TaxTMI 
TaxTMI 
2017 (11) TMI 487
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....Zarda Factory was conceived as a sole proprietorship of Lalit Kumar Arya in 1962, and, subsequently, metamorphosed into a partnership in 1965 and into the present private limited Company in June 1985 - originally named M/s Prabhat Zarda Factory (Muzpur) Pvt Ltd and later rechristened as PZFIPL on 27th March 1991. The Dramatis Personae 3. First, to introduce the dramatis personae, eschewing honorifics for ease of reference. 4. Lalit Kumar Arya and Rukmini Devi were husband and wife. They had three sons - Jyoti Kumar Arya (hereinafter referred to as "Jyoti"), Pradeep Kumar Arya (hereinafter referred to as "Pradeep") and Vijay Kumar Arya (hereinafter referred to as "Vijay"). 5. Jyoti was married to Malti Devi. The couple had three sons, namely Jai Kumar Arya (hereinafter referred to as "Jai"), Ujjwal Kumar Arya (hereinafter referred to as "Ujjwal") and Gaurav Kumar Arya (hereinafter referred to as "Gaurav"). 6. Pradeep was married to Manju Devi, and had only one son, Purushottam Kumar Arya (hereinafter referred to as "Purushottam"). 7. Vijay married Chhaya Devi. Their children, if any, have no part to play herein. 8. The relative positions of the above listed memb....
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....mismanagement, of the affairs of the Company, by Plaintiff No. 1. The said petition is still pending before the NCLT, and the issues involved therein do not impact the adjudication of the present appeal in any manner. 13 On 24th April 2017, the Company received a requisition, from its shareholders, for convening of an Extra Ordinary General Meeting (hereinafter referred to as "EGM") on 26th May 2017, with the following proposals: (i) removal of the plaintiff (Chhaya Devi) as Director/Managing Director of the Company, (ii) setting aside a notice, earlier issued, for approval of an agenda item, dated 31st of May 2014, to terminate the directorship of the defendants, and (iii) appointment of Defendant No 1 (Rukmini Devi) as Managing Director of the Company. 14. On receiving the said requisition, the plaintiff (Chhaya Devi) responded, on 25thApril 2017, alleging that the requisition was not in accordance with Section 169, read with Section 115 of the Companies Act, 2013 (hereinafter referred to as "the Act"), inasmuch as no Special Notice had been served, by the shareholders, on the Company and, instead, the Company had simply been requested to serve notice under Section....
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....d due to insufficient time or for the company's default, the director may without prejudice to his right to be heard orally require that the representation shall be read out at the meeting: Provided that copy of the representation need not be sent out and the representation need not be read out at the meeting if, on the application either of the company or of any other person who claims to be aggrieved, the Tribunal is satisfied that the rights conferred by this sub-section are being abused to secure needless publicity for defamatory matter; and the Tribunal may order the company's costs on the application to be paid in whole or in part by the director notwithstanding that he is not a party to it. (5) A vacancy created by the removal of a director under this section may, if he had been appointed by the company in general meeting or by the Board, be filled by the appointment of another director in his place at the meeting at which he is removed, provided special notice of the intended appointment has been given under subsection (2). (6) A director so appointed shall hold office till the date up to which his predecessor would have held office if he had not ....
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....of the company. (2) The Board shall, at the requisition made by,- (a) in the case of a company having a share capital, such number of members who hold, on the date of the receipt of the requisition, not less than one-tenth of such of the paid-up share capital of the company as on that date carries the right of voting; (b) in the case of a company not having a share capital, such number of members who have, on the date of receipt of the requisition, not less than one-tenth of the total voting power of all the members having on the said date a right to vote, call an extraordinary general meeting of the company within the period specified in sub-section (4). (3) The requisition made under sub-section (2) shall set out the matters for the consideration of which the meeting is to be called and shall be signed by the requisitionists and sent to the registered office of the company. (4) If the Board does not, within twenty-one days from the date of receipt of a valid requisition in regard to any matter, proceed to call a meeting for the consideration of that matter on a day not later than forty-five days from the date of receipt of such requisition, the meeting may be calle....
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....Injunction be passed restraining the company from holding its Extraordinary Meeting on May 26, 2017 or any time thereafter till the disposal of the company petition; (d) Injunction be passed restraining Prabhat Zarda Delhi (India) Private Limited (respondent no 1) from acting in terms of the purported communication/request dated April 24, 2017 or any other notice of like nature; (e) Status quo be passed in respect of the Board of directors of the respondent no 1 i.e. Prabhat Zarda Factory (India) Private Ltd; (f) Declaration that the purported notice dated April 24, 2017 allegedly issued under section 100 of the Companies Act, 2013 is illegal, null and void and not binding upon the company, its shareholders, directors and all concerned; (h) Declaration that the communication dated May 2, 2017 purportedly issued by one Shanker Prasad (respondent no 4) claiming himself to be a director is illegal and bad and has been issued without any authority and is not binding on the company, its board, the shareholders of the company and/or concerned; (i) injunction be passed restraining the company from convening any Extraordinary General Meeting of the respondent no 1 i.e. Prabh....
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.... was carried further, by way of appeal or any other proceedings, before any forum. It appears, therefore, to have been accepted by all parties. 26. CS (OS) 225/2017 came up for hearing, before a learned Single Judge of this court, on 19th May 2017, along with the application for stay filed therewith. The following order was passed by the learned Single Judge, thereon: "CS (OS) 225/2017 & IA Nos. 6236/2017 & 6238/2017: Issue notice to the defendant by speed post as well as one of the approved couriers, returnable on 24.05.2017. Dasti in addition. Dasti notices shall be collected on or before 20.05.2017. The affidavit of service shall be filed prior to the next date of hearing." 27. The plaintiffs proceeded, on 22ndMay 2017, to file yet another suit, i.e. CS (OS) 233/2017, this time against Defendants Nos 2 to 9 (which includes the present appellants), praying for a decree of permanent injunction in favour of the Plaintiffs and against the Defendants restraining them, their agents, servants, representatives and/or anyone acting on their behalf from threatening and/or harming and/or harassing the Plaintiff No 1 and/or issuing any letter and/or notice and/or document to ....
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.... by the Plaintiff No 1 in Co P No. 136 of 2014 is annexed and marked as Annexure-P/14." (Emphasis supplied) 29. CS (OS) 233/2017 and IA 6382/2017, filed therein, came up for hearing before a learned Single Judge, of this court, on 23rd May 2017. Significantly, once again, the order did not record any appearance, on the part of the defendants, so that the plaintiffs alone were represented during the hearing. The learned Single Judge who, apparently, was kept innocent regarding the order, dated 18thMay 2017 supra of the NCLT, as well as all proceedings relating to CS (OS) 225/2017, went on to pass the following order, on IA 6382/2017: "Present suit is a suit for permanent and mandatory injunction. Plaintiff No 1 is the managing director of plaintiff No 2 which is a company duly incorporated under the Companies Act. Plaintiff No 1has 30.4% shareholding in plaintiff No. 2. Defendant No 1 is the brother-in-law of plaintiff No 1 and the brother of her deceased husband. The grievance of the plaintiff is that the defendants are proposing to hold an Extra-Ordinary General Meeting (EGM) which is scheduled for 26.05.2017. The agenda of the meeting has been circulated throug....
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....17 at 2:19 PM on 23rd of May 2017. 31. It is also relevant to draw attention, here, to the averment, in sub-para w) of the same para 3, that the pendency of CS (OS) 225/2017 was, in fact, brought to the notice of the learned Single Judge on 23rd May 2017, during hearing of IA 6382/2017 in CS (OS) 233/2017. There is, however, not an iota of material to support this submission, which does not find support from the order, dated 23rd May 2017, of the learned Single Judge, either. 32. On 24th May 2017, the plaintiffs condescended to place, on the record of CS (OS) 233/2017, a copy of the order, dated 18th May 2017 supra passed by the NCLT. 33. The above situation resulted in Defendant No 2 (Jyoti, who is Applicant No 4 in the present appeal) moving IA 6537/2017 in CS (OS) 233/2017, under Order XXXIX Rule 4 of the CPC, for vacation of the stay granted by the learned Single Judge on 23rd May 2017. The said application came up before the learned Single Judge on 25th May 2017, on which occasion notice was issued thereon, returnable on 11th July 2017. Simultaneously, the learned Single Judge cancelled the date, of 9th October 2017, before the Joint Registrar, which was already fixed....
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....hese special leave petitions have been filed against an interim order dated 30th May, 2017 passed by the Division Bench of the High Court in FAO (OS) No 179/2017. Learned senior counsel for the petitioners submitted that the observations made by the Division Bench while issuing notice and granting interim order may be prejudicial to the interest of the petitioners and the order passed by the High Court is an ex parte interim order. Learned senior counsel further states that with regard to the subsequent meeting scheduled to be held on 12thJune, 2017, he is taking appropriate steps. It shall be open to the petitioners to take such steps, as may be admissible, in accordance with law since in this case we are not concerned with the meeting which is going to be held on 12thJune, 2017. With the above observation, the specially petitions are dismissed. Pending application, if any, also stands disposed of." (Emphasis supplied) 38. On the basis the liberty granted, by the Supreme Court, in the aforementioned order dated 9th June 2017, the plaintiffs moved the Original Side of this Court by way of a third suit, viz. CS (OS) 285/2017, praying that this Court be pleas....
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....t an Annual General Meeting or at an EGM and that, therefore, the impugned notice, dated 2nd June 2017 was illegal. Holding that the plaintiffs had made out a prima facie case in their favour, the learned Vacation Judge granted ex parte ad interim stay of the meeting of the Board of the Company, to be held on 12th June 2017, and further ordered that, if the said meeting had already been held, no effect be given to the decisions taken therein till the next date of hearing. 40. Defendant No. 2 (Jyoti), thereupon, filed IA 7150/2017 (under Order XXXIX Rule 4) and IA 7151/2017 (under Order XXXIX Rules 1 & 2) in CS (OS) 285/2017. These applications need not, however, detain us as, when they were listed before the learned Single Judge on 4th July 2017, it was submitted, on behalf of Defendants 2 to 10 (which include the present appellants before us), that the Board was proposing to convene an EGM, in terms of Section 100 of the Act, independent of the Resolution passed on 12th June 2017, which stood interdicted by the learned Single Judge. On the submission, the Single Judge noted, in the order dated 4th July 2017, thus: " Learned counsel for the defendant Nos 2 to 10 submits that ....
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....rest. The company is requested that this special notice be circulated to all the directors and shareholders and auditors of the company and a copy be also served on Mrs Triad Devi, the director under proposed removal, with a request to make further representation, if she desire, in accordance with the provisions of the companies act. Yours faithfully 1. Rukmani Devi 2. Jyoti Kumar Arya 3. Jyoti Kumar Arya HUF 4. Malti Devi 5. Jai Kumar Arya 6. Ujjwal Arya 7. Gaurav Kumar Arya 8. Manju Devi 9. Purushottam Kumar Arya" 42. Shankar Prasad, one of the Directors in the Company, also issued a Notice, dated 10thJuly 2017, of the meeting of the Board having been scheduled on 18th July 2017, and calling on Plaintiff No 1 to attend the said meeting. Nothing, however, turns thereon, as the said notice was, subsequently, withdrawn before court on 26th July 2017, with liberty to issue a fresh notice in accordance with law. 43. The plaintiffs (Chhaya Devi and the Company), thereupon, moved IA 7854/2017 and IA 7856/2017, in CS (OS) 285/2017, the former under Order VI Rule 17, and the latter under Order XXXIX Rules 1 and 2 of the CPC. 44. IA 7854/2017 sough....
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....rd of Directors scheduled for 18.07.2017 and also from giving effect to any resolution passed Board Meeting of Plaintiff No 2 on 18.07.2017, if convened; (ii) Pass and ad interim ex parte injunction against the Defendants restraining them, their agents, servants, representatives and/or anyone acting on their behalf from convening any Board Meeting and/or Extraordinary General Meeting and/or such other meeting of the Plaintiff No 2 without the leave of this Hon'ble Court;" 46. IA 7854/2017 and IA 7856/2017came up for hearing, before the learned Single Judge, on 17th July 2017, whereupon notice was issued on the said applications, and was accepted by the defendants. Learned counsel appearing for the defendants submitted, to this Court, that, without prejudice to the defendants' defence, it had been decided to defer the meeting, scheduled for 18th July 2017, to 28thJuly 2017. The proceedings were, therefore, renotified for 26th of July 2017. 47. On 26th of July 2017, the learned single Judge noted that no venue, or time, for the rescheduled meeting of 28th of July 2017, was forthcoming. He also observed that the notice, dated 22nd July 2017, issued by Shankar Prasad, did not ....
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....anagement and Administration) Rules, 2014 and the Secretarial Standards on Meetings of the Board of Directors" and, consequently, incapable of being acted upon. It was also contended that the said notice was "against the Articles of Association of the company". The following prayers were also sought to be added, in the plaint: "ii) A decree of permanent mandatory injunction against the Defendants restraining them, their agents, servants, representatives and/or anyone acting on their behalf from acting upon the notice dated 08.08.2017, notice dated 08.07.2017 and notice dated 21.08.2017 and/or calling/sending any notice for convening any Extraordinary General Meeting of Plaintiff No 2 and from attending/convening the Meeting of the Board of Directors scheduled for 26.08.2017 and also from giving effect to any resolution passed in the Board Meeting of Plaintiff No 2 on 26.08.2017, if convened; iii) A decree of permanent mandatory injunction against the Defendants restraining them, their agents, servants, representatives and/or anyone acting on their behalf from convening any Board Meeting and/or Extraordinary General Meeting and/or such other meeting of the Plaintiff No 2 witho....
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....ven at least 7 days notice before the date of meeting. This condition was also violated, insofar as Plaintiff No 1 was concerned, as the notice had been sent to an e-mail address, of Plaintiff No 1 which, however, was not her registered e-mail address. Such service did not, therefore, amount to valid delivery of the notice. That apart, in the case of delivery through registered post, two additional days were required to be added. (iv) Standard 1.1.1 of the Secretarial Standards on Meetings of the Board of Directors (hereinafter referred to as "the Secretarial Standards") stipulated that the Board meeting could be convened only by the Directors of the Company in consultation with the Chairman and Managing Director thereof. The notice, dated 8thAugust 2017 had, however, been sent by the defendants without consultation with Plaintiff No 1 who was the MD-cum-Chairman of the Company. (v) The basis of the notice dated 8thAugust 2017 was the earlier notice dated 8thJuly 2017 which, however, was not a "requisition" and could not, therefore, be acted upon. That apart, more than 21 days had elapsed since the notice of 8thJuly 2017. (vi) Standard 1.3.8 of the Secretarial Standards....
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....ene an EGM under Section 100 (1) of the Act, in view of the statutory position, admitted by learned counsel for the defendants, that an EGM could be convened only on a requisition. (vi) Even while convening an EGM on the basis of a requisition of the shareholders, it was necessary for the Board to apply its mind to consider whether the requisition was appropriate and in accordance with law. (vii) The notice dated 8thJuly 2017 was bereft of any reasons or grounds, and contained only a bald averment that Plaintiff No 1 was acting against the company's interests. Communication of the grounds on which she was being proposed to be removed, to Plaintiff No 1, was mandatory, as he was entitled to represent thereagainst. (viii) Curtailment of the statutory rights already enured in favour of Plaintiff No 1, who had been appointed as a whole time Director for a period of 10 years in 2008, required compliance with Section 169 of the Act. In the absence of any reasons, in the notice dated 8thJuly 2017, it could not be said that such compliance had taken place. The said notice had, therefore, been mechanically issued without application of mind. (ix) The judgement in L.I.C. of India....
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....ram Industries Ltd, 163 (2009) DLT 443. (iii) The plaintiffs filed CS (OS) 225/2017 and CS (OS) 233/2017, seeking the same reliefs as had been sought from the NCLT. While doing so, however, the plaintiffs intentionally suppressed the order, dated the 18th of May 2017, passed by the NCLT, from this Court. Moreover, in CS (OS) 233/2017, the plaintiffs misrepresented the facts, by stating that the NCLT had reserved orders on IA 17/KB/2017, for 22nd May 2017. The order, dated 23rd May 2015, in CS (OS) 233/2017was, therefore, obtained by fraud. This was also borne out from the fact that the said order was stayed by the Division Bench of this Court vide its order dated 30th of May 2017 in FAO (OS) 179/2017 and FAO (OS) 180/2017. The SLP, preferred thereagainst, was also dismissed by the Supreme Court or 9th of June 2017. (iv) The learned Single Judge erred in granting ad interim relief, as sought in IA 9618/2017, when IA 9617/2017, for amendment of the plaint, was still pending adjudication, notice alone having been issued thereon. Till the amendment was allowed, there was no substantive challenge, to the notice dated 8thAugust 2017, or the proposed meeting of the Board scheduled f....
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....ed by the Board under Section 100 (1), and not under Section 100 (2), as erroneously held by the learned Single Judge. (ix) The contention, of the respondents (i.e. the plaintiffs), that the issue had become infructuous in view of Section 100 (4) of the Act, which specified that the Special Notice remain valid only for 3 months from the date of its issue and had, therefore, expired on 7th October 2017, was misplaced, in view of the law laid down by the Supreme Court in Shree Chamundi Mopeds v Church of South India Trust Association, AIR 1992 SC 1439, which holds the quashing of an order results in restoration of the position as it stood on the date of passing of the order thus quashed. 60. Mr Chandhiok highlights the following, as irrefutable evidence of the fact that the plaintiffs have been "economical with the truth" and have, thereby, disentitled themselves to any relief from a constitutional court: (i) There is no whisper, anywhere in CS (OS) 225/2017, of the fact that Plaintiff No 1 had already moved the NCLT for interim injunction qua the requisition dated 27th April 2017 and notice dated 4th May 2017. (ii) It does not appear, either from a reading of the order, ....
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....) 285/2017, that the plaintiffs became aware, of the order dated 18th May 2017, passed by the NCLT, only on 22nd May 2017, when they received a copy thereof. 61. Per contra, Mr. Anil Sapra, learned Senior Counsel appearing on behalf of the plaintiffs (respondents) contends thus: (i) There is no universal principle that, till IA 9617/2017 was allowed, CS (OS) 285/2017 was amended, and the amended plaint taken on record, interim relief, as prayed in IA 9618/2017, could not be granted. While it could, perhaps, be argued that the learned Single Judge ought not to have finally disposed of IA 9618/2017, when IA 9617/2017 was still pending before him, the relief granted by the impugned order could legally have been granted on an ad interim basis, while issuing notice on IA 9618/2017. (ii) Section 169 (2) of the Act required issuance of special notice, under Section 115, of the resolution to remove the Director, before the resolution could be acted upon. Subsection (3) of Section 169 mandated sending of a copy, of such special notice of resolution, to the concerned director, and sub-section (4) permitted the said Director to represent thereagainst. Further, the 2nd proviso to Sect....
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.... of 3 months specified in Rule 23(1) of the Companies (Management and Administration) Rules, 2014, the period during which the stay, granted by the order, dated 25th August 2017 supra, passed by this Court, continues to operate, would stand excluded. (ii) Section 430 of the Act applies, as the proviso to Section 169 (4) specifically refers to the NCLT. Because recourse, to the NCLT, was also available, to the plaintiff, by virtue of Section 241 (1)(a) of the Act. Reliance was also placed, in this regard, on the words "either expressly or impliedly barred", figuring in Section 9 the CPC. (iii) That the plaintiffs were forum shopping was also clear from the fact that, having elected to submit to the jurisdiction of the NCLT, they approached this Court, while seeking the challenge a later notice. (iv) There was no justification for passing the impugned order, as the interim relief, which was finally granted thereby, already stood granted, to the plaintiffs, by the earlier order, dated 25th August 2017 supra, passed by this court in IA 9618/2017. This Court had, in the said order, clarified that any decision, taken in the meeting scheduled for 26th August 2017, would not be gi....
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....red to as "the 2014 Rules")? (ii) Was the learned Single Judge barred, by Section 430, read with Section 169 (4), of the Act, from passing the impugned order? (iii) Were the plaintiffs estopped, or otherwise barred, from invoking the ordinary jurisdiction of this Court, on account of their having elected to submit to the jurisdiction of the NCLT, while challenging the notice dated 24th of April 2017? (iv) Were the plaintiffs guilty of concealment of facts, so as to disentitle them from any relief of injunction, as claimed by them in IA 9618/2017? (v) Has the learned Single Judge erred in allowing IA 9618/2017, even when notice is yet to be issued on IA 9617/2017? The contention, of MrSapra, that this mistake was only technical, as the relief, which stands granted, by the impugned order, by way of final disposal of IA 9618/2017, could as well have been granted by way of interim relief, while issuing notice on the said IA, would also require to be examined in this context. (vi) Has the learned Single Judge erred in distinguishing the judgement in L.I.C. of India (supra)? What is the effect of the said judgement? (vii) Was the notice, dated 8th July 2017, illegal bec....
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....ce of convening of the Board meeting could only be issued either by the Company Secretary, or by a Director of the Company. In the circumstances, the notice, dated 10th July 2017, was withdrawn. Vide letter dated 28thJuly 2017, Ajay Kumar, a practising Company Secretary, was requested to convene the Board meeting, pursuant to the requisition, dated 8thJuly 2017, received from the shareholders. Ajay Kumar, however, responded that he was not employed with the Company and could not, therefore, issue the notice for convening of the Board meeting, which would have to be issued by the Directors thereof. It was in these circumstances that the notice, dated 8thAugust 2017 came to be jointly issued, by 6, out of 9 Directors of the Company, for convening of the Board Meeting on 26th August 2017 at 11 AM. The agenda set out for the said Meeting was only to discuss whether to issue notice to convene an EGM, pursuant to the Special Notice (referred to as a "requisition" in para 1), dated 8thJuly 2017, received from the shareholders, proposing removal of Plaintiff No 1 from her office as Director of the Company. 67.3. IA 9618/2017 came to be filed, by Plaintiff No 1, in CS (OS) 285/2017, seek....
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....hat, in view of the interim stay granted by the learned Single Judge on 25th August 2017, which continued from time to time and has been made absolute by the impugned order dated 11th September 2017, if the present appeal were to be allowed, the period from 25th August 2017 till the date when the present appeal is allowed, would merit exclusion while computing the periods specified in Section 100 (4) of the Act, or, for that matter, Rule 23 of the 2014 Rules. Alternatively, he submits, the period stipulated in the said provisions would stand extended by the period during which the interim stay, granted by the learned Single Judge on 25th August 2017, has continued - and would continue - to remain in operation. He relies, for this proposition, on Shree Chamundi Mopeds (supra). 67.9 We feel that the submission, of Mr Chandhiok, is well-taken, though the reliance, by him, on Shree Chamundi Mopeds (supra), may not be entirely apt. 67.10 In deference to the submission made by Mr Chandhiok, we proceed to examine Shree Chamundi Mopeds (supra). 67.11 The appellant in Shree Chamundi Mopeds (supra) (hereinafter referred to as "SCM") was tenant in respect of certain premises which be....
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.... Single Judge observed that the grant of stay, by this Court, on 21st February 1991, did not operate to revive the appeal of SCM before the AAIFR, which stood dismissed on 7th January 1991. 67.15 In these circumstances, two questions were framed by the Supreme Court, of which the second is not relevant for our purposes. The first question framed by the Supreme Court read thus: "What is the effect of the order passed by Delhi High Court dated February 21, 1991 staying the operation of the order dated January 7, 1991 passed by the Appellate Authority? Does it mean that after the passing of the said order by the High Court, the proceedings under the Act should be treated as pending and, if so, before which authority?" 67.16 On the issue thus framed, the Supreme Court held as under : (i) Section 22 of the SICAordained that winding up proceedings against the company would not lie except with the consent of BIFR / AAIFR, where, in respect of such company, (i) an inquiry under Section 16 was pending, or (ii) a scheme referred to in Section 17 was under preparation or consideration, or (iii)a sanctioned scheme was under implementation, or (iv) an appeal under Section 25 relatin....
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....pplied) (iv) As, therefore, no proceedings, under the SICA were pending, it was held that there was no impediment, on the learned Single Judge, in dealing with the winding up petition filed by the Church. 67.17 The question before the Supreme Court, in Shree Chamundi Mopeds (supra) was whether the stay, by the High Court, of the order of the AIIFR dismissing SCM's appeal would result in the proceedings before the AIIFR continuing to be deemed as pending during the currency of the stay order of the High Court The question was answered, in the negative, by the Supreme Court. However, the judgment does contain an observation (underscored hereinabove), to the effect that, if the order of the AIIFR were to be quashed and the matter remanded, the appeal would stand restored and could be said to be pending before the AIIFR after quashing of the said order. 67.18 The precise issue arising, in the present case, as enunciated in the objection voiced by Mr. Sapra, read with the response of Mr. Chandhiok, is whether the time, statutorily prescribed to act on the notice dated 8th August 2017, or on the resolution arrived at during the meeting dated 26th August, 2017, stood extended by ....
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....have jurisdiction to try all sorts of possible nature excepting suits of which the cognizance is either expressly or impliedly barred." 68.3 Clearly, Section 430 bars the Civil Court from entertaining any suit or proceeding, in respect of any matter which the NCLT "is empowered to determine by or under this Act or any other law for time being in force". 68.4 Mr. Sapra emphatically submits that words "is empowered to determine" are applicable only in a case where there is a specific statutory empowerment, in other words, where one or other provisions of the Act expressly empowered the NCLT to exercise a particular jurisdiction. He contends that it is only such jurisdiction, which stands specifically conferred on the NCLT, by some provision of the Act, which has been excluded from the jurisdiction of the Civil Court. He has drawn our attention to various provisions of the Act, which contain such express statutory empowerment. 68.5 Mr. Chandhiok, who does not seriously join issue, on principle, with Mr Sapra's submission, would seek, instead, to point out that such statutory empowerment of the NCLT is, indeed, to be found in the proviso to Section 169(4) of the Act. Section 1....
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....h, or the statutory tribunal has not acted in conformity with the fundamental principles of judicial procedure." (Emphasis supplied) 68.7 We may also note that U.O.I. v Tarachand Gupta & Bros, (1971) 1 SCC 486, which cited Mask (supra), worded the principle a tad differently (in para 22 of the report): "The principle thus is that exclusion of the jurisdiction of the civil courts is not to be readily inferred. Such exclusion, however, is inferred where the statute gives finality to the order of the tribunal on which it confers jurisdiction and provides for adequate remedy to do what the courts would normally do in such a proceeding before it. Even where a statute gives finality, such a provision does not exclude cases where the provisions of the particular statute have not been complied with or the tribunal has not acted in conformity with the fundamental principles of judicial procedure." (Emphasis supplied) 68.8 As, perhaps, the most authoritative pronouncement on the issue, the Constitution Bench of the Supreme Court, in Dhulabhai v State of M.P., AIR 1969 SC 78, set out the following 7 clear principles (of which only the first and last are really relevan....
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....ess prohibition in the particular Act. In either case the scheme of the particular Act must be examined because it is a relevant enquiry. (7) An exclusion of the jurisdiction of the civil court is not readily to be inferred unless the conditions above set down apply." (Emphasis supplied) 68.9 From the above authorities, the primary indicia, which would govern determination of the question of whether the jurisdiction of civil courts is, in any particular case, ousted, or not, would appear to be (i) whether the decision of the tribunal, on which jurisdiction is conferred, is also attributed finality by the statute, and (ii) whether such tribunal can do what the civil court would be able to do and is, therefore, an efficacious alternative to the civil court. Even when these two indicia stand satisfied, the jurisdiction of the civil court would continue to exist where the action, complained against, violates the statute. 68.10 We are unable to subscribe to Mr. Sapra's contention that the legislative bar to exercise of jurisdiction, by civil courts, engrafted in Section 430 of the Act, would operate only where the provision in the Act specifically, and in so many w....
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....ent and what is done indirectly by rule-making authorities which are vested with powers in that behalf by the Act." (Emphasis supplied) 68.12 Nearly a hundred years ago, a Division Bench of the High Court of Bombayexpressed the same sentiment, equally felicitously (in Manibhai Govindbhai Patel v The Nadiad City Municipality, AIR 1927 Bom 55), thus: "In this view, the main question is whether it is a duty "imposed under" the Act. I think it is obvious that the Legislature in using the expression "by or under this Act" did not use the word "under" simply to repeat what would he expressed by the word " by." The word" under " must have been intended to include some duties which would not be covered by the words " duty imposed by the Act." In its primary meaning the word "under" does, I think, cover the case of a duty imposed by some authority which is recognized by the Act, for instance, the common case of the Act giving power to Government or some person or body to make rules for the purposes of the Act. In such a case these may be duties imposed by those rules, and certainly such duties can be said to be imposed '' under the Act, " although they are not imposed "by t....
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....uced as under: "241. Application to Tribunal for relief in cases of oppression, etc. - (1) Any member of a company who complains that - (a) the affairs of the company have been or are being conducted in a manner prejudicial to public interest or in a manner prejudicial or oppressive to him or any other member or members or in a manner prejudicial to the interests of the company; (b) xxxxx may apply to the Tribunal, provided such member has a right to apply under section 244, for an order under this Chapter." 68.18 The amplitude of the words used in Clause (a) of Section 241(1) of the Act are undoubtedly wide and expansive. They cover all cases, where a complaint that the affairs of a company being conducted in a manner prejudicial to public interest, or in a manner to the complaint, or oppressive to the complaint, or prejudicial, or oppressive, to any other member or members, or prejudicial to the interests of the company, is made. 68.19 Clause (a) of Section 241 (1) of the Act limits the applicability of Section 241, however, to cases where "an order under this Chapter" (i.e. Chapter XVI of the Act, comprising Sections 241 to 246) is sought by the applicant, o....
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....ating the property made or done by or against the company within 3 months before the date of the application under this section, which would, it made or done by or against an individual, be deemed in his insolvency to be a fraudulent preference; (h) removal of the managing director, manager or any of the directors of the company; (i) recovery of undue gains made by any managing director, manager or director during the period of his appointment as such and the manner of utilization of the recovery including transfer to Investor Education and Protection Fund or repayment to identifiable victims; (j) the manner in which the managing director or manager of the company may be appointed subsequent to an order removing the existing managing director or manager of the company made under clause (h); (k) appointment of such number of persons as directors, who may be required by the Tribunal to report to the Tribunal on such matters as the Tribunal may direct; (l) imposition of costs as may be deemed fit by the Tribunal; (m) any other matter for which, in the opinion of the Tribunal, it is just and equitable that provision should be made." [C....
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....ction of the NCLT. 68.25 There is, in fact, no provision, in the Act, whereunder the claim contained in CS (OS) 285/2017, as made by the plaintiffs - irrespective of the merit or demerit thereof - could have been preferred before the NCLT. No case of exclusion of the jurisdiction of the Civil Court, under Section 430 of the Act or, consequently, under section 9 of the CPC can, therefore, be said to have been made out. 68.26 As it happens, we are not alone in the view we are taking. 68.27 K. Shivshankar Bhat, J., as a learned Single Judge of the Karnataka High Court, was, in Prakash Roadlines Ltd v Vijaya Kumar Narang, (1995) 83 Comp Cas 569, concerned with a claim, legally similar to that of the present plaintiffs, to remove certain directors from the company and appoint a director in their place. As in the present case, it was sought to be contended that the claim was not maintainable before the High Court, as it lay within the purview of jurisdiction of the Tribunal, under Section 397 of the Companies Act, 1956 (the predecessor provision to Section 241 of the present Act, and in parimateria therewith). Bhat, J., opined thus: "It is also necessary to note that under se....
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.... civil court, to adjudicate on the matter, stood ousted by Section 9 of the CPC read with Sections 398 and 402 of the Act. These provisions, it may be noted here, were somewhat parallel to Section 241 and 242 (2) of the present Act. Consequent on a detailed discussion, the learned judge held that the civil court had jurisdiction to try the suit. Significantly, in the course of such discussion, reliance was placed on the following aphorism, from the judgement of a Division Bench of the Calcutta High Court in Sarat Chandra Chakravarti v Tarak Chandra Chatterjee, AIR 1924 Cal 282: "An injunction may be granted on the application of a director restraining the plaintiffs co-directors from wrongful excluding him from acting as a director; there is nothing excluding the jurisdiction of the court from entertaining such a suit." Notice was also taken of another decision, in Sati Nath Mukherjee v Suresh Chandra Roy, (1941) 11 Com Cas 203, wherein it was held that "a suit for declaration that the plaintiff is a director and for the protection of his rights qua director is competent". 68.29 Ravinder Kumar Jain v Punjab Registered (Iron and Steel) Stockholders Association Ltd, (1978) 4....
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....t, there is no repugnancy nor inconsistency between the two remedies, therefore, the doctrine of election has no application." (Emphasis supplied) The doctrine of election, therefore, applies only where there exists more than one alternative remedy, and the litigant elects to choose one of them. In view of our finding, hereinabove, that the dispute raised in CS (OS) 285/2017does not appropriately fall within the purview of jurisdiction of the NCLT, the first of these three essential pre-requisites, for the doctrine of election to apply, is absent. Per sequitur, the doctrine does not call for invocation in the present case. 69.2 That apart, in view of our above finding that CS (OS) 285/2017 was competent and maintainable, the plaintiffs, quite obviously, could not be foreclosed from maintaining it merely because, earlier, they may have invoked the jurisdiction of the NCLT for a similar cause of action. The doctrine of election, even if applicable, cannot so operate as to foreclose an litigant from approaching the forum competent to adjudicate on the dispute sought to be raised by her, or him. 69.3 Further, it has to be borne in mind that the original invocation of jurisd....
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.... held on 26th May, 2017, but also encompassed any future EGM, which might be held "on the basis of any other notice of like nature till the disposal of the Company Petition". The said Company Petition, i.e. Company Petition No. 136/2014, as well as IA 217/KB/2017, continue to remain pending in the NCLT even as on date. It was, therefore, incumbent on the defendants to disclose, before this Court, in IA 9618/2017, the pendency of IA 217/KB/2017, moved by them before the NCLT, as well the nature of the prayers made in. The suppression, by the defendants, of this vital fact, appears ex facie, to have been deliberate, and we find considerable substance in the grievance voiced by Mr. Chandhiok on this score. 70.3 We are constrained to observe, therefore, that, even on account of their having approached this Court, in IA 9618/2017, without coming clean regarding the proceedings initiated by them and pending before the NCLT, or the order dated 18th May 2017 passed by the NCLT thereon, the plaintiffs were disentitled to seek any discretionary or equitable relief of injunction from this Court. 71 Issue No. (v) - Whether the learned Single Judge erred in allowing IA 9618/2017 even when....
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....orary ad interim injunction, during the pendency of the application for amendment. Else, he submits, the application for amendment would itself possibly be rendered infructuous. In an emergent situation, he submits, the power of the Court to pass appropriate orders in the interests of justice would be available for invocation, and there was no gainsaying this proposition. 71.3 The necessity of grappling with these rival points of view was, we are glad to say, obviated by the graceful acknowledgement, of Mr.Chandhiok, that, de hors his objection premised on Order XXXIX Rules 1 and 2 of the CPC, the power to do complete justice undoubtedly inheres in this Court by virtue of various other provisions in the CPC such as Sections 94, 141 and 151. 71.4 In view of the frank acknowledgement, by Mr. Chandhiok, of this legal position - for which we express our appreciation - we are obviated of the necessity to enter more deeply into this aspect of the matter. 71.5 We are also prima facie convinced with Mr. Sapra's alternate submission, that the relief finally granted by the learned Single Judge while disposing of IA 9618/2017 might as well have been legitimately granted by him as an ....
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....nk (PNB) as their authorized dealerbanker. The PNB wrote to the Reserve Bank of India ("RBI"), for permission to open Non-resident External (NRE) accounts, in the name of each of the 13 companies, for the purposes of investment in Escorts Ltd (hereinafter referred to as "Escorts"). In the meanwhile, investments commenced, and Caparo started sending remittances. Though this fact was brought to the notice of the RBI, by the PNB, the PNB did not disclose the fact that Swaraj Paul had separately remitted, to it, GBP 1,30,000 for the purpose of opening an NRE account. 73.1 Escorts, by a resolution of its Board of Directors, refused to register the transfer of shares, and wrote, to the RBI, to consider whether the Scheme contemplated circumvention, of the 1% ceiling stipulated therein, by a single foreign company channelling investment through a dozen subsidiaries. Other illegalities, on the part of the said 13 companies, were also alleged. Ultimately, the RBI accorded permission, to the PNB, to release the money remitted by Caparo from abroad, for making payment against shares of Escorts and DCM, subject to certain conditions. 73.2 This led to the Chairman of the Board of Director....
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....a new Board, to reconsider the decision. (iii) The members of the Company, in the EGM, and the Directors, were comparable to the legislative and executive organs of a parliamentary democracy, in which legislative sovereignty rested with the Parliament whereas administration was left to the executive government, subject to a measure of control by the Parliament through its power to force a change of government. Another view was that it was more akin to the division of powers between the Federal and State Legislature under the Federal Constitution. (iv) As it would be impracticable, for day-to-day administration of the Company, to be undertaken by the EGM, the modern practice was to confirm, on the Directors, the right to exercise all the company's powers except those which, by law, were expressly required to be exercised in the EGM. (v) An injunction could not be granted to restrain the holding of a general meeting to remove a Director and appoint another. (vi) Every shareholder of the company had the right, subject to prescribing procedural and numerical requirements, to call an EGM in accordance with the Act. Neither could he be restrained from doing so, nor was....
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....ion 169, and reads thus: "(3) On receipt of notice of a resolution to remove a director under this section, the company shall forthwith send a copy thereof to the Director concerned, and the director, whether or not is a member of the company, shall be entitled to be heard on the resolution at the meeting." In that view of the matter, it is obvious that the "opportunity of hearing" referred to in sub-section (1) of Section 169 is not an opportunity sui generis, distinct and different from the opportunity of hearing referred to in sub-section (3) of the same Section. The "reasonable opportunity of being heard" contemplated by sub-section (1) of Section 169 is only required to be afforded prior to removal of the director concerned. Such opportunity is also contemplated by sub-section (3). The two provisions are, therefore, required to be read conjunctively, not disjunctively. Viewed thus, it becomes apparent that the law laid down by the Supreme Court, in L.I.C. of India (supra), albeit in the context of Section 284 of the Companies Act, 1956, applies, equally, to Section 169 the present Act. 73.7 The above statutory reality stands reinforced by the Notes on Clauses to Claus....
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....able the shareholders to form a judgement on the business before them. The shareholders were not required to disclose the said reasons in advance. (v) The said reasons were not subject to judicial review. 73.10 A case, involving a dispute facially similar to that with which we are seized, is to be found in S. Varadarajan v Venkateswara Solvent Extraction (P) Ltd, (1994) 80 Com Cas 693 (Mad), decided by A.R. Lakshmanan, J. (as he then was), sitting singly in the Madras High Court. The petitioner, in that case, moved an application seeking an injunction restraining the second respondent from convening the EGM. The High Court decided the case after a thorough appreciation of Sections 169, 173 and 284 of the Companies Act, 1956, which correspond to Sections 115, 100 and 169 of the present Act; ergo, the decision is of considerable relevance to us. Though the said decision may not be of much assistance insofar as the scope of Section 169 of the present Act is concerned - as it dealt with removal of a Managing Director, which is outside the purview of the said provision - it offers considerable guidance, on the issue of interpretation and understanding of Sections 100 and 115 of th....
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....h sub-section (6) of section 169. The meeting was convened on April 23, 1992, which is well within the period of three months from February 8, 1992, that is the date of deposit of requisition. 18. xxxxxxxxx 19. Thus it is clear that the obligation to annex an explanatory statement to the notice of the meeting is only on the company when it calls for a meeting to transact special business. When a requisitionist calls for an extraordinary general meeting under section 169, there is no obligation on the requisitionist to annex an explanatory statements to the notice of the meeting. There is in my view no warrant for imposing such an obligation on the requisitionists. Therefore, I am of the view that there is no merit in the contention of Mr. A. K. Mylsamy, learned counsel for the petitioner, that the requisition notice dated February 8, 1992, and the notice of the meeting dated March 28, 1992, are bad and that they contravene the provisions of the Companies Act. 25. Point No. 5 : As already observed by me, a shareholder has the statutory right subject to the fulfillment of the provision of section 169 to call an extraordinary general meeting. No injunction can be issued restr....
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....ere considerations of irreparable prejudice and the like mandate otherwise. 74.2 What Section 169 guarantees to the Director, who is on the threshold of removal, is a "reasonable opportunity of being heard". Unquestionably, this opportunity connotes, and denotes, a right which is equally valuable and inviolable. It, however, denotes only so much, and no more. The words "reasonable opportunity of being heard" have been explained, by the Supreme Court, thus, in Fedo (P) Ltd v S. N. Bilgrami, AIR 1960 SC 415: "The requirement that a reasonable opportunity of being heard must be given has two elements. The first is that an opportunity to be heard must be given; the second is that this opportunity must be reasonable. Both these matters are just conceivable and it is for the Court to decide whether an opportunity has been given and whether that opportunity has been reasonable." (Emphasis supplied) 74.3 Where, therefore, the statute provides for a "reasonable opportunity of being heard", the opportunity is required to be reasonable, and realistic. In the absence of any specific statutory prescription to that effect, however, it is not open to the person affected by the action to ....
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....nt 344, which was carried in appeal to the Supreme Court. In that case, the Karnataka bank Ltd (hereinafter referred to as "the Bank"), by notice dated 27th January 1995, convened an EGM, scheduled for 2nd March 1995. The appellants before the High Court (who were two of the Directors of the Bank) moved the trial court on the ground, inter alia, that the convening of the said meeting had to be accompanied by an explanatory statement, as provided in Section 173 of the Companies Act, 1956 (corresponding to Section 100 of the present Act). As in the present case, the contention, of the said aggrieved Directors, was that "a very cryptic explanatory statement has been annexed to the notice which states that the other directors have no interest in the item of business and only states that a requisition has been received for the convening of the meeting". The four resolutions, set out in the Special Notice, were for removal of four Directors, including the two directors who had appealed to the High Court. The learned Trial Judge held that the case was not one that deserved grant of ad interim orders stopping the meeting from taking place. In revision therefrom, the High Court opined that ....
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....ion in which the Board is in receipt of a requisition made by the members, of sufficient strength as stipulated therein. It requires the Board, on receipt of such requisition, to necessarily call an EGM of the Company, within 21 days of receipt of such requisition, to be convened not later than 45 days from the date of such receipt. 75.2 The notice, dated 8th August 2017, issued by six out of nine directors of the Company, states that the company was in receipt of a requisition, dated 8th July 2017, from the share holders of the company, seeking removal of Plaintiff No.1 from her office as Director thereof. It is apparent, at first glance, that the notice, dated 8th August 2017, is neither relatable to subsection (1) nor to sub-Section (2) of Section 100 of the Act. Both these provisions empower the Board to call for an EGM. The notice dated 8th August 2017, on the other hand, does not call for any EGM, or for convening of any EGM. It merely calls for a meeting of the Board on 26th August, 2017, to discuss whether a notice, to convene an EGM, pursuant to the subject notice dated 8th July 2017, received from the members of the company, be issued or not. In other words, the notice....
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....at the notice dated 8th August 2017 was not, in fact, a notice under Section 100 of the Act at all, no question of any infraction, in issuance of such notice, of Section 179 (1) of the Act, could be said to exist. No proscription, against issuance of such notice, is to be found in the Act or any cognate legislation, plenary or subordinate. It cannot, therefore, be said that the notice was illegal in any manner. 77. Issue No. (x)- Whether the notice, dated 8th July, 2017, was a requisition for convening of an EGM and whether the subsequent notice dated 8th August 2017 erred in treating as one? 77.1 Inasmuch as the notice, dated 8th August 2017, was itself only a notice for fixing a meeting of the Board of the Company, to decide whether an EGM be convened or not, the issue of whether the notice dated 8th July 2017 was a requisition, or not, ceases to be of any serious relevance. The notice dated 8th August 2017, no doubt refers to the earlier notice dated 8th July 2017 as a requisition; however, the notice dated 8th August 2017 does not itself convene an EGM but only calls for a meeting of the Board, to decide whether an EGM should be convened, or not. As such, the decision whe....