2015 (5) TMI 325 - HC - Companies Law

Review application - Matter becomes functus officio as soon as the judgment is delivered and order is passed - Execution application is time barred as the Article 136 of the Limitation Act 1963 provided for a period of 12 years - Limitation period for payment of dividend is three years under Article 113 of the Limitation Act - It is settled law that executing Court cannot go behind the decree - Non payment of dividend - Held that - We have heard the rival contentions of the parties. We have carefully scrutinized the records and we find that there are some substance in the argument of Mr. Hoon. We also find that in the Judgment dated 21st May, 1981 the Hon ble Division Bench observed that Whether an application is barred by Act 137 of the Limitation Act and also some passage of the said Division Bench order where it is stated . In our view, if the same state of affairs of the Company continuous or in other words if any wrong committed before three years of the presentation of the application continuous to be in operation, there will be no question of limitation. We do not accept the broad proposition that the events which had taken place three years before the presentation of application are barred by Article 137 of the Limitation Act . We find Section 47 of the Code of Civil Procedure empowered the executing Court to interpret a decree and hold that it was a decree for payment of money. From the conduct of the TML it creates a doubt in our mind that it was the intention of TML not to transfer the unpaid dividend in favour of the Hungerford . Therefore, they prepared purported resolution dated 27th January, 1975 with the intention that in the balance sheet signed on 3rd November, 1975 with resolution dated 21st January, 1975, the Directors would not disclose the same in the balance sheet though in the auditor s report for the said year did not reflect such resolution. Therefore, from the conduct of the TML we have no hesitation to hold that the purported resolution dated 27th January, 1975 was fraudulently fabricated to deprive the Hungerford from its legitimate unpaid dividend. Non-payment of dividends was a continuous offence so long the payment is not made. Therefore, there is no question of limitation. Hence the theory of limitation would not be applicable in the present case as has been argued by Mr. Bose. We find that the Division Bench undoubtedly adjudicated on the issue regarding non-payment of dividend to the Hungerford by the TML . Therefore, the order passed by the Division Bench is a decree within the meaning of Section 2 of the Code of Civil Procedure. Therefore, unless and untill full satisfaction of the decree is discharged by the TML liability of the Division Bench order dated 21st May, 1981remains and the present execution application is nothing but a tool to execute the order which was filed within the period for 12 years and there is no bar of limitation. The decisions referred by Mr. Utpal Bose, the learned senior Counsel on the ratio that executing Court cannot go beyond the decree have no manner of application considering the aforesaid discussions that non-payment of money to the Hungerford by the TML towards the unpaid dividends clearly indicates that the appellant was directed by the said Division Bench order to make payment towards the unpaid dividend in respect of the specific period. Therefore, to realize the same the Hungerford has no alternative/option but to put the decree in execution which in the present case has been rightly done by the Hungerford . With this aforesaid discussions we hold that the impugned judgment and order passed by the Learned Trial Court is a well reasoned one and there is no infirmity, illegality which would deserve any interference. Therefore we have no hesitation to hold that the Appeal No.289 of 1994 preferred by TML has no merit and the same should be dismissed. Regarding the review application of the order dated 22nd August, 2008 we find that the grounds taken in the said application have failed to satisfy the essential ingredients of the Order 47 of Code of Civil Procedure. We find that there is no merit in the said review application. Therefore, the review application is hereby dismissed. But that will not preclude the applicant to take appropriate steps before the appropriate forum if so advised. - Decided against the appellant.

Summary

Issues Involved:
1. Application for review.
2. Shareholding and attachment by the Income Tax Department.
3. Settlement and recognition of the same.
4. Authority of counsel representing Hungerford Investment Trust Limited.
5. Specific performance of the agreement to sell shares.
6. Execution of decree and payment of consideration.
7. Appointment of receiver and lien on shares.
8. Mismanagement and oppression under Sections 397 and 398 of the Companies Act.
9. Execution application and amendment.
10. Limitation period for execution application.
11. Non-payment of dividends and continuous offence.
12. Interpretation of decree and payment of money.
13. Review application under Order 47 of the Code of Civil Procedure.

Issue-wise Detailed Analysis:

1. Application for Review:
The court highlighted that once a judgment is delivered, the bench becomes functus officio, meaning it cannot re-open the case. The scope for review is limited and must fit within the parameters set by Order XLVII of the Code of Civil Procedure. The petitioner sought to challenge the authority of the counsel who appeared for Hungerford Investment Trust Limited, but the court concluded that review is not the appropriate remedy for such an issue. The review application was dismissed as it did not meet the criteria under Order XLVII.

2. Shareholding and Attachment by the Income Tax Department:
The appellant's application was dismissed on the grounds of insufficient shareholding, as their 50% shareholding was attached by the Income Tax Department. The court found that the attachment did not negate the shareholding but upheld the dismissal based on the lack of requisite shareholding.

3. Settlement and Recognition:
The Division Bench had previously disposed of the appeal as infractuous due to a settlement that the applicant did not recognize. The applicant contended that the Division Bench could not pass the order in his absence as the Chairman of Hungerford Investment Trust Limited. However, the Special Leave Petition against this order was dismissed by the Apex Court.

4. Authority of Counsel Representing Hungerford Investment Trust Limited:
Mr. N.S. Hoon, claiming to be the Chairperson of the appellant, argued that the counsel who appeared for Hungerford Investment Trust Limited lacked authority. The court determined that this issue could be addressed in a proper regular proceeding and not through a review application.

5. Specific Performance of the Agreement to Sell Shares:
The court recounted the history of the agreement executed on October 3, 1956, for the sale of shares in Turner Morrison & Company Limited (TML) and the subsequent legal proceedings, including a suit for specific performance and various appeals. The decree for specific performance was eventually rescinded by the Supreme Court.

6. Execution of Decree and Payment of Consideration:
The court discussed the execution of the decree for specific performance, including the attachment of shares and the appointment of a receiver. The receiver was directed to deliver shares to Mundhra upon payment of the consideration, but the application for execution was dismissed, and subsequent appeals were also dismissed.

7. Appointment of Receiver and Lien on Shares:
The court detailed the appointment of a receiver for the shares and the legal battles over the lien claimed by TML. The Supreme Court eventually ordered the recession of the decree for specific performance and directed the receiver to hand over the shares to Hungerford.

8. Mismanagement and Oppression under Sections 397 and 398 of the Companies Act:
The court addressed the issues of mismanagement and oppression, framing 15 issues, of which only four were relevant. The Division Bench ordered an investigation into the affairs of TML and its subsidiaries under Sections 237 to 251 of the Companies Act, 1956.

9. Execution Application and Amendment:
The execution application and amendment were disposed of by the Learned Single Bench, directing TML to pay Rs. 12,16,350 to the applicant within eight weeks. The Division Bench later directed TML to furnish a bank guarantee for the amount.

10. Limitation Period for Execution Application:
The court addressed the issue of limitation, with the appellant arguing that the execution application was time-barred. The court found that non-payment of dividends is a continuous offence, and therefore, the limitation period does not apply.

11. Non-payment of Dividends and Continuous Offence:
The court held that non-payment of dividends is a continuous offence under the Companies Act, and the limitation period does not apply. The Division Bench's order directing payment of dividends reached its finality and is enforceable as a decree.

12. Interpretation of Decree and Payment of Money:
The court interpreted the Division Bench's order as a decree for payment of money, which is executable under Section 47 of the Code of Civil Procedure. The non-payment of dividends was deemed a continuous offence, and the execution application was found to be within the limitation period.

13. Review Application under Order 47 of the Code of Civil Procedure:
The review application was dismissed as it did not satisfy the criteria under Order 47 of the Code of Civil Procedure. The court found no merit in the application and upheld the original judgment and order.

Conclusion:
The appeal by TML was dismissed, and the cross-appeal by Hungerford was disposed of. The review application was also dismissed, with the court affirming that the non-payment of dividends is a continuous offence and the execution application was timely and enforceable.