TaxTMI 
TaxTMI 
2011 (7) TMI 1002
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....tested. One of them (C.A. No. 686 of 2010) was an application by the company for dismissal of the sections 397, 398 application. One Ajit Kumar Agarwal, opposed this application as an intervenor. It was strenuously argued on his behalf that the company should not be granted the prayers. Neither, the petitioners in the sections 397, 398 application should be allowed to withdraw from the application. He made an application (C.A. No. 721 of 2010) for dismissal of C.A. 686 of 2010. 3. The company and the petitioners in the sections 397, 398 application were together on one side. They were represented by a battery of counsel. One set of counsel represented the company. Another set represented the petitioners. Ajit Kumar Agarwal, was also very well represented. 4. The learned counsel for the company and the petitioners submitted that Ajit Kumar Agarwal had no locus standi to make the application. Similar submission was made on behalf of Ajit Kumar Agarwal that the alleged application by the Company was made by an incompetent person. It was submitted that Sujit Kumar Chatterjee, who affirmed the affidavit in support of the Judge's summons, on behalf of the company had no competence ....
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....im order and thereafter 6. This application was moved on 21-6-1985. It appears that the application was moved ex parte. On the same day an order was passed, inter alia, directing status quo to be maintained 'with regard to the shareholding of the respondent No. 1 (the company) until further orders'. The application was made returnable the following Monday with liberty to ask for further interim orders. 7. There was also an order in terms of prayer 'h' of the Judge's Summons. It appears that in prayer 'h', the Special Officer appointed by this order was directed to hold an Extra Ordinary General Meeting of the company for the purpose of election of an independent board of directors after rectifying the share register and to entrust its management with a newly elected board. 8. Nothing seems to have happened after that. I was not told as to what happened on the returnable day of the application. I do not think that any step was taken by the Special Officer for rectification of the share register or to convene the extraordinary general meeting, as, if, that had been done, it would certainly have been pointed out to me. 9. The petitioner Amita Sen died. Her four sons Subrat....
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....es in the Company, management of the tea garden and so on. They entered into a Memorandum of Understanding on 26-2-2007 for that purpose. It is said that during continuance of these negotiations, the above application for the withdrawal was filed. It also appears that pursuant to such memorandum of understanding the Board of Directors of the Company was reconstituted. Now, these directors allegedly informed the petitioners that the said sections 397, 398 proceedings were shown as pending in the records of the High Court. 16. Furthermore, assuming that the sections 397, 398 application was pending, early in 2010 Ajit Kumar Agarwal filed an application in those proceedings, which was numbered as C.A. 40 of 2010, for being added there as a party. 17. Immediately after that, two of the petitioners namely Subrata and Sanjoy took out another judge's summons for correction of the order dated 12-4-2007 so as to record that by that order C.P. No. 252 of 1985 and all connected applications had been dismissed as not pressed and not as recorded. Hence, necessary clarification from the Court was sought. This application was numbered as C.A. No. 53 of 2010. 18. Both these applications w....
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.... whether leave as sought ought to be granted. The agreement for sale of shares that has been detailed at paragraph 5 of the affidavit in support of the summons in CA No. 53 of 2010 had not been pleaded in the affidavit in support of the summons in CA No. 302 of 2007. Paragraph 4 of the withdrawal application merely asserted that the applicants did not wish to proceed or continue with the petition, but gave no reasons therefor. The court would have sought the reasons for withdrawal if the order intended to permit the withdrawal of the petition. ... It is not altogether impossible that it was the withdrawal application that was not pressed. Paragraph 5 of the affidavit in support of the summons in CA No. 53 of 2010 has a line to the effect that the parties to the memorandum of settlement referred to therein intended to have the subsisting interim order vacated with retrospective effect. If it were so, the withdrawal application ought to have disclosed it and specific attention of the court should have been drawn to it for the unusual order that was necessary to give effect thereto. But the withdrawal application was silent on such aspect and the court's leave was also not sought t....
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....d and void particularly in view of the pleadings as pleaded in paragraphs 19, 20 and 21 hereinabove; (viii) The authorised share capital of the Defendant No. 1 is limited to 3500 equity shares and the issued share capital of the Defendant No. 1 is limited to 22, 991 equity shares; (ix)That the Plaintiff is the holder of 7761 equity shares of the Defendant No. 1 amounting to 33.76 per cent of the total issued share capital; (x)** ** ** (a)** ** ** (b)** ** ** (c)A decree of perpetual injunction restraining the Defendants and/or each one of them :- (i)To issue any further share capital of the Defendant No. 1; (ii)To increase the share capital of the Defendant No. 1; (iii)To rely upon transfer of shares and/or allotment of any shares as pleaded in paragraphs 19 and 20 of the present pleading and also the actions or documents as pleaded in paragraph 21 of the present pleading; (iv)To act as the shareholder and/or Directors of the Defendant No. 1 in any manner whatsoever to conduct any business of the Defendant No. 1 including calling of Annual General Meeting Extraordinary Annual General Meeting, appointment of auditors, filing books of A....
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....the share of his parents, but for assertion of such right no step was taken by lodging share-scrips and proceedings were filed before the Company Law Board only in 2006. Such proceedings are pending. For non-assertion of rights by the petitioner, prima facie, at this stage, the petitioner is not entitled to any interim orders. Directions are given for filing affidavits. Affidavit in opposition be filed by three weeks. Affidavit in reply thereto, if any, be filed within two weeks thereafter. Matter to appear in the list six weeks hence. In GA No. 286 of 2010 similar directions are given for filing affidavits, let CS No. 10 of 2010 be not relegated to the list of undefended suit." 22. From the above judgment and order of 11-3-2010 of brother Sanjib Banerjee, J., the two petitioners and the company preferred two separate appeals being ACO No. 47 of 2010 connected with APOT No. 188 of 2010 and ACO No. 48 of 2010 connected with APOT No. 189 of 2010, the first appeal being preferred by the company and the second appeal being preferred by the two petitioners in the sections 397 and 398 proceedings. Those appeals were dismissed by a common judgment and order made on 5th August, 20....
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....ithdrawn according to the provisions contained therein. Moreover, this application has been made further to those provisions. 26. With regard to the locus standi of Sujit Kumar Chatterjee to sign the affidavit, the learned counsel for the applicant Company and Mr. S.B. Mookerjee, learned Senior advocate for the petitioners submitted that, in the said applications which were heard before brother Sanjib Banerjee, J., the affidavit of Sujit Kumar Chatterjee was relied upon by the petitioners in the sections 397, 398 application and Ajit Kumar Agarwal. There is also reference to such affidavit in the said judgment and order of his lordship made on 11-3-2010. Therefore, Ajit is estopped from challenging the authority of Sujit Kumar Chatterjee. Moreover, Sujit Kumar Chatterjee was duly authorised by the company to sign the affidavit. 27. The sections 397, 398 proceedings never became an action in rem. No steps were taken in that proceeding after passing of the order dated 21-6-1985. Therefore, the said petitioners always had the right to withdraw from that application at any point of time. 28. Ajit Kumar Agarwal's father died in 1968. He received, according to his assertion the ....
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....presentative action. Furthermore, this representative action was sought to be withdrawn by the said petitioners, further to a compromise between them and some third party. In such representative action no compromise would be effected without the leave of the Court under Order 23 Rule 3B of the Code of Civil Procedure. He relied on S. Narayanan v. Century Flour Mills Ltd. [1985] 3 Comp. LJ 209 (Mad.) (Paragraphs 13 & 14). 33. It was further submitted that according to admitted records, Ajit's mother was entitled to 1940 and his father 800 shares in the Company. His father died in 1968. Ajit inherited his shares. His mother transferred her 800 in his favour. Furthermore, his brother, Om Prakash Agarwal now deceased had also transferred his shares to him. These shares were not recorded in the register of the Company, for which he had taken out proceedings under section 111A of the Act. If these shares were his he would have more than 33 per cent shareholding in the Company as on the date of the status quo order made on 21-6-1985. Having such share-holding he was competent to prosecute the sections 397, 398 proceeding by being substituted in place of the said petitioners, if necessa....
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....) and Dhool Chand v. Ganpat Lal AIR 1957 Raj. 283 to contend, that being an heir of his parents, Ajit Kumar Agarwal could be considered as a legal representative and should be allowed to prosecute this proceeding. The learned counsel further submitted, citing Rajahmundry Electric Supply Corpn. Ltd. v. A. Nageshwara Rao AIR 1956 SC 213 (Para 6) that in the facts and circumstances of this case it was just and equitable that the Company be wound up. In those circumstances the sections 397, 398 application was still maintainable to be continued by the intervenor. Discussion and Conclusion 40. The first point is regarding the maintainability of this application. Did Sujit Kumar Chatterjee have the competence to sign the affidavit in support of the Judge's Summons on behalf of the Company? He described himself to be its constituted attorney. Let me try to look at the law. Order III Rule 1 of the Code of Civil Procedure prescribes that an agent can do any act for a party. Such agent according to Rule 2 is inter alia a constituted attorney. Now Order VI Rule 14 provides that a pleading is to be signed by a party or a person duly authorised by him, in case a party cannot sign it due t....
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.... that case the Hon'ble Supreme Court was considering the facts as proved by evidence, in a particular suit, where evidence showed that the person filing the suit had no authority. Furthermore, the Company did not ratify his authority, expressly or by implication. 44. This case is closer to United Bank of India's case (supra). 45. In my judgment, when a proceeding is continuing for a substantially long time, to the knowledge of a Company, and none has come forward on its behalf to challenge the authority of the signatory, such ratification may be implied. Such has happened in this case. Atleast, from the time of proceedings before brother Sanjib Banerjee J, affidavits were being filed by Sujit Kumar Chatterjee on behalf of the Company. No one came forward to challenge his authority. Therefore, there is implied ratification of his authority by the Company and acknowledgment of it by the intervenor. Principles of estoppel would also prevent the intervenor to challenge his authority at this stage. 46. Therefore, this objection is rejected. 47. The next point which needs to be disposed of is whether the instant proceedings are representative and whether leave of the Court is....
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....ts of this case, before applying to the Court for withdrawal of the section 397, 398 application. Nothing has been shown to me that these persons have given their consent. After the consent of these persons, leave as required under Rule 88(2) of the Company Court Rules, could be considered by the Court. Perhaps, that is why the prayer in the Judge's Summons is for an order of the Court for dismissal of the section 397, 398 proceedings. 52. There is no doubt that according to the annual return of the Company up to 29-6-1985, the father of Ajit Kumar Agarwal had 800 shares and his mother Sarbati Devi Agarwal had 1940 shares. Together they held 2740 shares which were about 11.8 per cent of the paid-up share capital of the Company. Now, by the order dated 21-6-1985 status quo was ordered regarding the shares. 53. According to Ajit Kumar Agarwal, in violation of the status quo order, the Company has indiscriminately increased its share capital and allotted shares so as to reduce the share-holding of Ajit Kumar Agarwal to 0.17 per cent. Even at the time of hearing of his application for rectification under section 111A of the said Act, before the Company Law Board, on 25-4-2008 it ....
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....t 3800 shares belonged to Maithan Das Agarwal. This was part of the averments that shares belonging to deceased persons were still existing in the records of the Company. 60. In page 57 of that petition it is mentioned that the intervenor's brother's purchase of 2021 equity shares of the Company was not registered. Scrutinising the petition it appears that it related to taking custody of the share scrips of deceased shareholders like the petitioner's husband M.M. Sen; orders for dealing with 'benami' shares of Sen, for recording recent purchase of shares, for recording the death of shareholders, for rectification of the share register on account of such death and for the above purposes. I do not read in that petition even a fragment of the cause of action of the intervenor or of that of his family, as sought to be made out now so as to merit, consideration for his transposition as the petitioner, in those proceedings. 61. Moreover, the intervenor's father died in 1968. He claims that his mother and brother transferred shares to him in 1975. His mother died in 2000. Ever since the death of his father in 1968 till 2006 no steps were taken by the intervenor. If he is transposed ....