TaxTMI 
TaxTMI 
1995 (2) TMI 332
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....court of the Senior Sub-Judge, Patiala. Initially, Civil Revision No. 1109 of 1994 directed against the order of the Additional District Judge, Patiala, was filed in this court, but before the matter could be finally decided, Civil Suit No. 460 of 1994 was filed in the court of the Additional Senior Sub-Judge, Rajpura. Since the matter involved was common in both the suits, i.e., the civil suit out of which Civil Revision No. 1109 of 1994 has arisen and Civil Suit No. 460 of 1994 learned counsel for the parties, on October 17, 1994, stated at the Bar that this court should finally decide the application under Order 39, rules 1 and 2 of the Code of Civil Procedure, filed by the plaintiff in Civil Suit No. 460 of 1994 and also the matter which was pending in appeal before the Additional District Judge, Patiala, arising out of the application under Order 39, rules 1 and 2 of the Code of Civil Procedure, in Civil Suit No. 33 of 1994. They further stated that on decision by this court, the appeal pending before the Additional District Judge would become infructuous. Not only the counsel made a statement at the Bar, but also filed a joint application, Civil Miscellaneous No. 6474-CII ....
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.... or holding themselves out as directors of B.S.B. in reliance upon the resolutions purported to be passed in the alleged extraordinary general meeting and further restraining defendants Nos. 1 to 10 from interfering with or obstructing or disputing the acting of defendants Nos. 10 and 16 to 25 as directors of B.S.B. It has been averred in the plaint that B.S.B. is a company incorporated under the provisions of the Companies Act, 1956 (in short, the Companies Act), and has its registered office at Bhankerpur Simbhaoli Beverages Pvt. Ltd., Bhankerpur, Dera Bassi, District Patiala, Punjab. The main objects of the company, i.e., B.S.B., are to carry on the business of brewers, distillers, bottlers, wine manufacturers and to prepare, buy, store, sell, distill, manufacture, redistill and deal in all kinds of beers, wine, liquors, etc. B.S.B. was earlier owned by Simbhaoli Industries Pvt. Ltd. (S.I.L. in short). The shareholding position of B.S.B. immediately before the takeover of the same by S.I.L. was as under : "1. Mr. S. Sandhu : 10 equity shares of Rs. 10 each. 2. Mr. Gurpal Singh : 10 equity shares of Rs. 10 each. 3. Mr. G.S. Mann : 10 equity sha....
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....ndran, Madan Mohan Suri, R. Ganesan, A. Roy Chowdhury and S.N. Pandey were appointed on July 8, 1989. The original four directors of the B.S.B. namely S/Sh. Pritam Singh Sandhu, Gurmeet Singh Mann, Jagraj Singh Mann and Gurpal Singh ceased to be the directors with effect from June 27, 1990. It is further averred that presently, the lawfully constituted board of directors of B.S.B. are S/Sh. Sarabhjit Singh, managing director, P.R. Pandya, director (secretary, SKOL Breweries Ltd.-a subsidiary of SWC), A.S. Chatterjee, director (manager, SWC), A. Sadasivam, director, (asst. vice-president, SWC), V. Jayaraman, director (general manager, Cruickshank and Co.-A subsidiary of S.W.C), Srijit Mullick, director (manager, SWC), M.M. Gupta, director (general manager, SWC), T.K. Ravishanker, director (general manager, SWC), A. Sabharwal, director (general manager, SWC), Rajiv K. Viz, director (deputy general manager, SWC) and Harsh Wardhan Sen, director (vice-president, SWC). It has been alleged that B.S.B. is/has been under the supervision and control of SWC as the whole of the board of directors consists of employees of SWC. Para 6 of the plaint then describes the name of the shareholders and....
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....s of B.S.B. by misleading the court. However, he failed to do so. Hence, the ex parte stay order was declined on February 21, 1994. The said suit is titled as Arun Kumar Jain v. T.K. Ramaswamy. It has been averred that the said suit has been filed by Arun Kumar Jain to thwart the earlier suit filed by B.S.B. against him. Upon such failure on the very next day, i.e., February 22, 1994, Arun Kumar Jain got another suit filed purported to be on behalf of B.S.B., the plaintiff in the present suit through one of his associates, J.C. Vohra, which was also filed before Shri J.S. Bhaia, Sub-Judge, First Class. The said suit came up for hearing on February 23, 1994, and a prayer for an ex parte stay order, restraining the defendants therein from interfering in the affairs and management of B.S.B. was made, which too was declined. Thereafter, on March 2, 1994, Arun Kumar Jain, filed another suit before the Senior Sub-Judge, Patiala, purported to be on behalf of Budgam along with one Ashok Jain who purported himself to be a director of B.S.B. In that suit, an ex parte stay order dated March 2, 1994, was passed against the defendants therein. An appeal was filed by Sarbjit Singh against the sa....
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....ourt dated February 22, 1993, Budgam has been specifically directed not to take or execute any policy decision. The said notice dated January 3, 1994, having been issued in the name of Budgam in violation of the order of the Jammu and Kashmir High Court dated February 22, 1993, is illegal and void ; that the alleged notice dated January 27, 1994, issued in the name of Budgam by Utpal Kumar Ganguly as a purported director is again in violation of the order of the Jammu and Kashmir High Court dated February 22, 1993. The said notice dated January 3/January 27, 1994, contained a decision of Budgam to drastically reconstitute the board of directors of B.S.B. which was a matter of policy decision and which Budgam was expressly restrained from taking by the order of the Jammu and Kashmir High Court; that there being no valid notice for convening the extraordinary general meeting of the shareholders of B.S.B., the purported meeting alleged to have been held on February 22, 1994, is consequently illegal and void ; that the alleged notice dated January 27, 1994, was not served to S/Sh. P.S. Sandhu, Gurpal Singh, J.S. Mann, Gurmeet Singh Mann and P.R. Pandya, i.e., five undisputed shareholde....
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....inary general meeting and the resolution passed thereat to be taken in the appropriate court. The plaintiff has, thus, stated that pursuant to the stay order of the Supreme Court, the plaintiff is filing this suit for challenging the alleged extraordinary general meeting and the resolutions passed thereat. The written statement has been filed on behalf of defendant No. 8, namely, Arun Kumar Jain and by defendant No. 15 purported to be on behalf of Budgam. Arun Kumar Jain in his written statement has taken exception to the filing of the suit by Sarbjit Singh, alleging to be the managing director of B.S.B. It has been alleged in the written statement that he has no right, title, interest, authority or competency to institute the suit, and the name of the said company shown as the plaintiff is illegal, unauthorised, wholly without jurisdiction and without authority. It has further been stated that the company, i.e., B.S.B., is wholly owned and controlled by Budgam having its registered office in Jammu which holds and owns 99.9% of the equity shares of B.S.B. In turn, one M.D. Chhabria and R.D. Chhabria hold and own respectively 39.87% and 60.08% of the shares in Budgam, i.e. , 99.9....
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....aid company has reconstituted its board of directors in the meeting of the board of directors on February 22, 1994, and since the removed directors were threatening interference in the affairs and management of the said company, the said company filed an injunction suit before the Senior Sub-Judge, Patiala, which is till date pending. Arun Kumar Jain has denied that the management of S.W.C. negotiated the purchase of the said company, as alleged in the plaint. He has also denied that Budgam had no funds to pay the price, though he has admitted that money advanced by Sica Breweries Pvt. Ltd. was a mere intercorporate deposit to Budgam. In para 5 of the written statement, Mr. Jain has given the names of nine persons alleged to be only directors of B.S.B., namely, S/sh. Arun Kumar Jain, T.K. Ramaswamy, M.D. Chhabria, U.K. Ganguly, N.D. Chhabria, Ashok Jain, Shyam Luthria, S.K. Basu and Shiv Shankar Sanyal. He has also denied that he has ceased to be a director as alleged by B.S.B. As regards the order of the Sub-Divisional Magistrate dropping the proceedings on March 2, 1994, he has stated that the same are arbitrary, non est and violative of the principles of natural justice. He has ....
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.... reserved to Budgam by the said order. He has, thus, prayed that the suit filed by B.S.B. be dismissed being misconceived, arbitrary and fraudulent. One S.S. Sanyal, purporting to be director of Budgam, has filed a written statement on behalf of defendant No. 15 which contains almost the identical averments as in the written statement filed by Arun Kumar Jain. The plaintiff, B.S.B., has filed replication to the written statements filed by Arun Kumar Jain, defendant No. 8 and defendant No. 15 wherein the plaintiff has denied the averments made in the written statements and has reiterated the stand taken by it in the plaint. The pleadings in Civil Suit No. 33 of 1994 out of which Civil Revision No. 1109 of 1994 has arisen are not necessary to be mentioned because the plaint and the written statements filed in Civil Suit No. 460 of 1994 cover the controversy raised in Civil Suit No. 33 of 1994. From a perusal of the pleadings of the parties, it is evident that S/Sh. P.S. Sandhu, Gurpal Singh, G.S. Mann, J.S. Mann and P.R. Pandya hold 10 shares of Rs. 10 each, whereas Budgam holds 5,50,000 equity shares of Rs. 10 each. The total shareholding of the company is 5,50,050 shares o....
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....y decision and if the plaintiff company has to exercise any voting right in other company, this right shall be exercised provisionally only and shall remain subject to the orders to be passed ultimately. (iii)The operative part of the impugned order as also the arrangements made hereinabove shall immediately come to an end on the passing of fresh order by the trial court." The issue as to who is the true owner of Budgam, is pending and hotly disputed before the Jammu and Kashmir court and does not call for consideration in the present proceedings. During the course of arguments of Dr. A.M. Singhvi, senior advocate, who argued on behalf of the plaintiffs in Civil Suit No. 460 of 1994 and contesting the respondents in Civil Revision No. 1109 of 1994 and Mr. G. Ramaswami, senior advocate, who argued on behalf of the contesting the defendants in Civil Suit No. 460 of 1994 and on behalf of the petitioners in Civil Revision No. 1104 of 1994, it was repeatedly clarified that no enquiry could be contemplated or conducted in the present proceedings to enquire as to who is the true owner of Budgam. In these proceedings, it was also fairly admitted by Mr. G. Ramaswami, senior advocate, ....
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....der dated February 22, 1993, the subsequent convening and holding of the extraordinary general meeting of Bhankerpur and the resolution dated February 22, 1994, cannot be said to be a willful disobedience of the said earlier order. 6. We, accordingly, set aside the order dated April 18, 1994, of the High Court of Jammu and Kashmir in CMP(COA) No. 139 of 1994. We also dismiss the contempt proceedings." Pursuant to the order of the Supreme Court, Civil Suit No. 460 of 1994 has been filed. Dr. A.M. Singhvi, senior advocate, has contended that no extraordinary general meeting of B.S:B. was held on February 22, 1994, and :he minutes, if any, and notices alleged to have been sent under certificate of posting have been manipulated by the defendants. In the alternative, he has contended that the meeting, if any, held was illegal and was in violation of the Jammu and Kashmir High Court order dated February 22, 1993, whereby the two warring factions of Budgam were prohibited to take any steps of policy nature. He has also referred to certain provisions of the Companies Act to submit that the alleged removal of directors was not valid and the meeting could not be held at a place othe....
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....ause in Stroud's Judicial Dictionary, 1973 edition, "meeting" has been described thus-(1) one swallow does not make a summer, nor does the presence of one shareholder constitute a "meeting" (Sanitary Carbon Co., In re [1877] WN 223). The word "meeting" implies a concurrence, or coming face to face of "at least two persons" (per Coleridge C.J. in Sharp v. Dawes [1876] 2 QBD 26 (CA)). There is accordingly and speaking generally, no "meeting" of shareholders or other bodies, if only one attends ; though "no doubt in a particular statute the word might be used in a special sense, so that the attendance of one might satisfy it" (per Coleridge C.J. in Sharp v. Dawes [1876] 2 QBD 26 (CA)) : see East v. Bennett Bros. Ltd. [1911] 1 Ch 163. In Oxford Companion to Law, 1980 edition, "meeting" has been described thus : "A gathering of two or more persons called to receive a report, take a decision or otherwise take some lawful action." According to Jowett's Dictionary of English Law, 1977 edition, a single person cannot constitute a meeting (Sharp v. Dawes [1876] 2 QBD 26 (CA)). In Venkataramaiya's Law Lexicon with Legal Maxims, 1983 (second edition), for a meeting, there must be at least two ....
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....ment of directors was allegedly taken up and resolutions to that effect were passed. The minutes of the meeting appear to have been signed by T.K. Ramaswamy, chairman. A reading of the minutes shows that out of the shareholders who hold 10 shares of Rs. 10 each, only one shareholder, namely, Gurpal Singh was present and Shalendra Sharma, alleged authorised representative of Budgam, second shareholder, was present. On the record, there is a letter of Gurpal Singh dated April 7, 1994, whereby he had informed the board of directors of B.S.B. that he neither received notice regarding convening of the extraordinary general meeting of B.S.B., nor did he attend any such meeting purported to have been held on February 22, 1994, at New Delhi, either in person or by proxy. He has also mentioned that the question of his father, P.S. Sandhu, attending the meeting does not arise as he had expired last year. Gurpal Singh has also filed an affidavit dated July 27, 1994, in Civil Suit No. 460 of 1994 in which he has affirmed and sworn that he never attended any meeting, nor received notice of convening of the extraordinary general meeting alleged to have been held on February 22, 1994, at New D....
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....ra 7 of their replication in Civil Suit No. 33 of 1994 have stated to the following : "The plaintiffs reaffirm and reiterate that an extraordinary general meeting of the first plaintiff was held after compliance of all the provisions of the Companies Act, and the defendants who have no interest and/or can possibly claim no interest in the first plaintiff are making feeble attempts to attack the validity of the said meeting. The plaintiffs crave reference to the minutes book, attendance register and the other statutory records of the first plaintiff to unequivocally demonstrate the veracity of the stand of the plaintiffs." (emphasis supplied). Having averred that the attendance register was maintained, no attendance register has been placed on record ; rather during the course of hearing of the matter, it was fairly conceded by counsel for the defendants that in fact there exists no attendance register. (iv) Budgam had allegedly issued notice dated January 3, 1994, to the directors sought to be removed and notice dated January 27, 1994, to other shareholders for convening of extraordinary general meeting, but no mention of these notices calling for the extraordinary general me....
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....res each in the first respondent-company have started acting according to the whims and fancies of SWC and MRC and consequently prejudicial to the interest of the petitioners who undisputedly hold 99.99 per cent. paid-up equity capital of the first respondent-company". The stand of the respondents thus clearly was that all the shareholders of B.S.B. except Budgam were colluding with the S.W.C. group. The stand now taken that Gurpal Singh had come to attend the meeting, seems to be improbable. Moreover, having made the averment that the remaining five shareholders including Gurpal Singh were colluding with the S.W.C. group, the simplest thing for the defendants to have done would have been to take signatures of Gurpal Singh on the requisition notice or on the attendance register. The contention of Mr. Ramaswami is that the modes provided under section 53 of the Companies Act for serving of notice or documents by the company are either by way of certificate of posting or by registered post, with or without acknowledgment due and in this case, the requisitionists having sent the notice under certificates of posting, the presumption in law is required to be drawn. According to him, onc....
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.... the address of the addressee, there is a deemed fiction that the cover is received by the addressee. The learned judges of the Division Bench repelled the argument by saying that (at page 881) : "A presumption can be drawn only if there is no other evidence available. In this case, the primary evidence regarding the posting of the letter is not produced. The best evidence that can be produced in this case is the despatch register of the company and the books of account showing the expenses incurred by the company for posting the letters, etc. None of these documents is produced. When the primary evidence is not produced, a presumption on the basis of section 53(2) of the Companies Act cannot be made use of since the posting of the letter is in dispute. Only if a document is sent by post, the presumption under section 53 of the Companies Act can arise. When there is no evidence regarding the posting of the letter, the document relied on by the appellant cannot be made use of". In the circumstances of that case, service of documents/letters sent under alleged certificates of posting was not accepted. In this case, what has been produced are the plain papers on which addresses are ty....
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....xtraordinary general meeting. Counsel for the plaintiffs in Civil Suit No. 460 of 1994 had appeared on behalf of the caveator on March 3, 1994, when the matter was taken up in contempt proceedings. The FAX message merely raised a query as to the convening and holding of the extraordinary general meeting and is neither of any consequence nor in any way establishes that the plaintiffs knew the factum of convening and holding of the extraordinary general meeting, before February 22, 1994. In order to determine as to whether proceedings of the meeting and resolution passed therein are valid, it is necessary to notice the provisions of section 169 of the Companies Act. Under the section, the board of directors of the company on requisition of such number of members of the company as is specified in sub-section (4), has the duty to call forthwith the extraordinary general meeting of the company. If the board does not, within 21 days from the date of valid requisition, proceed to call the meeting for consideration of the matter set out in the requisition, the requisitionists themselves are empowered to call a meeting of the company. Under subsection (7), the meeting of the requisitioni....
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.... and notice dated January 27, 1994, in this regard was sent to the other shareholders, namely, P.S. Sandhu, Gurpal Singh, G.S. Mann, J.S. Mann and P.R. Pandya, who hold 10 shares of Rs. 10 each. Notice dated January 27, 1994, has not been addressed to any other person except the shareholders and on the U.P.C. receipts, the names of these very persons are mentioned, meaning thereby that notice dated January 27, 1994, had not gone to anybody else except the shareholders. The business to be transacted in the extraordinary general meeting was for the removal of directors and appointment of new directors. The manner in which directors may be removed, is laid down in section 284 of the Companies Act. As per sub-section (1), a director may be removed by ordinary resolution, but under sub-section (2), special notice is required to be given to the company of any resolution to remove a director or to appoint somebody instead of directors so removed at the meeting at which he is removed. Under subsection (3), on receipt of notice of resolution to remove a director, the company has to forthwith send a copy thereof to the director concerned and the director, whether or not he is a member of the....
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....ch. On September 16, 1993, D. Dasgupta had resigned. However, in notices dated January 3, 1994, and January 27, 1994, served under section 169 of the Companies Act, S. Roy, R.S. Ahluwalia and D. Dasgupta were sought to be removed and were allegedly removed in the extraordinary general meeting stated to have been held on February 22, 1994. But, as is apparent from Form No. 32 filed with the Registrar of Companies, on March 12, 1992, S. Roy and R.S. Ahluwalia and on September 16, 1993, D. Dasgupta had already resigned. This fallacy in the resolution alleged to have been passed in the extraordinary general meeting dated February 22, 1994, was brought to the notice of the defendants by the Registrar of Companies when Form No. 32 regarding reconstitution of the board of directors in the extra ordinary general meeting dated February 22, 1994, was sought to be registered with the Registrar of Companies. The minutes of the meeting of the extraordinary general meeting show that T.K. Ramaswamy attended the alleged extraordinary general meeting and indeed presided over it. However, he was not even sent U.P.C. notice. T.K. Ramaswamy is admittedly not a shareholder of B.S.B. It is not understoo....
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.... Jain that B.S.B. through Sarabhjit Singh had filed a suit at Rajpura against Budgam and others, i.e., Suit No. 831 of 1993 and also Civil Suit No. 261 of 1993 against Arun Kumar Jain, seeking the declaration of his appointment as director as void and illegal and also injunction against the defendants for restraining them from interfering in the affairs and management of the company, but no mention of these suits too was made. The filing of Company Petition No. 29 of 1993 before the Company Law Board and declining of the prayer for the interim relief of convening the extraordinary general meeting too was within the knowledge of Arun Kumar Jain, but this fact has been omitted. The Senior Sub-Judge, Patiala, registered the suit on March 2, 1994, and on the application, pending notice to the other side, granted interim injunction restraining the defendants therein from holding out as directors/representatives of B.S.B. and from interfering in any manner in the affairs and management of the company. Aggrieved by the aforementioned order of interim injunction, an appeal was filed on behalf of Sarabhjit Singh and others. The learned additional District Judge, Patiala, vide his order date....
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....s in the petition. The Supreme Court relying upon Hari Narain v. Badri Das, AIR 1963 SC 1558 and Rajabhai Abdul Rehman Munshi v. Vasudev Dhanjibhai Mody, AIR 1964 SC 345, revoked the leave and held that "a party who approaches this court invoking the exercise of this overriding discretion of the court must come with clean hands. If there appears on his part any attempt to overreach or mislead the court by false or untrue statements or by withholding true information which would have a bearing on the question of exercise of the discretion, the court would be justified in refusing to exercise the discretion or if the discretion has been exercised, in revoking the leave to appeal granted even at the time of hearing of the appeal". In All India State Bank Officers Federation v. Union of India [1990] 2 JT 243, and G. Narayanaswamy Reddy v. Government of Karnataka [1991] 3 JT 12, the Supreme Court not only disapproved of the conduct of the petitioner therein in making statements in the petitions and affidavits recklessly and without proper verification, but also refused to grant relief, when it found that the petitioner therein seeking relief had not come to the court with frank and full....
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....". Again in para 21, it has been stated that the registered office and the factory unit of the first plaintiff is situated in District Patiala and the cause of action has arisen to the plaintiffs within the local limits of the jurisdiction of the court and thus, the court has ample jurisdiction to entertain and try the suit. The description of defendants Nos. 13 and 14 as given in the plaint is, "13. Shaw Wallace Company Ltd., 4, Bankshall Street, Calcutta-700 001, with branch office at Patiala, and, 14. Cruickshank and Company Ltd., 40, Bankshall Lok Community, Vasant Vihar, New Delhi-110 057, with branch office at Patiala". It has not been disclosed as to at what place, the branch office at Patiala of defendants Nos. 13 and 14 is situate. Admittedly, the industrial unit and the registered office of B.S.B. is at Dera Bassi which falls within the jurisdiction of the civil courts at Rajpura. Sections 15 to 20 of the Code of Civil Procedure, regulate the forum for institution of the suits. Section 15 of the Code states that every suit shall be instituted in the court of the lowest grade competent to try it. Section 16 states that a suit shall be instituted where the subject-matter is....
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....the firm was having a branch office at Chandigarh, will not confer jurisdiction unless it is shown that a part of the cause of action arose within the territorial jurisdiction of that court. In this case too, the only allegation is that branch offices of two of defendants Nos. 13 and 14, who were interfering in the management, are at Patiala and the other defendants are the agents/employees of defendants Nos. 13 and 14. This bald allegation cannot confer jurisdiction on the court at Patiala when no cause of action had accrued within the territorial jurisdiction of the Patiala court. No doubt, the District Judge, Patiala, has the administrative control over the courts at Rajpura, but for the matters relating to the subject-matter falling within the territory of Rajpura, powers have been given to the civil courts at Rajpura to entertain and try the civil suits. It was for this reason that the earlier suits were filed by the parties at Rajpura. Since the plaintiffs had failed to obtain any interim relief from the court at Rajpura, the suit at Patiala was filed. Thus, I am prima facie of the view that the court at Patiala has no territorial jurisdiction to entertain and try the suit. ....
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....that it is unnecessary to carry on these proceedings under section 145 of the Criminal Procedure Code, I hereby drop all the proceedings in respect of the above said distillery". It was only on March 2, 1994, when the Sub-Divisional Magistrate decided to drop the proceedings, that the suit at Patiala was filed and on that very date the plaintiffs were successful in obtaining the interim injunction. After having obtained the interim injunction from the Senior Sub-Judge, Patiala, C.O.C.P. No. 199 of 1994 was filed in this court on March 3, 1994. On March 4, 1994, G.R. Majithia J. on finding that the parties were at issue as to which of the parties is in actual physical possession of the company, on agreement of counsel for the parties directed the Chief Judicial Magistrate, Patiala, to supervise the working of the company till March 9, 1994, and that order is continuing till date. In view of the order in the contempt petition, none of the parties is in control of the company. As a matter of fact, no manufacturing activity took place between February 22, 1994, and presently too, no manufacturing is being done in the industrial unit and, therefore, as to who was in possession at the ti....