TaxTMI 
TaxTMI 
2026 (3) TMI 1740
X X X X Extracts X X X X
X X X X Extracts X X X X
....etitioners in GA 2899 of 2013, i.e. respondents herein, in case, they succeed in the application. 3. Learned Senior Advocate appearing for the appellant submitted that the learned Single Judge erred in holding that the notice issued on the part of the appellant with regard to convening the 13th Annual General Meeting was devoid of any explanatory note and for that reason, convening of the meeting was illegal. Learned Single Judge was also not justified in his conclusion that consent letter showing consent of more than 75% preference shareholders for redemption of preference shares at 20% of its face value was not appended to the record placed before learned Single Judge. 4. Learned Senior Advocate for the appellant also contended that the learned Single Judge was not justified in holding that the resolution adopted in 13th Annual General Meeting was not in consonance with the provisions of Section 106 of the Companies Act, 1956 and hence, the same was bad in law. In support of his contention, learned Senior Advocate for the appellant relied upon 2018 SCC OnLine Cal 5878 (Sri Milon Roy Chowdhury vs. Ashish Kumar Saha) and 1975 SCC OnLine Cal 321 (State of West Bengal and Other....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... appellant in its affidavit in opposition. 8. Learned Senior Advocate also contended that the learned Single Judge was not justified in refusing to grant the appellant an opportunity to produce the minutes of the Annual General Meeting held on September 20, 2010 with the specific recording that consent of more than 75% of the preference shareholders were obtained in writing. According to learned Senior Advocate, the respondents never made out a case that there was no written consent of more than 75% preference shareholders and that the recordings in the minutes of the Annual General Meeting dated September 20, 2010 was incorrect. He further contended that the learned Single Judge was not justified in holding that the special resolution passed in the 13th AGM cannot, in any manner affect the rights of any class of shareholders of the C - Series preferential shareholders to which the plaintiff/respondent belonged. Learned Senior Advocate further submitted that the learned Single Judge erred in coming to the conclusion that the resolution passed at the 13th AGM dated September 20, 2010, was not a special resolution recognized under the provisions of Section 106 of the Act of 1956. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... stood by the impugned judgment and order. 13. The respondents/plaintiffs invested Rs.1 Crore in the appellant bank by purchasing C-class preference shares of such bank in 1998 anticipating a fair dividend profit and bounty return of their investment. The representatives of the appellant bank persuaded the plaintiffs/respondents that the appellant was a financial institution wholly owned by the Government of India. According to the prospectus issued by the bank, it was admitted that the preference shares would result in attractive returns to the subscribers on its redemption on its due date irrespective of the fact whether the company earned benefit or not. It was also represented that there was no risk involved at all in investing in the preference shares of the appellant bank. The preference shares were to be redeemed on the maturity date which was 61 months from the deemed date of allotment with an upfront incentive of 0.4% of the subscribed amount was said to be given. 14. Relying upon such representation made in the prospectus, the respondent invested an amount of Rs.1 crore on December 3, 1998 and applied for Rs.1 lakh redeemable cumulative nonconvertible preference sha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....te i.e. January 3, 2004 and to pay the preference dividend due on such date. 17. In terms of a letter dated March 25, 2003, the appellant bank forwarded a cheque dated March 27, 2003 drawn in favour of the petitioners for a sum of Rs.9,57,650/- towards interim dividend for the year ending March 31, 2003 over the preference shares amount of Rs. 1 crore in terms of the decision of the board taken in its 67th meeting dated March 20, 2003. The respondents also made out a case that the conduct on the part of the appellant bank all along exhibited that the bank was in a sound financial position. By its letter dated December 23, 2003, the respondents/plaintiffs also requested the appellant bank to provide the details of the persons/entities who had opted for premature redemption of the preference shares. However such request of the respondents was never responded to. According to the respondents/plaintiffs, the appellant bank was under obligation to pay the respondents the redemption value of their preference shares. 18. By a letter dated March 18, 2004, through their advocate, the respondents called upon the appellant bank to pay off the redemption value as well as the dividend pay....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f Finance, Government of India to the effect that the appellant bank was required to redeem the preference share capital of the shareholders at 20% of the principal amount as full and final settlement thereof. By the said letter, the respondents were requested to surrender their share certificates. The said letter was responded by the respondents by its letter dated November 4, 2010. In such letter the respondents questioned the validity of such a resolution passed in respect of redemption of preference shares at 20% of principal amount as full and final settlement. They also sought specific details in respect of the number of preference shareholders and other persons who consented for or against the Special Resolution adopted in 13th AGM. 22. The respondents made out a case that the Special Resolution adopted in the 13th AGM was wholly illegal and its decision was null and void in violation of the provisions of the Act of 1956. The respondents herein, in the original suit contended that the rights of different classes of preference shareholders could not be decided upon by all other classes of preference shareholders in a meeting convened for all classes of preference sharehold....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erties of the respondent bank; d) A fit and proper person to be appointed a Receiver in respect of the properties and/or assets of the respondent and the Receiver so appointed be directed to make inventory and take inspection of the said assets and properties of the respondent bank and asserting the true value of the said properties and/or assets; e) The respondent bank be directed to keep apart a sum of Rs.1 Crore in a separate account; f) Ad interim orders in terms of prayers above; g) Costs of and incidental to this application be paid by the respondent; h) Such further or other order or orders the past and/or direction or directions be given as to this Hon'ble Court may deem fit and proper. 25. Such GA No. 2899 of 2013 was heard and initially, by an order passed on December 11, 2013, interim relief was granted therein which directed the petitioner Bank to set apart properties valued at Rs.2 crores, to satisfy the claim of the petitioners in GA 2899 of 2013, i.e. respondents herein, in case, they succeed in the application. It was finally heard by learned Single Judge which resulted in the impugned order, confirming the interim ord....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ue of the shares of that class." 29. It was the specific case of the appellant that notice of the Annual General Meeting was duly served upon the shareholders. Although, initially a point was raised on behalf of the respondents that the notice of the meeting did not contain the explanatory notes as required under the provisions of the Act of 1956, however, at the time of hearing the appeal such issue was not raised and pressed. The appellants relied upon the copy of notice, attendance sheet and the minutes of the meeting of 13th AGM which establishes that notice of the meeting was duly served upon the shareholders before the meeting. It also establishes that the notice dated August 23, 2010 contained sufficient explanatory notes with regard to modification in the terms of issue of redeemable cumulative preference shares at serial No. 6. The relevant extract of such notice runs to the following: - "Special Business 6) to consider and if thought fit, passed with or without modifications, the following resolution as Special Resolution (by preference Shareholders only) Resolved that person to Sec. 106 and other applicable provisions of the Compani....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hareholders, they are request cannot be acceded to. Thereafter, Ms. Sunanda Lahiri, Member, proposed the following resolution as ordinary resolution and Shri Amrik Sinigh, Member, seconded the same. Resolved that pursuant to Sec. 106 and other applicable provisions of the Companies Act, 1956 (including any amendments to or re-enactment thereof), if any, and in accordance with the provisions of the Memorandum & Articles of association of the company and subject to such other approvals, permissions and sanction as may be necessary, consent of the preference shareholders, be and is hereby accorded to the modification in the Terms of Issue of the redeemable cumulative preference shares of Rs..221.08 crore (Series C, D, DD, G, H, capital H1, H1H1, K-option B, L, LL, N, O, Q and Y) raised by IIBI on private placement basis for redemption of such shares at 20% of the principal paid up capital and state of "at par" without accruing any dividend since 1 April 2003 at the specified rate (s) thereon, till the date of redemption, in full and final settlement of such preference shares, in accordance with the consent in writing given by the concerned preferenc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....b of the opening part of Section 106 was not complied with by the defendant company and, as such, they completely flawed special resolution passed at the 13th AGM of the company held on September 20, 2010 is not of special resolution recognized by Section 106 of the Act of 1950." 33. In Mather and Platt fire Systems Ltd. (supra), noting the authority in Miheer H. Mafatlal V. Mafatlal Industries Ltd. (1996) 87 Comp Cas 792, the Hon'ble Supreme Court observed that, "26. The interpretation which has to be placed on the provisions of sub-section (1) of section 391 is no longer race Integra and has been dealt with in several reported cases. The leading judgement of the Supreme Court on the subject is in Miheer H. Mafatlal V. Mafatlal Industries Ltd. (1996) 87 Comp Cas 792. The judgement of the Supreme Court is an authority for the proposition that a separate meeting of the class of members or a class of creditors is required to be convened were a compromise or arrangement is proposed between the company and that class of members or creditors. Where the same terms of compromise are offered to a class of members or creditors, no separate meeting of a sub-class among them is re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....inate bench held that, "31. In 1964, therefore, the Supreme Court once again affirmed the principle that an interim relief can be granted only in aid of an as auxiliary to the main reliefs which may be available to the party on final determination of his rights in a proceeding under Article 226 and not otherwise. In the instant case the relief that was granted by the learned trial judge was not in aid of or auxiliary to the main relief that the petitioners were entitled to in the application under Article 226. In these circumstances, ". 38. Similarly, in Sri. Milon Roy Chaudhury (supra), another coordinate bench observed to the following, "18. It is settled law that breach of contract must ordinarily found in damages. The grant of a specific performance being discretionary, the same may be refused if the ends of justice do not so warrant. It is equally well settled that no interim relief can be granted unless it is in aid of final/substantial relief claimed in the suit. Now, if at the interim stage it is doubtful as to whether the court would be in a position to grant the final relief in terms, as claimed, grant of an interim order which is not in aid of the fi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....alue of the shares. The order allowed them to pay the said amount along with interest @ 9% P.A. on and from the date of offer being made on 20.9.2010 till the date of payment. Such order also directed the appellant to deposit further sum of Rs.80 lakh with the Registrar, Original Side to be kept in a suitable interest bearing fixed deposit account in any nationalized bank within two weeks from the date of the order. The order impugned in GA No. 610 of 2014 was directed to be stayed on such payment. 42. It is submitted on behalf of the respondents that the order dated September 10, 2015 passed in APO 86 of 2014 operates as res judicata in the present appeal. Such order reads to the following: "The appeal is directed against an interlocutory order dated 11.9.2013, whereby the appellant bank was directed to set apart properties valued at Rs.. 2 Crores to satisfy the claim of the respondents/petitioners, who were preferential shareholders of the bank. It appears that the bank had applied for voluntary liquidation and it is the concern of the respondent shareholders that their interest was not adequately secured. In appeal, by order dated 11.3.2014 the impugned order was sta....