9911796707
TMI Blog1985 (8) TMI 271X X X X Extracts X X X X X X X X Extracts X X X X ..... Group of Anil Saran, (3) Group of Durga Prasad Agarwal and (4) Group of P. L. Gupta. Basheshwar Nath and Anil Saran's groups were in the majority and were consequently the dominant group. An application was made by the group represented by Durga Prasad Agarwal being Company Petition No. 23 of 1981 in this court under sections 397 and 398 of the Act on the ground of oppression on the part of the dominant group. The application, it appears, was heard by the learned company judge on various dates and during the course of hearing the parties brought it to the notice of the court that they had come to terms and a compromise had been arrived at which was in the best interest of all concerned including the company. The learned company judge, after scrutinising the terms of the compromise, came to the conclusion that passing of a decree in the terms of the compromise arrived at between the parties would be in the interest of the company and accordingly, he passed the decree dated January 9, 1984, referred to above. All the parties to Company Case No. 23 of 1981 appear to have been satisfied with the judgment and decree passed by the learned company judge on January 9, 1984, as no one prefe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts before the civil judge during the course of execution of the decree. We accordingly find no substance in the preliminary objection that the appeal is not maintainable. Coming to the merits of these appeals, it may be pointed out that Special Appeal No. 9 of 1985 filed by the company has been argued by Sri Ravi Kant at some length. Counsel for the appellant in Special Appeal No. 7 of 1985 which has been preferred on behalf of two of the shareholders of the company who were not even parties in Company Case No. 23 of 1981 has adopted the arguments made by Sri Ravi Kant. In other words, he has challenged the order dated April 30, 1985, on those very grounds alone which have been urged by Sri Ravi Kant in Special Appeal No. 9 of 1985. The first submission which has been made by Sri Ravi Kant, counsel for the appellant company, is that clauses 9.1 and 9.2 of the compromise filed before the learned company judge on the basis of which the decree dated January 9, 1984, was passed were beyond the scope of sections 397 and 398 of the Act and consequently were without jurisdiction. As already seen above, the decree dated January 9, 1984, has become final. In the order dated April 30, 1985 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d fit in the interest of the company to remove the oppression contemplated by section 397 and the mismanagement contemplated by section 398 of the Act. In Debt Jhora Tea Co. Ltd. v. Barendra Krishna Bhowmick, [1980] 50 Comp. Cas. 771, it was pointed out by a Division Bench of the Calcutta High Court that there can be no limitation on the court's power while acting under sections 397, 398 and 402 of the Companies Act, 1956. Instead of winding up a company, the court has been vested with ample power to continue the corporate existence of a company by passing such orders as it thinks fit in order to achieve the objective by removing any member or members of a company or to prevent the company's affairs from being conducted in a manner prejudicial to public interest. The court under section 398 read with section 402 of the Act has the power to supplant the entire corporate management. Under these provisions, the court can give appropriate directions which are contrary to the provisions of the articles of the company or the provisions of the Act. On a reading of section 402( a ) and section 402( g ), there can be no doubt that the intention of the Legislature was to confer wide a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons 397 and 398 of the Act. Indeed it was a case there that in substance the dominant group was being deprived of the control of the company and the dues payable to the directors of that group or to its friends and relatives for achieving this purpose were to be paid. Consequently, we find it difficult to agree with the submission made by the learned counsel for the appellant that the provision contained in clauses 9.1 and 9.2 of the compromise was beyond the scope of sections 397 and 398 of the Act. It was then urged by learned counsel for the appellant that no resolution of the board of directors giving permission to acknowledge the liability contemplated by clauses 9.1 and 9.2 having been passed, these two clauses could not be given effect to. Reliance in support of this submission was placed by counsel for the appellant on section 292 of the Act. Sub-section (1) of the said section contemplates that the board of directors of a company shall exercise powers referred to in clauses ( a ) to ( e ) thereof on behalf of the company, and it shall do so only by means of resolutions passed at meetings of the board. However, the counsel for the appellant was unable to point out that w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the affairs of the company by selling its shares in favour of the group represented by Durga Prasad Agarwal are valid according to the appellant notwithstanding what is contained in section 46, we find no justification in not applying the same principle even in regard to clauses 9.1 and 9.2. It is settled law that a person cannot be permitted to approbate and reprobate or to blow hot and cold in the same breath. There is another reason why clauses 9.1 and 9.2 cannot be given the go-by on account of what is contained in section 46 of the Act; An affidavit was filed by Durga Prasad Agarwal on March 24, 1982 (paper No. A6/16-30), in Company Petition No. 23 of 1981, along with an application presented on the same date, namely, March 24, 1982. In para 5 of the said affidavit, it has been stated that the company is managed by a board of directors which consists of Sarvasri Bisheshwar Nath, Mohan Lal Agarwal, S. S. Agarwal, Smt. Shakuntala Devi, Smt. Sushila Bansal, Smt. Sneh Agarwal, Anil Saran and Lakshmi Chand. In regard to Lakshmi Chand, it was stated that he was a nominee director of the Uttar Pradesh Finance Corporation, Kanpur, who was arrayed as opposite party No. 10 in the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t attracted and unless recourse was taken to the procedures contemplated by section 391, the compromise, even though arrived at in proceedings under sections 397 and 398, could not be given effect to. Keeping in view the nature and the purpose of section 391 on the one hand and sections 397 and 398 on the other, we find no substance in this submission. The dominant purpose of proceedings under sections 397 and 398 is to remove oppression and mismanagement, as the case may be. For removing this oppression or mismanagement, the court can take recourse to any action, of course which is not unlawful and which may be in the interests of the company. In the instant case, the complaint made by the minority group represented by Durga Prasad Agarwal in proceedings under sections 397 and 378 was about oppression by the dominant group. It was this purpose which was to be achieved by passing orders in those proceedings. The purpose was achieved by ousting the dominant group completely from the affairs of the company. That group sold its shares to the minority group with the result that the minority group became the dominant group and gained control over the affairs of the company. For achievin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not disclosed as contemplated by section 299. Suffice it to say so far as this submission is concerned, that those pleas do not appear to have been pressed before the learned company judge. There is not even a ground in the memorandum of appeal by the company that these pleas were pressed before the learned company judge but were not considered by him. These pleas do not raise pure questions of law which could be raised in appeal even for the first time. They essentially raise questions of fact and cannot be decided unless fresh evidence is permitted to be adduced. In our opinion, the appellant is not entitled to raise these pleas at this stage. As regards non-disclosure under section 299, it may further be pointed out that the consequence of non-disclosure is contained in subsection (4) thereof which contemplates punishment with fine up to the extent mentioned therein. Nothing has been brought to our notice which may render the contract void and unenforceable for failure to make disclosure under section 299. As regards the appeal filed by two of the shareholders, it may be pointed out that the learned company judge has, in the order appealed against, stated that they appeared to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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