1983 (5) TMI 179 - HC - Companies Law

Oppression and mismanagement Power of Tribunal on application under sections 397 and 398, Winding up - Appeals from orders

Issues Involved:
1. Maintainability of the appeal.
2. Nature of the impugned order as a judgment under Clause 15 of the Letters Patent.
3. Applicability of Section 483 of the Companies Act.
4. Allegation of mala fide intent and delay by the company.
5. Discretion of the learned judge in refusing the supplementary affidavit.

Issue-wise Detailed Analysis:

1. Maintainability of the Appeal:
The primary objection raised by the respondents was regarding the maintainability of the appeal. The respondents contended that the impugned order, being interlocutory in nature, does not constitute a judgment under Clause 15 of the Letters Patent and hence, no appeal lies from such an order.

The court, however, determined that the impugned order, although interlocutory, had caused serious prejudice to the company. The adverse findings and comments in the reports by S.R. Batliboi and Co. were pivotal to the respondents' case. If the company was not allowed to contest these findings, it could lead to the supersession of its board of directors and appointment of a special officer or administrator. Therefore, the court held that the impugned order was a judgment within the meaning of Clause 15 of the Letters Patent and thus, the appeal was maintainable.

2. Nature of the Impugned Order as a Judgment:
The court referred to the Supreme Court's decision in Shah Babulal Khimji v. Jayaben D. Kania, AIR 1981 SC 1786, which stated that not all interlocutory orders are judgments. Only those orders which decide matters of moment or affect vital and valuable rights of the parties and cause serious injustice can be considered judgments.

The court found that the impugned order had indeed decided matters of moment and caused serious prejudice to the company. The inability to contest the adverse findings in the reports could significantly impact the final decision, potentially leading to the supersession of the company's board of directors. Thus, the impugned order was deemed a judgment under Clause 15.

3. Applicability of Section 483 of the Companies Act:
The company argued that even if the impugned order was not considered a judgment under Clause 15, the appeal was still maintainable under Section 483 of the Companies Act. Section 483 provides for appeals from any order made or decision given in the matter of the winding up of a company.

The court referenced the Supreme Court's observation in Shanta Genevieve Pommerat v. Sakal Papers Pvt. Ltd., AIR 1983 SC 269, stating that relief under Sections 397 and 398 is an alternative to winding up. Therefore, the provisions of Section 483 also apply to orders made in proceedings under Sections 397 and 398. Consequently, the court held that the appeal was maintainable under Section 483 of the Companies Act.

4. Allegation of Mala Fide Intent and Delay:
The respondents contended that the company's application for leave to file a supplementary affidavit was an afterthought and filed with mala fide intent to delay the proceedings. The court, however, found that the company was wrongly advised not to deal with the adverse findings in the initial affidavit-in-opposition. The company had annexed several documents in the proposed supplementary affidavit to contest the findings, indicating that the application was not an afterthought or filed with mala fide intent.

The court acknowledged some negligence on the part of the company in not addressing the findings earlier but held that this should not preclude the company from filing the supplementary affidavit.

5. Discretion of the Learned Judge:
The respondents argued that the learned judge had exercised discretion in refusing the supplementary affidavit, and this discretion should not be interfered with. The court disagreed, stating that the refusal had caused serious prejudice to the company. The supplementary affidavit could be allowed on terms to ensure fairness.

Conclusion:
The court set aside the impugned order of the learned judge and granted leave to the company to file the supplementary affidavit by June 6, 1983. The company was ordered to pay costs assessed at 100 G.Ms. to the respondents by the same date. If the company failed to comply, the appeal would stand dismissed, and the impugned order would be affirmed. If the supplementary affidavit was filed, the respondents were permitted to file an affidavit-in-reply within three weeks thereafter.

← Previous Next →