issue submits as under :-
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(a) Power of Attorney itself amounts to proxy agent. The learned counsel<br />
placed reliance upon the judgment in case of Gharda Chemicals vs. <strong>Jer</strong><br />
Kavasmaneck reported in (2005) 5 BCR 611 and more particularly paragraphs<br />
21, 29 and 30 which reads thus :-<br />
21. As stated earlier, the question before us is,<br />
whether the power of attorneys executed by the<br />
first holder in respect of the shares held jointly are<br />
valid and whether the power of attorney is a proxy.<br />
29. It is true that the issue as to whether the power<br />
of attorney can be treated as a proxy was not<br />
considered by the Chairman of the company while<br />
deciding the validity of the votes cast by the power<br />
of attorney holder. That issue was raised by the<br />
applicants for the first time before the learned<br />
Company Judge. As we have held that the votes<br />
cast under both the power of attorneys are valid, it<br />
is not necessary to consider the issue as to whether<br />
the power of attorney is a proxy or not. However,<br />
the above issue being raised and decided by the<br />
Company Judge and the counsel on both sides<br />
have also canvassed respective arguments before<br />
us, we deem it proper to deal with the said issue as<br />
well.<br />
30. In our opinion, a shareholder may execute an<br />
instrument of power of attorney or an instrument<br />
of proxy empowering a specified person to vote on<br />
his behalf at the meeting of the company. If the<br />
instrument, is in conformity with the proxy form<br />
set out in the Schedule IX of the Act, then the<br />
company would register it and issue voting slip to<br />
such authorised person. Thus, a person authorised<br />
to vote under a validly executed power of attorney<br />
under The Powers of Attorney Act, 1882 may not<br />
be entitled to vote if the instrument of power of<br />
attorney is not in conformity with the proxy form<br />
set out in Schedule IX of the Act. In other words,
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only such an instrument of power of attorney<br />
which is in conformity with the proxy form set out<br />
in Schedule IX of the Act will entitle the<br />
authorised person to vote.<br />
COAPPL41.12<br />
(b) This court cannot sit appeal over the reasons given by the chairman to<br />
conduct the meeting. The chairman has considered all the documents<br />
including power of attorney and provisions of law in his ruling. The power of<br />
attorney given by the Godrej to Mr.Bakshi to sale shares is not relevant.<br />
Eleven power of attorneys were already on record of the 1 st respondent<br />
company which gave power to vote. It is submitted that other than 11 power<br />
of attorneys on record referred by the chairman in his ruling is thus<br />
insignificant. This surplussage does not detract from the merits of the<br />
conclusion. The learned senior counsel placed reliance on the affidavit filed<br />
by the 1 st respondent company and more particularly paragraphs 13 to 17 to<br />
demonstrate how the inward register was maintained and when proxies were<br />
received. It is submitted that even letter from Dr.Gharda does not refer to<br />
proxy which was received on 17 th May, 2012. There was no inward number.<br />
The documents received from Godrej by the 1 st respondent bears the same<br />
initial which was on the data received from Gharda Foundation. The<br />
appellants does not make any grievance in respect of the proxy submitted by<br />
Gharda Foundation.<br />
136. Mr Dhond, the learned senior counsel appearing for M/s. Godrej
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Industries Limited allowed to be intervened by a separate order passed by this<br />
court, made the following submissions :<br />
(a) It is admitted that Godrej is the valid POA holder for <strong>Jer</strong><br />
Kavasmaneck. Consequently, <strong>Jer</strong> Kavasmaneck has voted through<br />
Godrej. Therefore, the member of the company, through its POA<br />
holder, Godrej had voted at the EOGM held on May 22, 2012.<br />
(b) Dispute is between the rights of Mr. Hegde and Godrej, both<br />
are not members of the company and their rights cannot be decided<br />
in 397/398 petition. Darius Kavasmaneck did not seek to vote and<br />
Mr. Hegde has not complained at all at the meeting or initiated any<br />
proceedings. Mr. Hegde is also not party nor has he filed any<br />
affidavit in the proceedings. Darius Kavasmaneck cannot substitute<br />
himself for Mr. Hegde or raise any grievance on behalf of a nonmember<br />
in 397/398 petition. Mr Bakshi has voted as per the<br />
authority given to him by Godrej which is valid.<br />
(c) Without prejudice to the foregoing, Godrej is a valid POA<br />
holder for <strong>Jer</strong>. Mr. Bakshi validly represented Godrej in respect of<br />
the <strong>Jer</strong> Kavasmaneck PAO. Mr. Bakshi is in the employment of<br />
Godrej and all his acts are ratifyble ex post facto. Without<br />
prejudice, Godrej hereby confirms Mr. Bakshi's authority to<br />
represent Godrej and if necessary even ratify all the acts of Mr.<br />
Bakshi pursuant to the Authority given to him by Godrej and<br />
recorded in the letter dated May 19, 2012. The authority given by<br />
Godrej to Mr. Bakshi reads as follows :<br />
“ The powers of attorney expressly authorise GIL to<br />
attend, vote and otherwise take part in all meetings held in<br />
connection with the Company in relation to the shares and<br />
to sign proxies for the purposes of voting thereat or for any<br />
other purposes connected therewith as freely as the said<br />
shareholder could themselves do. Pursuant to the said<br />
power contained in the irrevocable powers of attorney, GIL<br />
hereby authorise Mr. Rajiv Bakshi, Executive Vice<br />
President – Legal to attend, participate in and to vote at the<br />
extraordinary general meeting of the Company to be held<br />
on May 22, 2012 or at any adjournment thereof. The<br />
specimen signature of Mr Bakshi is appended below.”<br />
(d) The authority given to Mr. Bakshi included right to vote on<br />
behalf of Godrej and all contentions made by the Appellants in
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relation to the same are untenable. The allegations made against<br />
Godrej and/or Mr. Bakshi and grounds taken in the present Appeal<br />
on the basis of the same are frivolous because Godrej has never<br />
disputed the authority of Mr Bakshi. It is submitted that all the<br />
necessary documents were deposited with the company 48 hours<br />
prior to the meeting. The MOU dated 3 rd June 1992 executed by<br />
Darius Kavasmaneck and <strong>Jer</strong> Kavasmaneck in favour of Godrej is<br />
valid and subsisting Darius Kavasmaneck has obtained relief<br />
against Godrej on the basis of the same. <strong>Jer</strong> Kavasmaneck and<br />
Darius Kavasmaneck had pledged the shares with Godrej and had<br />
executed irrevocable POAs and binding on Darius Kavasmaneck<br />
and <strong>Jer</strong> Kavasmaneck. Therefore, all acts of Godrej pursuant to the<br />
said POA and loan cum pledge agreements are valid and <strong>Jer</strong> and<br />
Darius Kavasmaneck are contractually bound by the same.<br />
137. The learned counsel for respondent nos. 4 and 5 submits that admittedly<br />
the first appellant gave power of attorney to different persons in which voting<br />
powers were concurrently given to all. All of them have turned up at the<br />
meeting and two out of them sought to vote on the same shares. It is<br />
submitted that the appellant no. 1 herself created the situation and should<br />
therefore be estopped from now blaming the Chairman for taking the decision<br />
in the circumstances where problem itself was created by the appellants. The<br />
decision of the Chairman is a fair decision. The learned counsel submits that<br />
the Chairman had disallowed Godrej Industries Limited on the voting on<br />
bulk of the shares. It is submitted that the decision of the Chairman was with<br />
regard to the right of two contesting constituted attorneys, neither of whom<br />
were members and neither of whom could maintain the petition under section<br />
397 and 398 of the Companies Act, 1956.
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138. In rejoinder, Mr. Samdhani, the learned senior counsel appearing on<br />
behalf of the appellants submit as under :-<br />
(a) The Appellants have challenged the conduct of<br />
the EOGM dated May 22, 2012. Thus even assuming<br />
whilst denying that the convening of the EOGM was<br />
valid, its conduct being illegal and oppressive, the<br />
CLB ought to have adjudicated upon the validity of the<br />
conduct of the EOGM before allowing the resolution<br />
to be implemented. The challange to the conduct is not<br />
moonshine or illusory – but substantial questions have<br />
been raised by the Appellants particularly regarding<br />
the denial of the 1 st Appellant’s right to vote on 1710<br />
equity shares. If the 1 st Appellant was permitted to vote<br />
on the said 1710 shares, the resolution would not have<br />
been passed.<br />
(b) In the impugned Order in paragraphs 28 and 29<br />
it is recorded that CA 91 of 2012 is pending. CA 91 of<br />
2012 contains the specific challenge to the conduct of<br />
the impugned EOGM dated May 22, 2012.
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(c) The CLB in paragraphs 37 and 38 of the<br />
impugned Judgment has rendered findings on the<br />
correctness and conduct of the impugned EOGM.<br />
What is stated in the said paragraphs are matters<br />
concerning CA 91 of 2012 which was not even<br />
adjudicated upon. In any event the said statements are<br />
factually incorrect.<br />
(d) The Chairman at the meeting held that Mr.<br />
Bakshi is entitled to vote (on behalf of Godrej) on the<br />
basis of power of attorney dated March 9, 2012. This<br />
is also what is recorded in the purported Minutes and<br />
admitted by Godrej. Before the arguments commenced<br />
in this matter, Godrej’s contention was also the same<br />
i.e. the power of attorney used to vote at the meeting<br />
was the power of attorney dated March 9, 2012.<br />
(e) Though the respondents through their learned<br />
counsel admitted that reliance by the Chairman of the<br />
meeting to the power of attorney dated March 9, 2012<br />
is a ‘mistake’ argued that what mattered was the<br />
alleged letter of authority dated May 19, 2012 signed<br />
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by Mr. Pinto in favour of Mr. Bakshi. As such, the<br />
Respondents now say that the power of attorney dated<br />
March 9, 2012 is not relevant as the basis to vote at the<br />
meeting. In view of the above, the Chairman’s<br />
decision is, on the face of it, wrong on the arguments<br />
of the Respondents themselves.<br />
(f) The Chairman did not rely on the letter of May<br />
19, 2012 to permit Mr. Bakshi to vote. Nor did the<br />
Chairman rely on the purported proxy signed by Mr.<br />
Bakshi in his own favour to allow him to vote at the<br />
said EOGM. The submission on the basis that the<br />
letter of Mr. Pinto (page 1356, Volume 7) to the 1 st<br />
Respondent is by itself a proxy since proxy requires no<br />
particular form is not correct for the following reasons:<br />
the said letter was not intended by Godrej to<br />
be a proxy. If it was so intended, then reliance<br />
would have been placed only on that letter<br />
and Mr. Bakshi would not have signed an<br />
alleged proxy separately. In law a proxy is<br />
required to be stamped. The letter signed by<br />
Mr. Pinto is unstamped. Reliance is placed on<br />
AIR 1928 Bom 80. Headnote (l) which<br />
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reads thus :-<br />
177/195<br />
I would only add that those proxies<br />
which are unstamped, or upon which the<br />
stamps have not been cancelled must be<br />
excluded. Any votes recorded on the<br />
authority of such proxies go out.<br />
(g) Since the 1 st Respondent had refused to furnish a<br />
copy of the power of attorney dated March 9, 2012, the<br />
2 nd Appellant wrote a letter to Godrej asking for the<br />
power of attorney on the basis of which Mr. Bakshi had<br />
voted. Mr. Bakshi himself answered the said letter and<br />
furnished the copy of power of attorney dated March 9,<br />
2012. Therefore according to Mr. Bakshi also he derived<br />
the authority to vote on the basis of this power of<br />
attorney dated March 9, 2012. Admittedly, the power of<br />
attorney dated March 9, 2012 neither gives a power to<br />
attend or vote nor does it relate to the 1710 shares.<br />
(h) It is the specific case of the Appellants that the 1 st<br />
Appellant was denied her right to vote in respect of 1710<br />
equity shares. As such, by allowing Mr. Bakshi to vote<br />
on shares which belongs to the 1 st Petitioner, she was<br />
denied the right to vote.<br />
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139. Section 175 of the Companies Act provides that unless articles of the<br />
company otherwise provide members personally present at the meeting shall<br />
elect one of themselves to be the chairman thereof on a show of hands. (The<br />
chairman has prima facie authority to decide all questions which arise at the<br />
meeting which require decision at the time, member by submitting his<br />
ruling and voting upon a resolution which the Chairman allows to be put is<br />
not precluded from maintaining by litigation that he was wrong). Section 176<br />
provides that any member of the company entitled to attend and vote at the<br />
meeting of the company shall be entitled to appoint another person whether<br />
member or not as his proxy to attend the vote instead of himself but proxy so<br />
appointed shall not have any right to speak at the meeting. Section 176(5)<br />
provides that the instrument appointing proxy shall be in writing and shall be<br />
signed by the appointer or his attorney duly authorised in writing or if the<br />
appointer is a body corporate, be under its seal or be signed by an officer or<br />
an attorney duly authorized by it. Section 176(6) provides that the instrument<br />
appointing the proxy, if in any forms set out in Schedule IX, shall not be<br />
questioned on the ground that it fails to comply with any special requirements<br />
specified for such instrument by the articles. Article 94 of the Articles of<br />
Association provides that the Chairman of any meeting shall be the sole Judge<br />
of the validity of every vote tendered at such meeting. The Chairman at the<br />
conducting of the poll shall be the sole judge of the validity of any vote
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tendered at such poll. Article 97 provides as to how the voting rights are<br />
computed. Article 104 provides for voting by proxy. Article 104 to 109 and<br />
113 reads thus :<br />
“104. Subject to the provisions of these Articles votes<br />
may given either personally or by proxy but no Company<br />
which is, a member of this company shall vote by proxy<br />
so long as a resolution of its Board under Section 187<br />
of the Act authorising any of its officials or any other<br />
person to act as its representatives at any meeting of this<br />
company shall be in force.<br />
105. The instrument appointing proxy shall be in<br />
writing under the hand of the appointer or of his<br />
attorney duly authorised in writing or if such appointer is<br />
a corporation, under its common seal or under the hand<br />
of an officer or attorney so authorised. Members not<br />
resident in India may revoke proxies by cable.<br />
106. An instrument of proxy may appoint a proxy either<br />
for the purposes of a particular meeting specified in the<br />
instrument and any adjournment thereof or it may<br />
appoint a proxy for the purpose of every meeting of the<br />
Company and every adjournment of any such meeting.<br />
107. The instrument appointing a proxy and the power<br />
of attorney or other authority (if any), under which it is<br />
signed or a notarially certified copy of that power or<br />
authority shall be deposited at the office not less than<br />
forty eight hours before the time for holding the meeting<br />
or adjourned meeting as the case may be at which the<br />
person named in such instrument proposes to vote or, in<br />
the case of a poll, not less than twenty four hours before<br />
the time appointed for the taking of the poll and in<br />
default the instrument of proxy shall not be treated as<br />
valid.<br />
108. A vote given in accordance with the terms of an<br />
instrument appointing a proxy shall be valid<br />
notwithstanding the previous death or insanity of the<br />
principal or the revocation of the proxy or of the<br />
authority under which the proxy was executed or of the<br />
transfer of the shares in respect of which the proxy is<br />
given, provided no intimation in writing of such death,<br />
insanity revocation or transfer shall have been received
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by Company at its officer for the commencement of the<br />
meeting or adjourned meeting at which the proxy is used.<br />
109. The instrument of proxy shall be as near as<br />
practicable in the form set out in schedule IX of the Act.<br />
113. No objection shall be made to the validity, if any,<br />
except at the meeting or poll at which such vote shall be<br />
cast and every vote whether given personally or by<br />
proxy not disallowed at such meeting or poll shall be<br />
deemed valid for all purposes of such meeting or poll<br />
whatsoever.”<br />
COAPPL41.12<br />
140. The appellants through their learned senior counsel emphasized that the<br />
power of attorney referred by the Chairman to the meeting while permitting<br />
Mr. Rajiv Bakshi to vote was not in respect of 1710 equity shares of the<br />
appellant. The counsel led emphasis on the issue that the appellant was not<br />
permitted to vote in respect of 1710 shares and Mr. Bakshi was allowed to<br />
vote illegally and if the appellants would have allowed to vote in respect of<br />
1710 shares, the resolution that was passed in the EOGM held on 22.5.2012<br />
would not have passed with requisite majority. The learned counsel was at<br />
pains to point out that Mr. Bakshi and or Mr.Clemant Pinto did not have<br />
authority to sign any proxy and it was not stamped. Much emphasis was led<br />
on the issue that no instrument of proxy was submitted by Godrej Industries<br />
Ltd. within time prescribed with first respondent before EOGM was held. The<br />
counsel laid emphasis that pages of the proxies submitted to the company by<br />
Godrej Industries Ltd. were undated, some of the proxies provided did not<br />
indicate any date of receipt and or stamp of the company. It is submitted that<br />
there was no inward number in some of such proxies and thus considering
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this material record, this court therefore shall hold that the Chairman had acted<br />
mala fide in allowing Mr. Bakshi to vote and to deprive the appellants of<br />
voting in respect of 1710 shares.<br />
141. On perusal of the documents submitted by the parties which were on<br />
record in Company Application No. 73 of 2012 and 91 of 2012 before CLB<br />
and filed in the present proceeding indicates that 11 power of attorneys were<br />
executed by the appellants in favour of Godrej Industries Limited. The power<br />
of attorneys permits Godrej Industries Ltd. to attend and vote at the meeting<br />
in respect of aggregate 1710 shares, all such power of attorneys are<br />
irrevocable and are coupled with consideration. The record also indicates that<br />
all such documents were lodged with the company prior to 48 hours of the<br />
said EOGM came to be held. The first respondent company has given<br />
inspection of the documents to the appellants. It is not in dispute that the<br />
Chairman had considered the power of attorney dated 9 th March, 2012 which<br />
was not in respect of the shares belonging to the first appellant and in<br />
particular 1710 shares. The question that arises for consideration of this court<br />
is whether on the basis of all the material produced on record by both the<br />
parties, whether it can be concluded that Mr. Rajiv Bakshi was authorised to<br />
vote on behalf of the appellants and in particular 1710 shares.<br />
142. It is not in dispute that M/s. Godrej Industries Ltd. was not a member of
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first respondent company. It is also not in dispute that the said power of<br />
attorneys given by the appellants in favour of Godrej Industries Ltd. were in<br />
force on the date of EOGM,. Since Godrej Industries Limited being a company<br />
could not itself attend the meeting, it was entitled to authorize a person to<br />
attend the said meeting as its representative. The said company accordingly by<br />
its letter dated 19 th May, 2012 authorised Mr.Rajiv Bakshi to vote in the<br />
EOGM proposed to be held on 22 nd May, 2012 to appoint representative on<br />
power of attorneys and the said authority letter dated 19 th May, 2012 it is<br />
clear that Mr. Bakshi was appointed to attend the meeting and to vote in<br />
respect of the 1710 shares on behalf of the first appellant duly authorised by<br />
Godrej Industries Limited which was authorised by the first appellant. It is not<br />
in dispute that the said authority letter dated 19 th May, 2012 was also filed with<br />
first respondent company by Godrej Industries Limited. On the basis of such<br />
power of attorneys and such authority letter dated 19 th May, 2012, Mr. Bakshi<br />
exercised his powers on behalf of the appellants to sign the proxy in favour<br />
of himself to vote. In my view, since the relevant power of attorney<br />
authorised Godrej to vote and the authority letter dated 19 th May, 2012 inturn<br />
authorised Mr. Bakshi to vote, whether the proxy was stamped or not losses<br />
its significance. Similarly whether the proxies in the proper format were<br />
lodged or not also looses significance.<br />
143. The appellants could not point out any prohibitory order in the suit filed
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by Godrej Industries Limited against the appellants and the first respondent<br />
(suit bearing No. 1170 of 2005) restraining the parties from exercising rights<br />
under the power of attorneys executed by the appellants in favour of Godrej<br />
Industries Limited. In my view there is no merit in the submission of Mr.<br />
Samdani that in view of the pendency of the said suit filed by Godrej itself the<br />
first respondent could not have permitted the representative of Godrej to vote<br />
in the meeting exercising its powers under the said power of attorneys. The<br />
record indicates that the authority letter and two proxies were received by the<br />
first respondent company on 19 th May, 2012 which was prior to more than 48<br />
hours before the EOGM came to be held on 22 nd May, 2012. The appellants<br />
could not demonstrate that any of these documents were inserted later or the<br />
said documents were fabricated by Godrej or by respondent no. 1 or the<br />
Chairman. In my view there is no merit in the submission of Mr. Samdani that<br />
the documents filed by Godrej with the first respondent company allowing<br />
Mr. Bakshi to vote did not carry proper acknowledgment, inward number or<br />
the date thereon.<br />
144. The Division Bench of this court in the case of Gharda Chemicals<br />
Limited and Others Vs. <strong>Jer</strong> <strong>Rutton</strong> Kavasmaneck @ <strong>Jer</strong> <strong>Jawahar</strong> Thadani and<br />
Ors. Reported in 2005(5) Bom C.R. 611 has considered section 176 of the<br />
Companies Act, 1956 and has held that the shareholder may execute the<br />
instrument of power of attorney or instrument of proxy empowering the
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specified person to vote on his behalf at the meeting of the company.<br />
Paragraphs 21 to 26, 31 and 32 of the said judgment are relevant for this<br />
matter and reads thus :<br />
“21. As stated earlier, the question before us is, whether<br />
the power of attorneys executed by the first holder in<br />
respect of the shares held jointly are valid and whether the<br />
power of attorney is a proxy.<br />
22. The words "power of attorney" and "proxy" are not<br />
defined under the Companies Act, 1956. Even the articles<br />
of association of the company do not define these words.<br />
23. Section 1A of The Powers of Attorney Act, 1882<br />
defines the word 'power of attorney' to include any<br />
instrument empowering a specific person to act for and in<br />
the name of the person executing it.<br />
24. Section 176 of the Companies Act, 1956 provides that<br />
a member of the company entitled to vote at the meeting of<br />
the company can appoint any other person (whether a<br />
member or not) as a proxy to attend and vote instead of<br />
himself.<br />
25. Article 114 of the Articles of Association framed by the<br />
appellant No. 1 company reads as under:<br />
"114. On a poll taken at a meeting of the Company, a<br />
member entitled to more than one vote, or his proxy<br />
or other person entitled to vote for him as the case<br />
may be, need not, if he votes, use all his votes or cast<br />
in the same way all the votes he uses."<br />
[Emphasis supplied]<br />
26. On perusal of the aforesaid provisions of Companies<br />
Act and the articles of association of the company, it is<br />
seen that at the meeting of the company not only the<br />
shareholder and the proxy holder but some other duly<br />
authorised person is also entitled to vote. In other words, at<br />
the meeting of the company the vote can be cast by the<br />
shareholder and in his absence his proxy or other person<br />
entitled to vote for him. As rightly contended by the<br />
learned Counsel for the applicants, it is not the<br />
nomenclature but it is a substance of the document which
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is relevant. In the absence of the member, a person seeking<br />
to attend and vote at the meeting of the company must be<br />
duly authorised to do so by a valid document. Such a<br />
document may not be in the proxy form set out in<br />
Schedule IX of the Act, but shall meet the requirement of<br />
the company law i.e. the document contains all necessary<br />
particulars set out in form in Schedule IX of the Act. In the<br />
present case, both the power of attorneys have been found<br />
to be substantially complying with the requirement and<br />
contain necessary details and particulars and the appellant<br />
No. 1 company after duly registering the said power of<br />
attorneys has issued voting slips to the power of attorney<br />
holder. In fact, the voting slips issued by the company<br />
specifically provides that the power of attorney holder is<br />
entitled to vote at the 28th Annual General Meeting of the<br />
company. Even at the meeting all the parties proceeded on<br />
the footing that the power of attorney holder is entitled to<br />
vote at the meeting and the dispute raised was regarding<br />
the validity of the power of attorneys executed by the first<br />
holder instead of all the joint holders. Therefore, the<br />
question to be considered is, whether the first holder alone<br />
could execute a power of attorney in respect of shares held<br />
jointly ?<br />
31. Section 176 of the Companies Act provides that any<br />
member of a company entitled to attend and vote at a<br />
meeting of the company shall be entitled to appoint any<br />
person (where a member of not) as his proxy to attend and<br />
vote instead of himself. Although, Schedule IX of the<br />
Companies Act sets out the general form of proxy, Article<br />
62 of the Schedule 1 to the Companies Act provides as<br />
follows:<br />
"62. An instrument appointing a proxy shall be in<br />
either of the forms in Schedule IX to the Act or a<br />
form as near thereto as circumstances admit."<br />
Similarly, Article 109 of the Articles of Association of<br />
the applicant No. 1 company reads as under:<br />
"109. The instrument of proxy shall be as near as<br />
practicable in the form set out in the Schedule IX of<br />
the Act."<br />
Therefore, even though Schedule IX of the Act sets<br />
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out the form of proxy, it may be varied if the<br />
circumstances so require. In other words, the proxy<br />
form as set out in Schedule IX is not mandatory. So<br />
long as any instrument contains all the requisite<br />
particulars set out in the form in Schedule IX it can be<br />
treated as a proxy. If an instrument like power of<br />
attorney contains all the requisite particulars, such as<br />
the name of the company, the name of the person<br />
executing the instrument, the name of the person<br />
empowered to vote as a proxy, etc. as set out in the<br />
form in Schedule IX to the Companies Act then such<br />
an instrument can be treated as a proxy. As stated<br />
earlier, the instrument of proxy is executed to<br />
empower a third person to vote at the meeting of the<br />
company for and on behalf of the person executing<br />
the instrument of proxy. Proxy is one acting for<br />
another. It is an authority or power to do a certain<br />
thing. A proxy is a lawfully constituted agent. A<br />
power of attorney is an authority given by a formal<br />
instrument whereby one person, who is called the<br />
donor or principal, authorises another person, who is<br />
called the donee, attorney or agent, to act on his<br />
behalf. In the absence of any specific bar, a power of<br />
attorney that substantially complies with the<br />
requirement of Schedule IX can be considered as<br />
proxy. In the present case, it is not dispute that the<br />
power of attorney executed by the applicant Nos. 4<br />
and 5 contains all the particulars set out in the form in<br />
Schedule IX and on being satisfied, the company has<br />
issued the voting slips in favour of the power of<br />
attorney holder. The fact that Clause 2 of the power of<br />
attorney empowers the power of attorney holder to<br />
vote himself or appoint a proxy, it does not mean that<br />
the power of attorney holder cannot vote without<br />
executing a deed of proxy in his own favour. Where<br />
the power of attorney holder himself decides to vote,<br />
then he has to forward the deed of power to attorney<br />
to the company and if the same is in conformity with<br />
the proxy form set out in Schedule DC, then the<br />
company would register it and issue voting slip to the<br />
power of attorney holder. In the present case, on<br />
registration of power of attorney, voting slips have<br />
been issued by the company to the power of attorney<br />
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holder. Therefore, in the facts of the present case, the<br />
learned Company Judge was justified in holding that<br />
the power of attorney constituted a proxy.<br />
32.The contention of the appellants that the words 'power<br />
of attorney' and 'proxy' being different, the power of<br />
attorney cannot be considered as proxy is without any<br />
merit because, as stated earlier, the object of both the<br />
instrument of power of attorney as well as the instrument<br />
of proxy is to empower a third person to act for and on<br />
behalf of the person executing such instrument. So long as<br />
a document is in conformity with the form in Schedule IX<br />
of the Act, there is no impediment to consider that<br />
document as proxy. Similarly, the fact that the instrument<br />
itself does not purport to be a proxy and the same is not<br />
registered as proxy makes no difference because<br />
admittedly the voting slips issued by the company<br />
empowers both the power of attorney holder as well as the<br />
proxy holder to vote at the meeting of the company. In this<br />
view of the matter, we are of the opinion that in the facts<br />
of the present case, no fault can be found with the findings<br />
of the learned Company Judge that the power of attorney is<br />
a proxy.”<br />
COAPPL41.12<br />
145. In my view what is relevant is an authority or power to do certain<br />
things. The power of attorney is an authority given by a formal instrument<br />
whereby one person who is called donor or principal authorizes another<br />
person who is called donee, attorney or agent to act on his behalf. Perusal of<br />
the power of attorney executed by the appellants in favour of Godrej<br />
Industries Limited clearly indicate that it contains all the particulars set out in<br />
schedule IX including power to vote on behalf of the appellants. In my view,<br />
the Chairman was right in issuing voting slips in favour of Mr. Rajiv Bakshi<br />
to vote in respect of 1710 shares and such decision cannot be faulted with.<br />
The Division Bench of this court has already held that the proxy form as set
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out in schedule IX is not mandatory. So long as any instrument contains all<br />
the requisite particulars set out in the form in schedule IX, it can be treated as<br />
proxy. In my view separate proxy itself was not required in view of the fact<br />
that he power of attorney itself authorized Godrej Industries Limited to vote<br />
and the said company in turn and rightly authorized Mr. Bakshi to exercise<br />
the votes on behalf of the appellants. In my view, the entire ruling of the<br />
Chairman has to be considered as a whole and not few sentences in isolation.<br />
Considering the entire ruling of the Chairman and the minutes of the meeting<br />
held on 22 nd May, 2012, it is clear that Chairman was right in permitting Mr.<br />
Bakshi to cast vote on behalf of the appellants as duly authorised. I am bound<br />
by the view taken by the Division Bench of this court in the case of Gharda<br />
Chemicals Limited (supra).<br />
146. Mr. Samdani, the leaned senior counsel appearing for the appellants<br />
placed reliance on the judgment of this court in the case of Jar Ratan<br />
Kavasmaneck <strong>alias</strong> <strong>Jer</strong> <strong>Jawahar</strong> Thadani and Ors. Versus Gharda Chemicals<br />
Limited dated 7 th April, 1995 delivered by Shri Justice A.P. Shah as he then<br />
was, in Company Application No. 127 of 1995. The learned counsel submits<br />
that where the voting has been disallowed by the chairman, shareholder has<br />
got right to challenge the decision of the Chairman in the court. It has been<br />
held that normally the court will be slow to interfere with the Chairman's<br />
ruling but when the ruling is shown to be erroneous on the point of law,
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interference can be warranted in the facts and circumstances of the case.<br />
This court has held that if it is brought to the notice of the court that the<br />
Chairman's ruling is erroneous in law, recourse to certain provisions of the<br />
articles are not brought to the Chairman's notice, it will be open for the court<br />
to correct the said mistakes. This court took a view that the ruling of the<br />
Chairman has resulted in causing serious prejudice to the minority<br />
shareholders, as they are precluded from voting on the resolutions which are<br />
of considerable importance. This court in the said matter has set aside the<br />
ruling of the Chairman rejecting the votes cast on behalf of the applicants.<br />
147. Mr. Bobde, the learned senior counsel appearing on behalf of the<br />
respondent No. 2 invited my attention to para 15 of the said judgment and<br />
submits that it has been held that where the voting has been disallowed by the<br />
Chairman, shareholder has got right to challenge the decision of the Chairman<br />
in the court and when such ruling is erroneous on the point of law. The<br />
learned senior counsel submits that in this case the shareholders were not<br />
disallowed by the Chairman to vote but were allowed to vote through<br />
constituted attorney. The learned senior counsel submits that the ruling of the<br />
Chairman is not erroneous on any point of law. The learned Chairman has<br />
considered all the documents on record and was satisfied that Mr. Bakshi was<br />
rightly authorised to cast vote and has then permitted to exercise such rights<br />
on behalf of the appellant. The learned counsel submits that the ruling of the
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Chairman is final. It is submitted that the Article 109 provides that the<br />
instrument of proxy shall be as far as possible in the format set out in<br />
schedule IX. This instrument of power of attorney read with letter of authority<br />
satisfies all the conditions required to treat the said document as instrument of<br />
proxy. The learned counsel rightly placed heavy reliance on article 19 of the<br />
Articles of Association which provides that the Chairman of any meeting shall<br />
be sole Judge of the validity of every vote tendered at such meeting and shall<br />
be sole judge of validity of any vote tendered at such poll.<br />
148. In my view, Mr. Bobde, the learned senior counsel is right in his<br />
submission that the Chairman was right in permitting Mr. Bakshi to cast vote<br />
in respect of 1710 shares. In my view, all the documents which were on<br />
record of the company before voting including power of attorneys and letter<br />
of authority were required to be considered by the Chairman to find out<br />
whether it satisfies the requirement of proxy. In my view, the appellants had<br />
failed to show that the ruling given by the Chairman is erroneous on any<br />
point of law. The appellants had failed to show that any serious prejudice is<br />
caused to the minority shareholders by virtue of the Chairman permitting<br />
Mr. Bakshi to cast vote. It is not in dispute that the power of attorney was<br />
executed by one of the appellant authorising Godrej Industries Limited to vote<br />
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<br />
exercise of voting by Mr. Bakshi was none other than M/s. Godrej Industries<br />
Limited itself. Mr. Dhond the learned senior counsel appearing for Godrej<br />
Industries Limited, in my view has rightly submitted that 11 power of<br />
attorneys were executed by the appellants in favour of Godrej Industries<br />
Limited which entitled Godrej Industries Limited to vote in respect of 1710<br />
shares of the appellant no. 1 and these power of attorneys had been submitted<br />
with first respondent company more than 48 hours prior to EOGM. The<br />
learned counsel pointed out that it was unnecessary for Godrej Industries<br />
Limited to authorise Mr. Bakshi by the resolution of Board of Directors nor<br />
was it necessary for Mr. Pinto to be authorised by resolution of the Board of<br />
Directors. It is submitted that issuance of letter dated 19 th May, 2012 was<br />
internal mater of Godrej Industries Limited and is covered by the affairs of<br />
indoor management. The learned counsel submits that M/s.Godrej Industries<br />
Limited had no prejudice at any point of time in Mr. Rajiv Bakshi exercising<br />
vote in respect of 1710 shares and his action in any event are ratified by<br />
Godrej Industries Limited.<br />
150. In my view, on conjoint reading of section 176(1) with articles 104 to<br />
109 and 113 it is clear that filling of the proxy form was alternate to the<br />
power of attorney and authority letter already filed by the Godrej Industries<br />
Limited 48 hours prior to the date of EOGM. It is not in dispute that Mr.
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Bakshi is in the employment of Godrej Industries Limited. M/s. Godrej<br />
Industries Limited in its submissions made before this court has confirmed<br />
that Mr. Rajhiv Bakshi was authorized to represent M/s.Godrej Industries<br />
Limited and if necessary have been ratified all the acts of Mr. Rajiv Bakshi,<br />
pursuant to the authority given to him by M/s. Godrej Industries Limited and<br />
recorded in the letter dated 19 th May, 2012. The said authority letter clearly<br />
indicates that Mr. Bakshi was authorised to attend, participate in and to vote at<br />
the EOGM held on 22 nd May, 2012 or on any adjourned date thereof. In my<br />
view since M/s. Godrej Industries Limited has not disputed the authority of Mr.<br />
Rajiv Bakshi to vote and in view of the fact that Godrej Industries Limited<br />
was authorised by 11 power of attorneys to vote on behalf of the appellants, in<br />
my view no illegality is committed by the Chairman in permitting Mr. Rajiv<br />
Bakshi to vote on behalf of the first appellant. I am therefore, of the view that<br />
there is no merit in any of the submissions made by Mr. Samdani, the learned<br />
senior counsel appearing for the appellant that the procedure followed by the<br />
Chairman in conducting the EOGM was illegal. In my view the ruling of the<br />
Chairman is final unless the same is erroneous on question of law.<br />
151. The CLB in paragraph 37 and 38 of the impugned order has considered<br />
even the issue arising out of the power of attorneys, letter of authority and<br />
proxies and has rendered finding of fact that the petitioners themselves were<br />
guilty of issuing multiple power of attorneys which were in force at the same
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time, causing confusion and forcing the Chairman to take the decision,<br />
which he did in the bona fide manner. It is recorded that the petitioners by<br />
having issued multiple power of attorneys being irrevocable power of<br />
attorneys coupled with interest in favour of M/s. Godrej Industries Limited<br />
which permitted them to attend and vote at the meeting of the company were<br />
responsible for the presence as well as participation of Mr. Rajiv Bakshi at the<br />
meeting. It has been further held that the articles of association of the<br />
company as well as provisions of the Companies Act, mandate that the<br />
Chairman shall be the sole judge of the validity of all votes cast at the<br />
meeting and that the decision of the Chairman in that regard shall be<br />
conclusive. In my view, CLB was right in rendering such finding of fact<br />
based on the documents produced by both the parties and such finding in my<br />
view cannot be faulted with. In my view no prejudice is caused to the<br />
appellants by ruling of the chairman or the impugned resolution passed by the<br />
first respondent.<br />
152. The first respondent invited my attention to the affidavit in reply filed<br />
by it which indicates that after passing of the impugned order by CLB on 13 th<br />
August, 2012, the first respondent has filed/uploaded form No. 23 after<br />
intimation of the resolution with the registrar of companies along with copy<br />
of the resolution with the copy of the amended articles of association of first<br />
respondent. The first respondent has also filed/uploaded form 21 after notice
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of order dated 21 st May, 2012 and 13 th August, 2012 passed by CLB in<br />
Company Application No. 73 and 85 of 2012. The shareholders are already<br />
informed by the first respondent company about the amendment to the articles<br />
of association. Form No. 23 has been re-submitted by the first respondent with<br />
the Registrar of Companies and has been approved. The first respondent<br />
company has also approved the transfer of shares received from Manoj C.<br />
Gandhi, Mr. Malte and Mrs. Hajvane to Protegenia Advisors Pvt.Ltd. and the<br />
said transfers have been approved by the first respondent in the meeting held<br />
on 20 th August, 2012. The said transferee of the shares are<br />
shareholders/members of the first respondent company. From the perusal of<br />
the documents annexed to the affidavit in reply dated 4 th August 2012 it is clear<br />
that the first respondent has already implemented the resolution passed by it in<br />
EOGM held on 22 nd May, 2012. Article 57 has already been deleted. In my<br />
view, there is no case made out by the appellants under Section 10F of the<br />
Companies Act for interference with the order passed by CLB.<br />
153. In my view, the appellants have failed to prove that the conduct of the<br />
chairman in conducting impugned EOGM as well as ruling given by the<br />
chairman is illegal or that he acted malafide or the same was part of any<br />
alleged pro-conceived, deliberate, oppressive desire. The appellants have not<br />
proved that affair of the 1 st respondent company were conducted in the manner<br />
prejudicial to public interest or in the manner oppressive to the appellants. It is
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also not proved that the facts exist which would justify making of order for<br />
winding up of respondent no.1 on the ground that it is just and equitable to do<br />
so but to wind up the company would unfairly prejudice to the appellants.<br />
154. Thus in my view, the company law board was right and justified in<br />
vacating and/or modifying its earlier order dated 21 st May, 2012 and not<br />
restraining the 1 st respondent from implementing the resolution passed in the<br />
EOGM held on 22 nd May, 2012. No interference is thus warranted by this<br />
Court under Section 10F of the Companies Act, 1956.<br />
155. I, therefore, pass the following order :-<br />
(a) Company Appeal (L) No. 41 of 2012 is dismissed.<br />
(b) There shall be no order as to costs.<br />
(c) In view of the dismissal of the Company Appeal (L) No. 41 of<br />
2012, all pending Company Applications filed in the present<br />
appeal also disposed of accordingly.<br />
(R.D. DHANUKA, J.)<br />
At this stage, learned counsel appearing for the appellants seek<br />
continuation of ad-interim order dated 30 th August, 2012. Learned counsel for<br />
the respondents strongly opposes continuation of the ad-interim order.<br />
Application for continuation of stay is rejected.<br />
(R.D. DHANUKA, J.)