1964 (8) TMI 82 - HC - Companies Law

Summary

Issues Involved:
1. Revocation or setting aside of the order dated February 7, 1964.
2. Validity of the agreement dated February 11, 1964, under Rule 37 of the Mineral Concession Rules, 1960.
3. Whether the agreement constitutes a present demise or an interim arrangement.
4. Jurisdiction and power of the Court to make interim orders under sections 397 and 398 of the Companies Act, 1956.
5. Protection of the respondent's rights and investments under the agreement.

Issue-wise Detailed Analysis:

1. Revocation or Setting Aside of the Order Dated February 7, 1964:
The applicant sought to revoke or set aside the order dated February 7, 1964, which approved the draft agreement for lease and directed the Special Officer to execute the same. The Court noted that the order was made by consent of all parties and had been acted upon. The order had been completed, perfected, and filed, and the respondent had invested money based on this order. Therefore, the Court concluded that the order could not be recalled or set aside. The Court emphasized that the order was made with the understanding that necessary permissions from the Central and State Governments would be obtained, and there was no intention to contravene statutory provisions.

2. Validity of the Agreement Dated February 11, 1964, Under Rule 37 of the Mineral Concession Rules, 1960:
The applicant argued that the agreement for lease constituted a subletting or transfer of interest in a mining lease without the prior consent of the State and Central Governments, thereby violating Rule 37 of the Mineral Concession Rules, 1960. The Court examined the terms of the agreement and found that it conferred exclusive possession and the right to exploit the collieries to the respondent, which amounted to a transfer of interest. Therefore, the agreement was in contravention of Rule 37 and could not be given effect without the necessary permissions.

3. Whether the Agreement Constitutes a Present Demise or an Interim Arrangement:
The Court analyzed the terms of the agreement to determine whether it constituted a present demise or an interim arrangement. The agreement provided for the transfer of possession and the right to exploit the collieries and engineering works. Although the possession was under the Special Officer, the terms indicated exclusive possession by the respondent. The Court concluded that the agreement, while containing elements of an interim arrangement, effectively created a present demise, thereby violating statutory provisions.

4. Jurisdiction and Power of the Court to Make Interim Orders Under Sections 397 and 398 of the Companies Act, 1956:
The Court affirmed its jurisdiction and power to make interim orders under sections 397 and 398 of the Companies Act, 1956. The Court emphasized that it had the authority to regulate the conduct of the company's affairs and make orders that appeared just and equitable. The Court noted that the main application under sections 397 and 398 was still pending, and it had the power to make appropriate interim orders to address the issues raised in the application.

5. Protection of the Respondent's Rights and Investments Under the Agreement:
The Court recognized that the respondent had invested significant sums of money based on the agreement and the order of February 7, 1964. The Court emphasized the need to protect the respondent's rights and investments. The Court directed the suspension of any further operation of the agreement dated February 11, 1964, but ensured that the respondent's actions and investments up to that date were protected. The Court appointed the directors of the respondent as managers under the Special Officer to continue operating the collieries and engineering works, pending the necessary permissions from the Central and State Governments.

Conclusion:
The Court concluded that while the order dated February 7, 1964, could not be set aside, the agreement dated February 11, 1964, violated Rule 37 of the Mineral Concession Rules, 1960. The Court suspended further operation of the agreement and directed the Special Officer to take over possession of the company's assets. The directors of the respondent were appointed as managers under the Special Officer to continue operations, ensuring compliance with statutory provisions and protecting the respondent's investments.