2012 (6) TMI 642 - HC - Companies Law

Amalgamation - application for recalling the order appellants are majority shareholders Applicants shareholders of respondent did not attend the meeting nor they received any notice of the meeting Held that - There is also no determination of non-service of the notices personally on the shareholders, advertisement in inconspicuous newspapers to prevent shareholders from attending the meetings, attendance by unauthorised persons, voting by unauthorised persons and the attendance register showing attendance by dead persons - since order sanctioning scheme and follow up action pursuant thereto, had become final in proceedings wherein some of present applicants were not only present but participated, same could not be agitated once again and, therefore, action of appellants was hit by principle of res judicata - even otherwise since all appellants had accepted scheme of amalgamation and companies against whom relief was sought for were no longer in existence, they could not be reverted back to their earlier position

Issues Involved:
1. Non-receipt of notice for the meeting.
2. Fraudulent practices in the meeting.
3. Res judicata and constructive res judicata.
4. Delay and acquiescence.
5. Legality and validity of the scheme of amalgamation.

Issue-wise Detailed Analysis:

1. Non-receipt of Notice for the Meeting:
The appellants contended that several shareholders, including Applicants Nos. 1, 2, 8, and 10, did not receive any notice for the meeting held on May 18, 2002. This claim was supported by affidavits from Dr. Narendra Rungta and Dr. Mrs. Neena Rungta, who affirmed that they neither received any notice nor attended the meeting. The appellants argued that the lack of notice invalidated the meeting and subsequent resolutions.

2. Fraudulent Practices in the Meeting:
The appellants alleged that a fraud was practiced on the shareholders and the court. They claimed that notices were not served properly, proxies without authorization attended the meeting, and even deceased shareholders were marked as present. These actions were purportedly done to manipulate the approval of the amalgamation scheme. The appellants argued that these fraudulent practices rendered the meeting and the resolutions adopted therein unlawful.

3. Res Judicata and Constructive Res Judicata:
The respondents argued that the application was barred by res judicata and constructive res judicata, as similar issues had been previously adjudicated. They highlighted that some appellants had supported an earlier challenge by Ambika Prasad Modi, which was dismissed by both the trial court and the appellate court. The principle of res judicata was invoked to prevent re-litigation of the same issues that had been conclusively decided.

4. Delay and Acquiescence:
The respondents also contended that the appellants were aware of the scheme's sanctioning and had acquiesced by not challenging it in a timely manner. The court noted that the appellants had ample opportunity to challenge the scheme earlier but failed to do so. The delay in filing the application was seen as a significant factor against the appellants, indicating their acceptance of the scheme.

5. Legality and Validity of the Scheme of Amalgamation:
The court examined whether the scheme of amalgamation was approved and implemented in compliance with legal requirements. Despite the appellants' claims of irregularities and fraud, the court found that the scheme had been sanctioned by the court and implemented. The court held that the appellants had accepted the scheme, and reversing it would be impractical due to the changes in shareholding and third-party rights that had since been created.

Judgment:
The court dismissed the appeal, upholding the trial judge's decision primarily on the grounds of res judicata, constructive res judicata, and acquiescence. The court found no merit in reopening the issues that had already been decided. The cross-objection regarding the publication of notice in obscure newspapers was allowed, setting aside the trial judge's findings on this point. The court emphasized that the appellants had accepted the scheme and that reversing it was not feasible due to the significant changes that had occurred.

Conclusion:
The judgment underscores the importance of timely challenges to corporate actions and the finality of judicial decisions. The principles of res judicata and acquiescence played a crucial role in the court's decision to dismiss the appeal and uphold the scheme of amalgamation.

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