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TMI Blog1982 (3) TMI 210X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The validity of the said order was challenged in a writ petition being Misc. Petition No. 1306 of 1973, filed by the company and its two directors against the Union of India and others. By an order dated January 10, 1974, the directors appointed by the Central Govt. were restrained from taking any further steps or action in furtherance or implementation of the said order on the petitioners giving an undertaking, inter alia , not to call any meeting of the board of directors without the orders of the court. The undertaking was modified by order dated March 15, 1974, but that is not material for us. The Revenue Department in order to recover its tax dues had a receiver appointed of the business of the company and this appointment came to an end on June 29, 1977. Thereafter, a notice of Motion No. 1154 of 1977, dated November 3, 1977, was taken out in the said writ petition to modify the said undertaking to enable the company, firstly, to call a meeting for appointing four new directors, secondly, to permit the board of directors to accept resignations of the old directors, and, thirdly, to empower the reconstituted board of directors to convene a meeting to carry on day-to-day bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... board will meet at least once in a fortnight. The fortnight is being calculated as the first 15 days of the calendar month and the remaining days of the calendar month constituting the two fortnights. This board is further under an obligation to get the accounts of the company audited and call an annual general meeting within the period of three months. Once the annual general meeting so held elects its own board of directors, this board will cease to function as such except that the bank's two nominees as creditors-representatives will continue as directors of the board, subject, however, to the general provisions of the Companies Act. To avoid misunderstanding it is clarified that nominee No. 1 of the bank appointed as chairman is only during the limited period as mentioned in para. 1 and the elected board will be free to act according to the provisions of the Companies Act. The appointment of the two directors under section 408 in pursuance of this order will also come to an end along with the life of this temporary board. However, it is the contention of the Union of India that in view of the earlier appointment of respondents. Nos. 6 and 7, which is under dispute, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order dated 17th November, 1973, has expired or not is squarely decided in the writ petition between the same parties and the decision is binding on the parties. The learned counsel further contended that the act of the court in granting stay of the operation of the order dated 17th November, 1973, and passing various other orders from time to time cannot prejudice any party to these proceedings. On the other hand, Shri Bhabha, learned counsel appearing for the respondent company, has contended that the order dated 17th November, 1973, has exhausted itself after the expiry of three years from 17th November, 1973, and, thereafter, no order is made by the appropriate authority after giving a reasonable opportunity which is necessary and after fulfilling the conditions which are precedent to the making of the order. Thereafter, there is no question of exercise of any power contrary to the provisions of the statute. In the absence of any fresh order under section 408(1), there is no question of approval under section 408(5). The ad hoc board constituted under Shri Justice, Deshmukh's, order was a workable order without prejudice to the rights and contentions of both the parties as ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugned order dated November 17. 1973, came to an end on November 16, 1976, as it was for a period of three years from the date of the passing of that order. The injunction granted by the order dated January 10, 1974, is still in force. Even otherwise, having regard to what has been transpired in the various notices of motion taken out on behalf of the company or otherwise, it is abundantly clear that the parties have proceeded on the footing that the appointment of the directors under section 408 continues, although the 6th and the 7th respondents appointed to hold office as directors under the impugned order could not participate in the meetings of the board by virtue of the injunction of this court. Nevertheless, the parties sought a variation of the undertakings given by them and brought about the appointment of new directors under section 408(1) in place and stead of respondents Nos. 6 and 7. One of the directors, Shri D. D Sathe, still continues to be a director holding office by virtue of section 408(1). As regards the other director appointed under section 408(1), the company has sought by prayer ( a ) of the notice of motion for appointment of a director in place of Shri H. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was to remain in force till 31st December, 1971, but the appointment of the two Government directors was to continue for a period of one year from 25th June, 1973, as further stated at page 591. Thus, in that case of the appointment of the Government directors came to an end by the end June, 1974. Now, the reported judgment is of Shri Justice Rege. Against his decision, Appeal No. 67 of 1974 was filed. The appeal was heard by Nathwani and Naik JJ. The learned judges found that the impugned order had spent its life and, therefore, the appeal did not survive. I fail to see how on the analogy or methodology of that case I can hold that the life of the order in the present case has come to an end. In the case before me, as we have seen, the order dated 17th November, 1973, could not be implemented as the directors were restrained and the company gave an undertaking not to call any meeting of the Board of Directors without the order of the court. It is not in dispute that the order dated 15th November, 1977, constituting the ad hoc board was without prejudice to the rights and contentions of the parties. The annual general meeting of the company held on 30th September, 1981, was in cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring. The order has not been set aside; it has not lived its life of three years, and, therefore, it is very much alive. The Government Directors are still holding office as directors and, therefore, there is no question of fresh order being made as suggested by Shri Bhabha. In my view, therefore, with the appointment of Government directors subsisting and they continue to hold office as directors, the change in the board of directors cannot have effect unless confirmed under section 408(5). In the result, I allow the petition in terms of prayers ( a ) and ( b ) with costs. Shri Bhabha applies for stay of the operation of the above order in order to enable the company to file an appeal against the order. Shri Bhabha states that by order dated 22nd December, 1981, in Company Application No. 6 of 1982, the court has allowed the newly constituted board to function on certain conditions and, therefore, on the same conditions the newly constituted board be continued. Shri Advani opposes the application and submits that the company has already committed several grave and serious irregularities leading to the passing of the order dated 17th November, 1973. The new board can cause imm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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