TaxTMI 
TaxTMI 
TaxTMI 
2003 (11) TMI 453
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.... The chain of events leading to and culminating in passing of the Court order dated April 26, 1996, by the Hon'ble Supreme Court and filing of the present appeal may be briefly narrated in this way which would also help us to a great extent to appreciate the rival contentions raised in this appeal. 3. Sri Ajit Chatterjee and his brother, Sri Argha Kusum Chatterjee (to be referred as Chatterjee Brothers hereinafter), claiming themselves to be members of Peerless Company within the meaning of the Companies Act, 1956, filed a petition in this Court on May 30, 1991, under sections 397 and 398 read with other relevant provisions of the Act alleging, inter alia, gross mismanagement in the affairs of Peerless Company by its directors and also alleging gross irregularities and illegality, particularly in issuance of 30,000 shares by its directors, with specific prayers for supersession of the board of directors of Peerless Company and all its subsidiaries and also for appointment of special officer/receiver to manage the affairs of the company and its subsidiaries as interim measure and also for final directions from the Court for proper management of the company and its subsidiaries as c....
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....aggrieved party was entitled to proceed with both the appeals and the company petition. 7. The Division Bench of this Court after hearing the respective parties dismissed both the applications of the present appellant by an order dated February 2, 1995, holding, inter alia, that there was no statutory requirement of service of notice upon the appellant and when the original company petition became non est, there was no question of any transposition of the Chatterjee Brothers or bringing of the appellant on record as the sole appellant because simultaneously leave was also granted for withdrawal of both the appeals by the Chatterjee Brothers. The present appellant thereafter filed two separate special leave petitions before the Hon'ble Supreme Court sometime in July, 1995 and the Hon'ble Supreme Court by its order dated April 26, 1996, while disposing of the two appeals arising out of the special leave petitions granted liberty to the present appellant to file appeals both against the dismissal of the company petition and allowing of the interlocutory application by the trial Judge of this Court and following the directions of the Hon'ble Supreme Court, the appellant has filed this....
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....panies Act. Mr. Gupta submits that from a plain reading of the order of the Hon'ble Supreme Court it is very much clear that the Hon'ble Court did not touch the order of the Division Bench of this Court dated February 2, 1995, and naturally, the order of the Division Bench dated November 16 and 18, 1993, as well as the order of the Division Bench dated February 2, 1995, have become final and is beyond any further challenge. 10. Mr. Gupta contends that since the order of the earlier Division Bench of this Court granting leave in favour of the Chatterjee Brothers to withdraw the main company petition has become final, there is no question of allowing the present appellant to continue the present appeal because the main petition out of which the order of the learned Single Judge dated January 13, 1992, arose is non-existent and if that original company petition is non-existent in the eye of law, there cannot be any question of preferring an appeal in connection with that non-existent company petition. 11. Mr. Gupta submits that the present appellant in fact has been trapped unaware because without being successful to get the order of the earlier Division Bench dated February 2, 1995....
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....hout the appellant and its associate, R.L. Gaggar, the Chatterjee Brothers had no legal entity in the matter of filing of the original petition. Mr. Gupta con-tends that these submissions of the appellant are probably based on total misconception of law and statutory provision. Mr. Gupta submits that under the provisions of rule 88(2) of the Company Rules, any petitioner can withdraw a company petition filed under section 397/398 of the Act only with leave of the Court and there is no statutory requirement of service of any notice on anybody. 14. Mr. Gupta submits that the plea of the appellant to pursue the company application as of independent right is perhaps derived from misinterpretation of the decision of the Hon'ble Supreme Court in Rajahmundry Electric Supply Corpn. Ltd. v. A. Nageswara Rao [1956] 26 Comp. Cas. 91 (commonly known as Rajahmundry's principle), but, the ratio of the decision in Rajahmundry Electric Supply Corpn. Ltd.'s case (supra) cannot be of any help for the present appellant simply because in Rajahmundry Electric Supply Corpn. Ltd.'s case (supra) the original petitioner did not withdraw the petition but some consenting parties subsequent to filing of the ....
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....order of the Hon'ble Supreme Court dated April 26, 1996, should be properly gone through and analysed. Mr. Chatterjee contends that it is pertinent to mention that the Hon'ble Court did not turn down the appeals preferred by the Bhagawati Developers Pvt. Ltd. (to be mentioned hereinafter BDPL for convenience) rather the Hon'ble Court disposed of both the appeals by recording some observations in general and by granting leave to BDPL in particular to prefer the present appeal. 17. Mr. Chatterjee contends that the Hon'ble Court made it clear that the respondents would not raise any objection on the question of limitation and on the question of locus standi against the appeal to be filed by the BDPL in pursuance of the order of the Hon'ble Court. Mr. Chatterjee contends that as per order of the Hon'ble Court it shall be open for the respondents to contend at the time of hearing of the appeal that by virtue of the withdrawals of the Chatterjee Brothers, the original application under sections 397 and 398 is not maintainable in law and also to contend that the ground upon which the learned Single Judge of this Court dismissed the main application is perfectly in order and justiciable. ....
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.... Court on April 26, 1996, the earlier orders of the Division Bench of this Court dated November 16, 1993, November 18, 1993 and February 2, 1995, legally merged in the order of the Hon'ble Supreme Court and, hence, in the eye of law, the orders dated November 16, 1993, November 18, 1993 and February 2, 1995, stood automatically quashed notwithstand-ing no such observation having been recorded in the order of the Hon'ble Supreme Court dated April 26, 1996. 20. Mr. Chatterjee contends that even if this Bench is of the view that the principle of merger is not applicable to the present case as urged by the appellant, still, no challenge can be thrown against continuance of this appeal simply because BDPL acquired an independent right to file the present appeal under the leave granted by the Hon'ble Supreme Court and this direction was recorded by the Hon'ble Court at the suggestion of the respondents. Mr. Chatterjee submits that the Hon'ble Supreme Court made a clear distinction between withdrawal of the Chatterjee Brothers and withdrawal of the company petition and by making such distinction the BDPL has been given the right and authority to pursue an independent appeal challenging t....
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....ection of the Hon'ble Supreme Court. Mr. Chatterjee submits that the true impact of this observation of the Hon'ble Supreme Court in the matter of condonation of delay in preferring the appeal has got a far reaching legal consequence. 23. Mr. Chatterjee submits with reference to the decisions of the Hon'ble Supreme Court in Ramdoss v. K. Thangavely [2000] 2 SCC 135 and Rajendra Nath Kar v. Gangadas & Gangadhar Rathi AIR 1979 SC 566, that when a Court condones the delay caused in filing a proceeding it does not extend the period of limitation prescribed by law for filing it, rather it treats the proceeding as if it is filed within limitation, which it has the power to do if sufficient cause is shown for not filing the proceeding within the prescribed period. Mr. Chatterjee submits that the sub-heading of section 5 of the Limitation Act is somewhat misleading and following the decision of the Larger Bench of the Hon'ble Supreme Court as Rajendra Nath Kar v. Gangadas & Gangadhar Rathi AIR 1979 SC 566, it may be reasonably argued that the date of filing of the present appeal should be taken as that of filing much before the purported withdrawal of the appeals and company petition by t....
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....ntainability of the appeal should be discarded and this Court should be pleased to hold that equity, fair play and the principles of natural justice demands that BDPL should be permitted to proceed with the appeal and this Division Bench should dispose of the appeal on the merits without indulging itself in any flimsy technicalities which would be against all canons of fair play, more so, when affairs of a public company is at issue. 26. In the course of reply and while refuting the above contentions raised by Mr. Chatterjee on behalf of the appellant in support of maintainability of the appeal, Mr. Gupta has made the following submissions for consi-deration of this Court : 27. Mr. Gupta submits that the doctrine of merger is indeed an age old legal proposition but in a decision of the Hon'ble Supreme Court in State of Madras v. Madurai Mills Co. Ltd. [1967] 19 STC 144 and followed by another decision of the Supreme Court in Kunhayammed v. State of Kerala [2000] 245 ITR 3601, the Hon'ble Court held that the doctrine of merger is a doctrine of rigid or universal application and it cannot be said that wherever there are two orders, one by the inferior authority and other by superio....
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....he Companies (Court) Rules provides for withdrawal of such representative proceeding with leave of the Court and, hence, no help or assistance can be derived from the Code of Civil Procedure keeping in mind the special statutory provision of the Companies (Court) Rules. Mr. Gupta contends that it is very much clear from the order of the Hon'ble Supreme Court that the Hon'ble Court recognised the withdrawal of Chatterjee Brothers both from appeal and the company petition and, hence, the Hon'ble Supreme Court without considering the prayer of BDPL for its transposition as appellant in the appeals filed by the Chatterjee Brothers granted liberty to file independent appeal and at the same time, the respondents were given full liberty to agitate over the maintainability of such appeals to be preferred by BDPL and the Hon'ble Court made it further clear that both sides would be at liberty to support their respective stand on the question of maintainability of the appeal and it would be open for the appellate forum to decide the issue keeping in mind the relevant statutory provisions of the Companies Act and the Companies (Court) Rules and also the legal proposition of Rajahmundry Electri....
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....d of directors are working in a narrow sectarian interest overlooking the general interest and benefit of the shareholders and to substantiate their point they cited various instances like issuance of 30,000 shares, changing of accounting procedure and also for siphoning off of money of the company for the benefit of a particular group of directors-cum-shareholders. 34. The Peerless Company and its directors, Mr. S.K. Roy, and others challenged the company petition both on the merits as also on maintainability by filing affidavit-in-opposition and also by filing an interlocutory petition and the learned trial Judge took up both the matters together for consideration. The learned trial Judge ultimately dismissed the main petition holding it to be not maintainable and for that matter did not enter into the merits of the allegations of the Chatterjee Brothers. While dismissing the main petition on the question of maintainability, the learned trial Judge observed, inter alia, that one of the Chatterjee Brothers, namely, Ajit Kr. Chatterjee could not be considered to be a member of the company within the meaning of the Companies Act, inasmuch as, being a non-resident Indian, he did not....
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.... the order of the Division Bench dated February 2, 1995, it is available that the Division Bench in its order had the occasion to examine the legality and validity of the order of the trial Judge dated January 13, 1992 and expressed its specific observation upholding the findings of the learned trial Judge on the question of maintainability of the original company petition. From the order of the Division Bench dated February 2, 1995, it is further available that the BDPL in support of its prayers had argued before the Division Bench that the order granting leave of withdrawal in favour of Chatterjee Brothers was ex facie, illegal and invalid simply on the ground that no notice before granting such withdrawal was served on it as the company proceeding was representative in character and such notice was a sine qua non for granting such withdrawal. The BDPL in support of its right of recording its name as sole appellant in both the appeals sought to convince that following the principle laid down in Rajahmundry Electric Supply Corpn. Ltd.'s case (supra), the Division Bench should consider its prayer because the Court should consider the validity of a proceeding started under section 3....
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....ention of Peerless Co. and dismissed the application under section 397/398, which also meant dismissal of interlocutory application. 41. Against the order of the learned Single Judge, two special appeals were filed by the Chatterjee Brothers. Pending those appeals, it appears, there was a settlement between the Chatterjee Brothers and the persons in control of Peerless, as a result of which the Chatterjee Brothers withdrew their appeals. This was done without notice to the appellant herein. The Division Bench dismissed the appeal as withdrawn. When the appellant came to know of the said dismissal, it approached the Division Bench of the High Court seeking permission to continue the special appeals. The appellant's contention was that inasmuch as the appeals were withdrawn and dismissed without notice to it (who was a consenting party and whose shareholding alone enabled the original petition to be filed, they are entitled to continue the appeals). This plea was rejected by the Division Bench against which the present appeals are preferred. 42. When these appeals came up for hearing, Sri K.K. Venugopal, learned senior advocate for the respondents, submitted that the proper course ....
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....casion to examine the order of the learned Single Judge dated January 13, 1992 and also the several orders of the earlier Division Bench of this Court dated November 16, 1993, November 18, 1993, as well as the order dated February 2, 1995, which was the subject-matter of challenge before the Hon'ble Supreme Court. From the order of the Hon'ble Supreme Court it is equally clear that the Hon'ble Court recognised the withdrawal of Chatterjee Brothers both from the appeals as well as from the company petition. From the order of the Hon'ble Supreme Court it is also clear that the Hon'ble Supreme Court did neither set aside the order of the earlier Division Bench dated February 2, 1995, nor modify the same. The Hon'ble Supreme Court also did neither allow the prayer of BDPL for transposition of the Chatterjee Brothers in the category of proforma respondents in the appeals nor did allow the prayer of BDPL for recording its name as sole appellant in those appeals. From a plain reading of the order of the Hon'ble Supreme Court, there are reasons to hold that the Hon'ble Court neither interfered with the order of the Division Bench dated February 2, 1995, nor recorded any observation touchin....
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....the original petition has been properly instituted, the withdrawal of the Chatterjee Brothers at a later point of time does not affect the validity of its continuance. It was further made clear by the Hon'ble Court for the appellant to argue that dismissal of the appeals preferred by the Chatterjee Brothers on the basis of their withdrawals shall not come in the way of the appellant raising such contentions as are open to them in law. 48. From the trend of arguments put forward by the respective parties and also from their written notes submitted before us, we are inclined to hold that both the parties have in fact strictly adhered to the directions of the Hon'ble Court in the matter of forwarding their points in the continuance of the present appeal inasmuch as the respondents have urged in detail touching the maintainability of the appeal in the manner as indicated by the Hon'ble Court and similarly, the appellant has also put forward its point in support of continuance of the appeal in the manner as indicated by the Hon'ble Court contending, inter alia, that withdrawal of the Chatterjee Brothers from the appeal as well as from the company petition cannot affect their independen....
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....al from the appeals and the company petition. At this juncture we intend to bring it on record that we very much admire and appreciate the innovative argument of Mr. Chatterjee in his attempt to establish his point regarding interpretation of the provision of section 5 of the Limitation Act, though we have no hesitation to record at the same breath that on proper examination of the point at issue after hearing both the sides we are unable to subscribe to the views expressed by Mr. Chatterjee in the matter of his interpretation of the provisions of section 5 of the Limitation Act. 52. On a plain and simple reading of the provisions of section 5 of the Limitation Act, we gather the reasonable impression that by exercising power given by the statute under section 5 of the Limitation Act the Court of law extends the period of limitation and by no stretch of imagination, it can be argued that the statutory provision indicates any 'anti-clock-wise' movement as contended by Mr. Chatterjee and such a movement as proposed by Mr. Chatterjee would be against the very principle of statutory provision and nobody would deny that the Court of law would accept the statutory provision as it stands....
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....ng of the order of the Hon'ble Supreme Court that there was no existence of the original company petition since withdrawal of the Chatterjee Brothers can there be any existence of any appeal arising out of the said company petition and in our considered view the only answer to this crucial question must be in the negative. Further reference has been made by the contesting parties to the ratio of decision laid down by the Hon'ble Supreme Court in the case of Rajahmundry Electric Supply Corpn. Ltd. ( supra) and from the order of the Hon'ble Supreme Court we also get that the appellant was given the liberty to argue on this point that notwithstanding withdrawal by the Chatterjee Brothers the appellant can proceed with the company proceedings provided it can be shown that the said proceeding was properly presented at the initial stage and at the same time, the respondents were also given the liberty to argue that in view of the withdrawal of the Chatterjee Brothers the company proceedings cannot be continued and it is significant to note in this context the observation of the previous Division Bench where it went on recording that "if a horse is alive the rider could be changed but the....