TaxTMI 
TaxTMI 
1981 (8) TMI 248
X X X X Extracts X X X X
X X X X Extracts X X X X
....oration Ltd. of its Dunkuni Unit. The plaintiff bank also filed a winding up application in 1978 in this Court for realisation of its dues which was not the subject matter of the present suit. Both the suit and the winding up petition by the plaintiff bank are pending. In 1977 the Defendant No. 3, Mohan Lal Mittal instituted a proceeding under Sections 397-398 of the Companies Act, 1956, relating to the management of affairs of the said Defendant No. 1 Company, Andhra Steel Corporation Limited, and various interim orders were made from time to time in the said proceeding. It is alleged by the applicant, purna Investment Limited, through the said Promod Kumar Mittal, the son of Mohan Lal Mittal, that the Defendant No. 1 company, Andhra Steel Corporation Limited, did not file its Balance Sheets after the year ending 31st March, 1975. As such, the petitioners are unaware of the real state of affairs of the company. By a consent order passed in the Sections 397-398 application on the 25th May, 1977, an Extraordinary General Meeting of the Defendant No. 1 Co., Andhra Steel Corporation Limited, was directed to be convened and held for the purpose of election of Directors. The said Extrao....
X X X X Extracts X X X X
X X X X Extracts X X X X
....present application was made by the petitioner who state that they are members of the Defendant No. 1 company and as such, vitally interested in the management of its affairs which have been carried on in a manner most detrimental to the interest of the defendant No. 1 company and its minority shareholders including the petitioner. It is stated in the petition that if the terms of settlement are permitted to be put in it would most prejudicially affect the interest of the defendant No. 1 company and the interest of the minority shareholders including the said petitioner, Purna Investment Limited. In para 9 of the petition some of the alleged infirmities of the formal application were put in the terms of settlement and to pass a decree on the compromise inter alia (1) the proposed terms of settlement are alleged to have been approved by the Managing Committee of the said Defendant No. 1 Company, Andhra Steel Corporation Limited, constituted by an order of the Appeal Court dated 26th July 1977. The said order of the Appellate Court is annexure 'B' to the petition and are at pages 44, 45 and 48. By the said order of the Appeal Court the Board of Directors was restrained from a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... suit. The Defendant No. 1 company under the proposed terms of settlement is proposing to dispose of the Dunkuni Unit and is further proposing to affect the immovable properties of the Defendant No. 1 company at Bangalore by proposing to create a charge over such immovable properties at Bangalore as security for payment of the part of the decretal dues of the plaintiff bank under the proposed terms. Therefore, this Court has no jurisdiction to record such terms of settlement as it purports to affect immovable properties outside the jurisdiction of this Court, (5) the proposal to dispose of the Dunkuni Unit of the Defendant No. 1 company by private treaty without public auction is unfair, improper and in any event would not enure for the benefit of all, (6) it is alleged that the Defendant No. 3 Mohan Lal Mittal, the father of Promod Kumar Mittal, who has verified the petition on behalf of the said Purna Investment Pvt. Ltd. has not agreed to sign the said terms of settlement which was attempted to be put in on the 23rd May, 1980. Therefore, Order 23 Rule 3 of the C. P. C. has no application as consent of all the Defendants is required for the proposed terms of settlement. On these ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... should be distributed by way of dividends among the shareholders. He has undoubtedly a further interest to participate in the assets of the company which would be left over after winding up but not in the assets as a whole as Lord Anderson puts it." 4. In that decision the leading English decision in Commissioner of Inland Revenue v. Forrest 1924 (8) Tax Cases 704 at page 710 the observation Of Lord Anderson was referred to and also the decision of the earlier Supreme Court in Sholapur Mills' case, i.e., Charanjit Lal v. Union of India was referred to and relied on. 5. Reference was also made to the Division Bench decision of this Court in Sham Lal Puro hit v. Jagging Nath Roy where the question whether a share holder in a compulsory winding up has any locus standi to apply for setting aside the sale of property belonging to the company arose under Order 21 Rule 90 of the C. P. C. and dealing with this question D.N. Sinha, C. J., observed in para. 15 summarizing the position of a share-holder as follows at pp. 429-430, "The result of these decisions may be summarized as follows :-- (1) In the case of Public Limited company registered under the said Act, the company is....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 23 Rule 3 of the Civil P. C. made by the plaintiff bank and opposed the application on various grounds set out in the affidavit which I have already mentioned before. Mr. Chowdhury also referred to the question of registration of the terms of settlement and submitted that it is not fair and reasonable and, therefore, it should not be accepted and the application should be allowed. Mr. Nag also submitted referring to the dictionary meaning of the word 'intervention' which includes the right of the shareholder to appear in a proceeding where the interest of the company is being adversely affected. He referred to the decision in Jhajharia Brothers Ltd. v. Sholapur Spinning & Weaving Company Limited (1940) 72 Cal LJ 458 : (AIR 1941 Cal 174) where a suit was filed by a shareholder and it was held that there can be a suit by the shareholder against the company for individual wrong done to them. Apart from individual wrong there may be suits to restrain acts ultra vires the company and the Court will interfere in cases of ultra vires acts because they are not within the constitution. 7. For the same purpose of the leading English decision in Natal Land Etc. Company v. Poulin C....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of law as that would depend on the status, position and power of a shareholder in public Limited Company. Unless the applicant has locus standi, there is no question of going into the other matter raised in the petition and also argued from the Bar to re-enforce the arguments of Mohan Lal Mittal in different forms once in the said application under Order 23 Rule 3 of the C. P. C. and again in Sections 397-398 application for removal of the Managing Committee. The present application appears to me to be an abuse of the process of the Court and utterly mala fide and it is not necessary for me to go into the other questions raised as those are already being raised in the application under Order 23 Rule 3 of the C. P. C. The position of the shareholder is denned under the Companies Act, 1956, and particularly the principles laid down in the Supreme Court decision in Mrs. Bacha F. Guzdar v. Commr. of Income-tax which I have already quoted before has clearly laid down the position of the shareholder of a company although Mr. Nag has in his usual thoroughness and erudite scholarship quoted the passage from Oleck on Modern Company Law, an American publication, in which generally the propo....