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TMI Blog1968 (10) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... the shareholders had a locus standi before the meetings had been convened and had considered the proposed amalgamation of the company with M/s. Automobile Products of India Ltd., Bombay. Mr. S. N. Kacker has appeared on behalf of a shareholder even before issue of notice and has been heard on the question whether the shareholders are entitled to a notice of such an application before any directions are given. By an order of this court, passed on October 7, 1968, a notice of the application was also served upon the standing counsel for the Central Government so that he may also be heard on the preliminary question whether a notice of the application before the court should go to the Central Government at this stage. Consequently, Mr. H. N. Seth appeared for the Central Government and submitted that the Central Government was also entitled at this stage to a notice under section 394A of the Act, before any order is passed to convene a meeting. Learned counsel for the applicant has pointed out that there are two methods under the Companies (Court) Rules, 1959, in which applications may be made. The first is by means of an application through summons and the other is by means of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e notice to the Central Government of an application made through summons only. Similarly, it is creditors or shareholders before a decision is taken to hold a meeting inasmuch as they will be heard at the meeting. It is contended that it is enough if they are heard at the meeting or meetings and then by this court before any scheme is sanctioned. The contention, if accepted, would prevent the Central Government as well as creditors and shareholders, whose meeting or meetings may be proposed, before a scheme has been actually considered at a meeting. In support of this contention learned counsel has relied on two cases : In the matter of Bangeswari Cotton Mills Ltd. [1967] 37 Comp. Cas. 195 and W.A. Beardsell Co. (P.) Ltd. and Mettur Industries Ltd., In re [1968] 38 Comp. Cas. 197 , 201. In Beardsell and Company's case 2 the Madras High Court had followed the decison of the Calcutta High Court in Bangeswari Cotton Mills s case ( supra ) and had held: "In an application to the court under section 394 of the Companies Act for the sanctioning of a compromise or arrangement, notice to the Central Government need not be given at the initial stage before the court makes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd (2) of the Companies Act, 1956, by the Supreme Court of India. With great respect for the views taken in the above mentioned cases, I find it difficult to use Rules made by the Supreme Court for the purposes given in section 643 of the Act to interpret the intentions of Parliament in enacting section 394A in 1964. So far as rules relating to the "holding of meetings of creditors and members in connection with proceedings under section 391" are concerned, section 643(1)( b )( iii ) enables the Supreme Court to make rules which are consistent with the Code of Civil Procedure, 1908. Under section 643(1) rules can be made for the purpose of carrying out the duties imposed on the court by the Act, inter alia , with regard to "the holding and conducting of meetings to ascertain the wishes of the creditors and contributories". It is true that the Supreme Court has not, so far, made rules for service of notices upon the Central Government under section 394A of the Act. The reason for this is obvious. In 1959, when these Rules were made, section 394A was not on the statute book. The rules, therefore, provide only for issue of the summons in Form No. 33 which, as set out above, itself ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation by petitions only. Nor do I find a conflict between section 394A and the Companies (Court) Rules. Coming to the question whether the shareholders have a locus standi or not to be heard at this stage, it is clear that there is no statutory provision, such as section 394A of the Act, for serving notices upon them before a decision to hold a meeting. Nevertheless, the questions which require adjudication in proceedings under section 391(1) of the Act, even before the stage of the approval of an arrangement is reached, are given in rule 69. These are decided when giving "directions at the hearing of summons" "Hearing", as contemplated by rule 69, obviously implies hearing of all sides which are to be heard. The matters to be decided after hearing of the summons are specified as follows : "(1)etermining the class or classes of creditors and/or of members whose meeting or meetings have to be held for considering the proposed compromise or arrangement; (2)fixing the time and place of such meeting or meetings ; (3)appointing a chairman or chairmen for the meeting or meetings to be held, as the case may be ; (4)fixing the quorum and the procedure to be followed at the meeti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a satisfactory manner and is liable to be wound up. Or, it may be pointed out that there is no need for holding a meeting of shareholders or creditors for deciding whether an amalgamation should take place because the Central Government itself was about to pass an order under section 396 that it is essential in public interest that an amalgamation should take place. The shareholders may also be interested in pointing out whether the use of the powers of the court under section 391 is at all called for in a case and whether it is not a matter which should be left to voluntary decisions by the members of the companies concerned. These are questions on which a hearing at the initial stage may prevent unnecessary orders under section 391(1) and save unnecessary waste of time, energy and money. It may also be mentioned here that, even if the Rules do not specifically provide for notice, rule 9 of the Companies (Court) Rules enables this court, in the exercise of its inherent powers, to issue directions for service of notice upon the parties interested or concerned, if no specific rule was there for this purpose. As I have already indicated, my view is that both the Central Governmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervice of the summons and not of other material. In the present case, the affidavit supporting the summons is a fairly long document. I, therefore, dispense with the need to serve copies of the supporting affidavits upon the shareholders. The Central Government has already been served with a copy of the affidavit through its counsel. The shareholders may be served through summons in Form 33 by ordinary post and publication. The sending of the summons may be evidenced by certificates of posting. Service by registered post is dispensed with. The next date of hearing of the application is fixed at November 13 , 1968, by consent of parties. The affidavits in reply should be filed by that date. As Mr. S. N. Kacker, appearing on behalf of one of the shareholders, has prayed for a copy of the affidavit in support of the summons, he will be supplied with a copy of the affidavit in support of the summons in the course of the day. Other shareholders, who put in appearance and desire copies of the affidavit, may obtain copies by applying similarly for copies on the next date of hearing. This procedure will obviate delay in the hearing of the application which is the main objection of the app ..... X X X X Extracts X X X X X X X X Extracts X X X X
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