1981 (8) TMI 248 - HC - Companies Law

Summary

Issues Involved:
1. Locus Standi of Shareholder to Intervene
2. Validity of Proposed Terms of Settlement
3. Authority of Committee of Management
4. Jurisdiction of the Court
5. Fairness of Private Treaty Sale
6. Consent Requirement under Order 23 Rule 3 of CPC

Issue-wise Detailed Analysis:

1. Locus Standi of Shareholder to Intervene:
The primary issue addressed was whether Purna Investment Pvt. Ltd., a shareholder of Andhra Steel Corporation Ltd., had the locus standi to intervene in the settlement proceedings. The court referred to the Supreme Court decision in Mrs. Bacha F. Guzdar v. Commr. of Income-tax, Bombay, which established that a shareholder has no interest in the property of the company but only in the profits and surplus assets upon winding up. It was emphasized that the company is a separate legal entity from its shareholders. Therefore, the court concluded that Purna Investment Pvt. Ltd. did not have the locus standi to intervene in the suit or the application for recording the terms of settlement under Order 23 Rule 3 of the Civil Procedure Code (CPC).

2. Validity of Proposed Terms of Settlement:
The proposed terms of settlement involved the sale of the Dunkuni Unit of Andhra Steel Corporation Ltd. to Grand Steel Alloy Ltd., which was alleged to be a concern of Shiv Kumar Agarwalla, related to one of the defendants. The petitioner argued that this sale was detrimental to the interests of the company and its minority shareholders. However, the court did not delve into the validity of the proposed terms, as it had already determined that the petitioner lacked the locus standi to intervene.

3. Authority of Committee of Management:
The petitioner contended that the Committee of Management, constituted by an order of the Appeal Court, did not have the authority to approve the proposed terms of settlement. It was argued that the sale of a substantial part of the company's undertaking required the consent of the General Body of members under Section 293(1)(a) of the Companies Act, 1956. The court did not address this issue in detail due to the preliminary finding on locus standi.

4. Jurisdiction of the Court:
The petitioner argued that the court lacked jurisdiction to record the terms of settlement as it affected immovable properties outside its jurisdiction, specifically in Bangalore. The court did not address this issue in detail, as the petitioner's locus standi was not established.

5. Fairness of Private Treaty Sale:
The petitioner claimed that the sale of the Dunkuni Unit by private treaty without public auction was unfair and improper. The court did not examine this claim due to the preliminary finding on locus standi.

6. Consent Requirement under Order 23 Rule 3 of CPC:
It was alleged that not all defendants, including Mohan Lal Mittal, had agreed to the proposed terms of settlement, making the application under Order 23 Rule 3 of the CPC inapplicable. The court did not address this issue in detail, as the petitioner's locus standi was not established.

Conclusion:
The court concluded that Purna Investment Pvt. Ltd. had no locus standi to intervene in the settlement proceedings. The application was deemed an abuse of the court's process and was dismissed with costs. The court did not address the substantive issues raised by the petitioner, as the preliminary finding on locus standi was dispositive.