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TMI Blog1958 (5) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... before us by Mr. Sankat Haran Singh. The aforesaid application for reconstruction, which was exclusively on behalf of Sri Arjun Prasad, respondent No. 1, had been admitted on October 6, 1953. along with the following directions : "The petitioner is directed to arrange for holding separate meetings (a) of the debenture holders and of the other secured creditors of the company, (b) of the unsecured creditors of the company, (c) of the preference shareholders of the company and (d) of the ordinary shareholders of the company on November 9, 1953, at 10 a.m. and 4 p.m. and on November 10, 1953, at 10 a.m. and 4 p.m. The meetings of item (a) will be held at 10 a.m., on November 9, 1953, of item (b) at 4 p.m. on the same date, of item (c) at 10 a.m., on the 10th November, 1953, and of item (d) at 4 p.m. on the same date. Mr. S.N. Dutt, barrister-at-law, if he does not consent, Mr. G.C. Banerji, an advocate of this court, is appointed to act as chairman of the meetings with power to adjourn the same ... The chairman is directed to report the result of the meetings to the court on or before November 17, 1953." Perhaps Mr. Dutt did not accept the chairmanship. So the first two meetings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent No. 1 to vote on their behalf in person. Accordingly he acted as such on their behalf and voted for them in person and not by proxy. Now the objections, which are the subject-matter of these appeals, against this report of Mr. G.C. Banerji are three-fold. The first is that the chairman wrongly allowed Sri Arjun Prasad to represent the aforesaid two companies in person. The second objection is that Sri J.N. Mustafi was wrongly allowed by the chairman to represent Bihar Sugar Mills Association, who were creditors to the extent of Rs. 2,833-12-0 and the Indian Sugar Mills Association, who were creditors to the extent of Rs. 956 on the basis of proxies executed in his favour inasmuch as the same had not been done in conformity with rule 147 of the Patna High Court Rules. The third objection is relating to Sri N.N. Sahay and it is said that he too was wrongly allowed to represent the Standard Vacuum Oil Co., as in his case also the proxy submitted was not in order. All these three objections have been decided against the appellants by the learned company Judge. Here, however, at the time of argument the last two objections have not been pressed either by Mr. S.N. Dutt or by Mr. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Patna High Court Rules is not at all applicable to a proceeding under reconstruction inasmuch as that rule as also others framed by this court under the Companies Act is exclusively meant for a proceeding in liquidation. In other words, the way in which a creditor corporation may vote at a meeting of the creditors held in the course of a reconstruction proceeding of a debtors' company is not controlled by rule 150 of the Patna High. Court Rules. What Mr. Chaudhary contends is that the provision of law, as laid down in section 153 of the Indian Companies Act, 1913, for the purpose of meetings held in the course of a reconstruction proceeding, is an exhaustive code and as within the terms of that section the power given to the creditors to appear in person or by proxy is not subject to any qualification or limitation, there is no reason why in this respect any distinction or discrimination should be made between a creditor who is a natural person and one who is not so. That means the rule of law, as provided in section 153 of the Indian Companies Act, 1913, for a creditor to vote in person or by proxy is to be construed independent of any limitation that is to be found in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contrary to law as laid down in section 153(2) of the Companies Act, 1913, the court has no option but to look into it and not to give any sanction to it unless that is disposed of. In other words, the sanction of the court, which is a sine qua non for the compromise or arrangement being binding on all the parties concerned, is dependent on the fact that at least on the very face of it the report does not suffer from any non-compliance of the rule of law as laid down in section 153 of the Companies Act, 1913. On the question of sanction, Halsbury's Laws of England (Hailsham Edition) in article 1354 of Volume V at page 794, while dealing with this subject, says : "The court must be satisfied that the statutory provisions have been complied with, that the classes of creditors or members have been fairly represented by those who attended and that the statutory majority approving the scheme is acting bona fide in the interest of the class it professes to represent. The arrangement must also be such as a man of business would reasonably approve, and fair and reasonable as regards the different classes, if any." Similar point came to be considered in In re Alabama, New Orleans, Texas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ikewise in the case of In re English, Scottish, and Australian Chartered Bank [1893] 3 Ch. 385 Lopes L. J. observed : "Now, the mode in which this power is to be exercised has, to my mind, been very well and correctly laid down in the Alabama, & C. Railway Company's case [1891] 1 Ch. 213, which has already been referred to. What I understand to be decided by that case is this, that it is not sufficient for the court to ascertain that the statutory conditions have been complied with ; the. court must go further than that, and be satisfied that the statutable majority which are to bind the dissentient minority have acted bona fide, that they have not acted adversely to those whom they professed to represent, and, lastly, that the arrangement contemplated is a reasonable arrangement, such as that which a man of business would reasonably approve. With regard to the word 'reasonably' it must always be borne in mind, the word 'reasonably' is a relative term : it means reasonably with regard to the particular circumstances of the case. What is reasonable in one case might be unreasonable in another. The reasonableness must be always regarded with reference to other alternatives. For inst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In In re English, Scottish, and Australian Chartered Bank [18931 3 Ch. 385, Lindley L.J. does not seem to have had his attention drawn to the fact that what he had said in In re Alabama, New Orleans, Texas and Pacific Junction Railway Co. [1891] 1 Ch. 213, was not quite the same as what Bowen L.J. and Fry L.J. had said, but he plainly approved of what Bowen L.J. and Fry L.J. had said, for he so stated, and he quoted what Fry L.J. had said : He also said this (In re English, Scottish, and Australian Chartered Bank case (supra)): 'If the creditors are acting on sufficient information, and with time to consider what they are about, and are acting honestly, they are, I apprehend, much better judges of what is to their commercial advantage than the court can be... While, therefore, I protest that we are not to register their decisions, but to see that they have been properly convened and have been properly consulted, and have considered the matter from a proper point of view .....the court ought to be slow to differ from them ' In my opinion, then, so far as this second duty is concerned, what I have to see is whether the proposal is such that an intelligent and honest man, a member o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the learned company Judge until the hearing of the report had already been taken up. Therefore, on that technical ground alone this part of the argument; has to fail. Further, I think that the right of a person to vote as the representative of a company under such circumstances depends essentially on the question whether he has been validly appointed or not and not upon evidence produced by him in support of that authority. And so far as the evidence is concerned, it is meant only to satisfy the chairman that he is the person duly authorised so that he may be in a position to admit the vote cast by such a representative which is generally done by the simple production of the copy of the authorised resolution : In re Kelantan Coconut Estates Ltd. [1920] W.N. 274 ; 64 S.J. 700. Then on merits also I think there is no substance in this objection. It is quite understandable that in the meetings, wherein those resolutions were passed, the chairman must have put the signature on the minutes not after each resolution but only once at the end of it, as is the common practice in matters like these. Perhaps it is for that reason that section 83(2) of the Indian Companies Act, 1913, spea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the appellants in this connection is that the chairman should not have at the meeting of the unsecured creditors held on 9th November, 1953, allowed Sri Arjun Prasad to represent in person the said two companies, Bhadani Brothers and Hindustan Coal Co., and in the absence of any proxy having been filed on their behalf, their votes should not have been counted in calculating the requisite statutory majority for the approval of the scheme. This raises a question as to the mode in which a creditor corporation Can exercise votes in a general meeting of the creditors held in the course of a proceeding under section 153 of the Indian Companies Act, 1913. Now under common law, votes at all meetings are taken by show of hands, and it is only when a poll is taken that regard is to be had to voting power according to number of shares. That means', unless a poll is demanded, the voting is to be done by numerical majority and it is this which we find laid down in article 62 of Table A of the English Companies Act, 1948, and in regulation 60 of Table A of the Indian Companies Act, 1913. Then the other principle which also is well-established is that the proxy shall not be entitled to vote e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nglish Companies (Winding-up) Rules, 1949. Therefore, it is manifest that on a poll, may it be in the case of a general meeting of the shareholders of a going concern or may it be in the case of a general meeting of creditors or contributories and that too either when the concern is in the course of reconstruction under section 153 or in the process of winding up, the mode of voting at least in form is the same, namely, either in person by proxy. "A proxy", as defined in Stroud's Judicial Dictionary, "is a lawfully constituted agent (per Smith LJ. in In re English, Scottish, and Australian Chartered Bank [1893] 3 Ch. 385, an agent properly appointed (per Lindley LJ.) and semble (from the judgments of the Court of Appeal in that case), he need not, in the absence of a contrary regulation, be appointed in writing. However, in the court below, Williams J., said, ' Under the Companies Act, generally, there can be to my mind no doubt but that the authority of the proxy must be in writing' and referring to the phrase 'Creditors present, either in person or by proxy', section 2, 33 and 34 Viet, c. 104, he added, that 'means a proxy authorised by an instrument in writing'; but referring to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as it was under the Act of 1913, and it was only recently that under the new Companies Act, 1956, a similar provision has now been made in section 187, which for all practical purposes in this respect is the same as what was provided in the English law so far back as 1929. Section 187 of our new Companies Act, 1956, reads: "(1)A body corporate (whether a company within the meaning of this Act or not) may- (a)if it is a member of a company within the meaning of this Act, by resolution of its board of directors or other governing body, authorise such person as it thinks fit to act as its representative at any meeting of the company, or at any meeting of any class of members of the company; (b)if it is a creditor (including a holder of debentures) of a company within the meaning of this Act, by resolution of its directors or other governing body, authorise such person as it think fit to act as its representative at any meeting of any creditors of the company held in pursuance of this Act or of any rules made there under, or in pursuance of the provisions contained in any debenture or trust deed, as the case may be. (2)A person authorised by resolution as aforesaid shall be entit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ke any other creditor may vote not only by proxy but in person also, and if there is any lacuna in the section about the procedural part of it then that lacuna, according to learned counsel, can be very conveniently removed with the help of the general provisions of company law and specially those provided in regulations 71 and 91 of the Indian Companies Act, 1913. In my opinion, this contention is not correct. When properly analysed, this will be found to be based on the assumption that the word "person" as used in section 153 of the Indian Companies Act, 191.3, means not only a natural person but also an artificial person like a corporation unlike its implication as used in section 79 or regulation 64 of the Indian Companies Act, 1913, or as used in rule 144 of the Rules framed by this court. But I think there can be no justification for such an assumption, either in law or on fact. In the first place, the word "person" as understood in its ordinary sense generally implies a natural person and not a person artificial unless there is a provision made for it either expressly or by necessary implication. Mr. Chatterji appearing for the liquidator has rightly in this connection dra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) to understand the Legislature as intending such persons, as, by the use of proper means, may be able to fulfil the condition ; and not those who, though called ' person' in law, have no capacity to do so at any time, by any means, or under any circumstances, whatsoever." Thirdly, it has to be remembered that this part of the provision for voting as is stated in section 153 is much the same as the one provided for a winding up concern in rule 144 or the one provided for a going concern in section 79(e) or in regulation 64 of the Indian Companies Act, 1913. And if it is to be accepted that the phrase "a member or a creditor may vote either in person or by proxy", when read with regulations 71 and 91 of the Indian Companies Act, 1913, provides an exhaustive Code on the subject then I see no reason why the same phrase when used in section 79(e) of the Indian Companies Act, 1913, and rule 144 of this court could not have served that purpose when read in the context as stated above and why the Legislature at all thought it necessary to make any special provision for a member company in section 80 of the Indian Companies Act, 1913, and for a creditor company in sub-section (b) of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rporation, as contemplated under section 153 of that Act, can vote only by proxy and not in person. Further, as pointed out by Mr. Dutt, the only provision wherein a reference has been made in relation to the Indian Companies Act, 1913, as to how a creditor corporation is to vote is to be found in rule 150 alone which has been framed by this court under the powers given to it there under. That rule provides : "Where a corporation is a creditor, any person who is duly authorised in writing by the corporation to act generally on behalf of the corporation at meetings of creditors and contributories and to appoint himself or any other person to be the corporation's proxy, may fill in and sign the form of proxy on the corporation's behalf and appoint himself to be the corporation's proxy and a proxy so filled in and signed by such a person shall be received and dealt with as the proxy of the corporation." That means, under this rule also the mode of voting that is allowed in the case of a corporation creditor is one by proxy alone and not in person. Further, it has to be noted that this rule falls under the heading "proxies" in relation to general meetings of creditors and contributor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et that cannot be a ground for saying that they do not apply at least to the present proceeding and that for two reasons. The first is that though section 153 of the Indian Companies Act, 1913, does provide that the meeting held there under shall be called, held and conducted in such manner as the court directs, but in the present case there was no such direction ever made by the learned company Judge. The second is that the present proceeding under section 153 of the Indian Companies Act, 1913, was after all one which was taken up while the company was already in the process of winding up. Therefore, according to Mr. Dutt, in the absence of any other provision on the subject, this rule 150 can alone be a proper guide for a proceeding like the one before us. In my opinion, on principle this argument seems to be correct, and if that is so, which I think is so, then it has to be held that rule 150 of this court is applicable at least to a proceeding like the one before us and as that rule in the case of a creditor corporation speaks of voting by proxy alone and not in person, therefore, the contention of Mr. Choudhary contrary to it has to be rejected. Then a question has been rais ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sence of any direction given in that behalf by the court or so long as there is no specific provision made by this court under the rules framed by it for a meeting under section 153 of the Indian Companies Act, 1913, there is no reason why the rules as framed by this court cannot be held applicable at least mutatis mutandis to such a proceeding if taken after an order of liquidation has already been passed. In the present case it is not claimed that Sri Arjun Prasad in voting on behalf of the aforesaid two companies acted as their proxy ; rather the specific claim made on his behalf is that he acted on their behalf in person and that on the basis of the resolutions passed in his favour to that effect by those corporations. Therefore, in the absence of any proxy having been filed by Sri Arjun Prasad, the votes cast by him on behalf of the two corporations, namely, Bhadani Brothers and Hindustan Coal Co., should not have been counted in calculating the result of the approval of the unsecured creditors in the meeting held on 9th November, 1953, as contemplated under section 153 of the Indian Companies Act, 1913. Next in the alternative it has been argued that even if it be so, that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the findings given by the learned company Judge on the validity of the proxies filed by Mr. P.K. Bose and Mr. G.K. Verma are still open to be attacked in the manner and on the ground as it has been attempted to be done here. In my opinion not and that for two reasons. First on the ground that the appeals before us on behalf of the appellants are directed against that specific part of the order whereby the learned company Judge has dismissed their objection relating to some particular creditors who had voted in support of the scheme and not against any of that part of the order which deals with the votes cast against the scheme. If the respondents were dissatisfied with the order passed by the learned company Judge as to the votes cast by Mr. P.K. Bose on behalf of the Eastern Railway and by Mr. G.K. Verma on behalf of the Sales Tax Department, who had voted against the scheme, the proper course open to them was to prefer an appeal against those particular orders and not to reopen the decisions by way of reply to the present appeals which relate to orders other than those. In the second place, though it is true that ultimately in the concluding portion of the judgment the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so far as the votes cast by Mr. J.P. Singh on behalf of Chini Mazdoor Sangh and Mr. G.G. Dubey on behalf of Pranlal Valji are concerned, they had been rejected on a ground entirely different and not on one which is now said to be applicable in the case of proxies filed by Mr. Bose and Mr. G.K. Verma. In the case of Mr. J.P. Singh, who voted for Chini Mazdoor Sangh there was no proxy received from that Sangh at all. It is true that the learned company Judge has observed that: "It is possible that some authority was submitted by Shri J.P. Singh before the chairman, authorising him to represent the Chini Mazdoor Sangh." But this observation on the very face of it is based on mere supposition; though as a matter of fact there is nothing on the record to show that Chini Mazdoor Sangh had given proper authority to Mr. J.P. Singh to vote on its behalf. In the case of Mr. G. G. Dubey, the only objection raised was that the proxy form executed by Pranlal Valji had not been duly attested. In answer thereto the learned company Judge has held and I think rightly that in the absence of any specific direction by the court in regard to the form of proxy to be filed in this case, it was not nec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppealable and in support of that order they opined: "The order in the present case neither affects the merits of the controversy between the parties in the suit itself, nor does it terminate or dispose of the suit on any ground. An order for transfer cannot be placed in the same category as an order rejecting a plaint or one dismissing a suit on a preliminary ground as has been referred to by Couch C.J. in his observations quoted above. An order directing a plaint to be rejected or taken off the file amounts to a final disposal of the suit so far as the court making the order is concerned. That suit is completely at an end and it is immaterial that another suit could be filed in the same or another court after removing the defects which led to the order of rejection. On the other hand, an order of transfer under clause 13 of the Letters Patent is, in the first place, not at all an order made by the court in which the suit is pending. In the second place, the order does not put an end to the suit which remains perfectly alive and that very suit is to be tried by another court, the proceedings in the latter, to be taken only from the stage at which they were left in the court in whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional jurisdiction. Appeals only lie from judgment in civil matters, in the exercise of ordinary or extraordinary original jurisdiction of the court and, with the leave of the Judge, against a decree or order made by him in the exercise of appellate jurisdiction against a decree or order made by a subordinate court. In section 205, Government of India Act, providing for appeals to the Federal Court the words used are 'judgment, decree or final order'. In Mohammad Amin Brothers Ltd. v. Dominion of India AIR 1950 FC 77, the point arose whether an order under the Letters Patent setting aside an order of a single Judge directing the compulsory winding up of a company was a final order against which an appeal lay to the Federal Court and, it having been held that it was not a final order an argument was raised that it may be a judgment if it was not a final order. Their Lordships held that by reason of the collocation of the words the word "judgment" would not include interlocutory judgment and observed as follows: 'In English courts the word judgment is used in the same sense as a decree in the Civil Procedure Code and it means the declaration or final determination of the rights of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w. It is the admitted case of the parties that on the poll taken in the meeting held on 9th November, 1953, the result would have been otherwise had the votes cast by Sri Arjun Prasad on behalf of Bhadani Brothers and Hindustan Coal Co., in person been rejected and eliminated from the poll. In other words, in the latter case the scheme could not be placed before the court for the necessary sanction as contemplated under section 153 of the Indian Companies Act, 1913. Therefore, it is manifest that in such circumstances any order dismissing the objection raised on behalf of those who were in opposition to the scheme finally determines and concludes their right of dissent to the same. That being so, I have no hesitation to hold that the order under appeal is a judgment within the meaning of the word as used in clause 10 of the Letters Patent. In other words, the appeals are competent. In the result, therefore, it has to be held that Sri Arjun Prasad (respondent No. 1) in law as laid down in the Indian Companies Act, 1913, and the rules framed there under was not entitled to vote in person on behalf of the aforesaid two corporations, namely, Bhadani Brothers and Hindustan Coal Co., ..... X X X X Extracts X X X X X X X X Extracts X X X X
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