TaxTMI 
TaxTMI 
2002 (4) TMI 864
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....parties concerned i.e. the Company, its employees, shareholders and creditors was taken care of. In another appeal being D.B. Special Appeal No. 24/94, the grievance of the appellant Smt. Rajni Sanghi inter alia is that the Company Petition filed by her as a shareholder and creditor being Company Petition Nos. 2/92 and 3/92 were directed to be heard along with the Company Petition No. 6/86, still the learned Company Judge disposed of the Company Petition irrespective of the fact that both the company petitions were not listed and they were not on board. It is also submitted that her deceased husband Ashok Kumar Sanghi who was third respondent in the Company Petition died on 1-2-1990 but without taking his legal representatives on record the Company Petition was disposed of. She also filed an application along with her minor daughter Meenakshi for impleading her a party, but the same was erroneously rejected by the learned Company Judge. Thus, the impugned order sanctioning the scheme of reconstruction has been passed at her back in violation of principles of natural justice. The another significant development during the pendency of the special appeal is that while on 2-3-2000 the ....
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....eneral meeting of the Board has become long over due. The Company has not submitted its annual audit report. It is, thus, inter alia prayed that to remove all the Directors of the Company and appoint new Directors or in alternate order winding up of the Company. 4. During the pendency of the Company Petition the original third respondent Shri Ashok Sanghi died on 1-2-1990 as such his wife and minor daughter Meenakshi also filed company petitions being Nos. 2/92 and 3/92 as a shareholder as well as a creditor [under section 433(e) read with section 439 of the Companies Act]. 5. That the petitioner in the Company Petition namely Shri R.K. Sanghi, Smt. Pushpa Sanghi and the second respondent Smt. Uma Sanghi wife of late Shri N.K. Sanghi, Amrit Kumar Sanghi, Akshey Kumar Sanghi and Smt. Rachna Sanghi appeared in person before the learned Company Judge on 5-9-1994 and submitted a scheme known as scheme of reconstruction-cum-family settlement. The scheme was signed by aforesaid persons present in the Court. A statement was made by Shri R.K. Sanghi that the consent of his son Nitin Sanghi and daughter Mrs. Deepa Kejriwal with respect to the family settlement shall be filed within two we....
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....K. Sanghi agreed to pay a sum of Rs. 40 Lakhs to Shri A.K. Sanghi and his family members on behalf of Smt. Uma Sanghi. (c)Against the requisition of the land sought to be transferred belonging to the Company other property at Bani Park shall be surrendered to the Government under Urban Land Ceiling. (d)Shri A.K. Sanghi and his family members, who have filed a petition before the Delhi High Court for making the award of the Arbitrator dated 3-12-1987 as the rule of the Court shall withdraw the said proceedings unconditionally. The learned Company Judge disposed of the Company Petition bearing No. 6/86 in terms of the aforesaid scheme of reconstruction-cum-family settlement by order dated 5-9-1994. 6. An application was made for correction of typographical mistake in the order dated 5th September, 1994. It was prayed that in para 12 a statement may be included to the effect that Shri R.K. Sanghi and his family members shall transfer 505 shares of the Company in the name of Smt. Uma Sanghi or her nominees. A permission was also sought to submit the names of the nominees of Smt. Uma Sanghi in whose favour share of the Company and India Motors Pvt. Ltd. from A.K. Sanghi and his fami....
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....rs in favour of the appellant Shri M.K. Sanghi and his family members in lieu thereof the property of the Company mentioned in Para 3 of the Scheme of Reconstruction was transferred on its book value which was far less than the market value. However, the appellant did not raise any objection in the said proceedings because he was beneficiary of the scheme of reconstruction. There also no notice was given to other parties including the fourth respondent. Averments have been made with respect to certain payments to the creditors. 8. Smt. Rajni Sanghi wife of late Shri Ashok Sanghi has also filed an appeal under section 18 of the Rajasthan High Court Ordinance read with section 391(7) of the Companies Act against the order of the learned Company Judge sanctioning the scheme of reconstruction inter alia on the ground that she had also filed a company petition being No. 3/92 and her minor daughter Miss Meenakshi Sanghi filed Company Petition No. 2/92 and the said company petitions were directed to be heard along with the instant company petition No. 6/86, but the learned Judge without hearing the said company petitions has sanctioned the scheme which has caused serious prejudice to her....
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....erest of the sixth respondent Shri Vijay Kumar Sanghi and the appellant Mahendra Kumar Sanghi are diametrically opposed to each other. It is also averred that the conduct of respondent No. 6 disentitles him to be transposed as appellant. A reference has been made to clause 8 of the Scheme which provides transfer of 270 shares to the third respondent Company held by Shri A.K. Sanghi and his family members which includes Shri Vijay Kumar Sanghi against the payment of Rs. 40 Lakhs to Shri A.K. Sanghi and his family members by the first respondent. It is also averred that Shri A.K. Sanghi and his family has already given consent for the Scheme of reconstruction. 11. The first issue which requires consideration is as to whether the sixth respondent Shri Vijay Kumar Sanghi can be transposed as appellants ? It is submitted by Mr. Sandeep P. Agarwal learned counsel appearing for Shri Vijay Kumar Sanghi that transposition of a defendant or respondent as co-plaintiff or the appellant should always be permitted where it is necessary for complete adjudication upon the question involved and to avoid multiplicity of proceedings. In support of the contention, he has referred to large number of p....
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.... up for consideration before the Apex Court in Northern Plastics Ltd. v. Hindustan Photo Films Mfg. Co. Ltd. [1997] 4 SCC 452. The Court ruled that in order to earn locus standi as "person aggrieved" other than the arraigned in the original proceedings it must be shown that the said third party has a direct interest in the subject. The Court recorded that it cannot be general public interest or interest of a business rival. The Apex Court in Northern Plastics Ltd.'s case (supra) has quoted the view of James L.J. with approval as follows:- "But the words 'person aggrieved' do not really mean a man who is disappointed of a benefit which he might have received if some other order had been made. A 'person aggrieved' must be a man who has suffered a legal grievance, a man against whom a decision has been pronounced which has wrongfully deprived him of something, or wrongfully refused him something, or wrongfully affected his title to something." Thus, we are of the view that an appeal under section 391(7) or 483 of the Act can be maintained by any person aggrieved of the order under challenge, which causes him prejudice in some form or the other. In such cases, a leave will be require....
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....rd has dropped the fight with the first respondent. Keeping in view this fact and the fact that no embarrassment will result in there being two appellants with conflicting interest, the Court observed that even if necessary the Court can take action suo motu either under Order 1, Rule 10, CPC or in its inherent jurisdiction transpose a defendant as appellant. The Court observed that Smt. Saila Bala being a purchaser of the property has vital interest in the dispute and as such the justice requires that she should be given an opportunity to protect her rights. 14. In Surya Kanta Jana v. Tarak Nath Jana AIR 1927 Cal. 37 the Court held that the High Court has ample power in the interest of justice to add parties, or to transpose a party from one category to another. In Bhagwati Prasad Bhagat v. Mt. Pahil Sundari AIR 1969 Pat. 215, a Division Bench of the Patna High Court held that a prayer for transposition cannot be disallowed merely on the ground that the decree was not against him. In R.S. Maddanappa v. Chandramma AIR 1965 SC 1812, the Apex Court relying on Bhupendra v. Rajeshwar AIR 1931 PC 162 ruled that the Court can even suo motu exercise the power to transpose a party from on....
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.... the ends of justice without objec- tion to the provision of statutory limitation. In view of the aforesaid discussion, the application filed by Shri Vijay Kumar to transpose him as an appellant deserves to be granted. 18. As far as the application filed by Shri Mahendra Kumar Sanghi is concerned, there can be no objection to permit him to withdraw as an appellant from the appeal. This will not have any effect on the survival of the appeal as we have already ordered Shri Vijay Kumar to transpose him as appellant. It is significant to notice that the validity and correctness of the impugned order i.e. the order of the learned Company Judge dated 5/6-9-1994 for grant of scheme of reconstruction-cum-family settlement has also been challenged in another appeal being D.B. Special Appeal No. 24/94 filed by Smt. Rajni Sanghi, is in existence. 19. It is contended by Mr. Sandeep P. Agarwal learned counsel appearing for the transposed appellant Shri Vijay Kumar that the learned Company Judge has sanctioned the scheme for reconstruction-cum-family settlement in complete violation of the provisions of section 391 of the Companies Act. A plain reading of the impugned order will show that the ....
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....s per the award of arbitration, Shri Vijay Kumar was required to transfer the shares in the name of her group. It is further averred that Shri Vijay Kumar Sanghi has acted upon the scheme of reconstruction by retiring from the partnership of M/s. Sanghi Brothers and his wife retired from the partnership Firm M/s. Rajasthan Theatre. However, she had admitted that the formalities of transfer of title deed of M/s. United Motors to the nominee of Shri R.K. Sanghi is to be completed vice versa Shri R.K. Sanghi was required to transfer the shares in respondent No. 3 standing in his name and in the name of his family members to her group. 20. Shri R.K. Sanghi, who was initially supporting the reconstruction scheme has now filed an affidavit on 23-11-2001 supporting the appeal and seeking the direction to quash order dated 5/6th September, 1994. It is averred that the main beneficiary of the family settlement is Mrs. Uma Sanghi and her family consisting of her son Shri Akshey Sanghi and his wife Smt. Rachna Sanghi and her daughter-in-law Smt. Rajni Sanghi w/o Late Ashok Sanghi (appellant in Appeal No. 24/94). It is alleged that Smt. Uma Sanghi has not only excluded all the shareholders of....
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....romise or arrangement is proposed- (a)between a company and its creditors or any class of them; or (b)between a company and its members or any class of them; the Court may, on the application of the company or of any creditor or member of the company, or, in the case of a company which is being wound up, of the liquidator, order a meeting of the creditors or class of creditors, or of the members or class of members, as the case may be, to be called, held and conducted in such manner as the Court directs. (2) If a majority in number of representing three-fourths in value of the creditors, or class of creditors or members, or class of members, as the case may be, present and voting either in person or, where proxies are allowed under the rules made under section 643, by proxy, at the meeting, agree to any compromise or arrangement, the compromise or arrangement shall, if sanctioned by the Court, be binding on all the creditors, all the creditors of the class, all the members, or all the members of the class, as the case may be, and also on the company, or in the case of a company which is being wound up, on the liquidator and contributories of the company : Provided that no orde....
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....r person by whom the application has been made under sub-section (1), has disclosed to the Court by affidavit or otherwise all material facts relating to the company such as latest financial position of the company, auditor's report on account of company, pendency of any investigation proceedings in relation to the company under sections 235 to 251 of the Act and the like. 23. A Division Bench of Bombay High Court in J.S. Davar v. Dr. Shankar Vishnu Marathe AIR 1967 Bom. 456 after quoting the opinion of Brown L.J. in Alabama, New Orleans, Texas & Pacific Junction Rly. Co., In re [1891] 1 Ch. 213 made the following pertinent observation:- "On a review of these authorities and from the provisions in section 153(2) of the Indian Companies Act, 1913, it seems to us clear that the consent of the majority of creditors or shareholders to a scheme does not conclude the issue whether the scheme should be sanctioned. The jurisdiction of the Court which is called upon to sanction a scheme transcends the mere consideration that a majority of these affected by the scheme is willing to submit to the scheme. The creditors of a company may agree to accept a fraction of the amount due to them fro....
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....nd reach a conclusion of its own. It must consider whether it is in the interest of the company as a whole and of the class of persons for whom the majority acts and whether the scheme is such that it must be pushed through. Therefore, the correct approach to a case is to bear in mind that the Court is neither called upon merely to register a decision of the majority, nor is it called upon to act in such a manner that the minority will create a stalemate and thereby retard the progress which the majority has legitimately and reasonably a right to expect and make. The Court must test the scheme not from the point of view of a lawyer or an accountant or an expert, but, it must look at it from the point of view of a reasonable and a fair minded person..." (p. 305) 25. In Patiala Starch & Chemical Works Ltd. 27 Comp. Cas. 111 (sic) the Court has laid down the guiding principle for the Court in the matter of sanction of the scheme. The Court observed:- "The Court ought not to substitute its discretion for that of the shareholders of a company, who should normally be permitted to manage their own affairs themselves; but in sanctioning a scheme, the Court does not simply register the wi....
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....uggested should be acceptable to the Court whose powers are set out in section 402. Even accepting the argument, the compromise which has not been agreed to by Syed Mahomed Ali, one of those represented in the petition, cannot be used to stifle the enquiry of the petition in the absence of a finding that the compromise was entered into bona fide in the interest of the company as a whole...." (p. 591) 27. In view of forgoing discussion, it clearly emerges that while it is true that a scheme under section 391 cannot be scrutinised in the way harping critic, a hairsplitting expert, a meticulous accountant or fastidious counsel, but the Court will also not act as a rubber stamp or register as a matter of course or to treat the scheme as a fait accompli to accord sanction merely upon a casual look at it. It is obligatory upon the Court to scrutinise the scheme and to see whether there has been compliance of the provisions of law and whether it conforms to the standard of reasonableness. It must also be ensured that the majority has acted bona fide and the minority is not being overridden by a majority having interests to its own clashing with those of the minority whom they seek to co....
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....ge also did not try to satisfy about the bona fides of the persons presenting the scheme for sanction. There is an allegation that the impugned scheme is for the personal benefit of Smt. Uma Sanghi. It is not necessary to trace all the objections with respect to the sanction of the scheme for the simple reason that it does not fulfil the pre-requisites as referred to above. The scheme sanctioned by the impugned order of the learned Company Judge deserves to be set aside on this ground alone. 29. As far as the appeal filed by Smt. Rajni Sanghi is concerned, there is substance in her say that in spite of the specific direction to hear the company petition by her being No. 3/92 and another by her daughter Miss Meenakshi under section 433(3) read with section 439 of the Companies Act along with the instant company petition No. 6/86, the learned Company Judge sanctioned the scheme without directing at least to place the two other petitions on board. It is submitted by Smt. Rajni Sanghi that the scheme of reconstruction was forwarded without taking signatures or without informing all the non-petitioners or the shareholders and all the creditors even the creditors in whose behalf the com....