9911796707
TMI Blog1985 (8) TMI 314X X X X Extracts X X X X X X X X Extracts X X X X ..... e before the trial court which is annexed to the petition of this application, may briefly be stated. According to the appellant, respondents Nos. 1 to 6 are and/or, as was represented by them, were the owners of; 8,100 shares of Ambari Tea Co. Ltd., respondent No. 7 herein. It is alleged that the shares of the said company owned and/or held by respondents Nos. 1, 3 and 5 out of the said 8,100 shares the same were held and are still held in their names as also in the names of their respective benamidars. So far as the shares of the said company owned and/or held by respondents Nos. 2 to 6 out of the said 8,100 shares are concerned, most of them were represented to the appellant to have stood in the name of their respective benamidars; but, according to the appellant, it subsequently transpired that the same stood in their respective names. According to the appellant, respondents Nos. 1 to 6 held themselves out and/or represented to the appellant to be the owners of and in total charge and/or control of the aforesaid shares out of the controlling block of the shares of the said company. It is alleged that at all material times, respondents Nos. 1, 2, 3 and 4 were and still are the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant and its nominee or nominees in the same position of majority in the board of directors and as shareholders as the said respondents were at or about the time of the said agreement. The appellant's further case is that pursuant to the said arrangement and in terms thereof, the appellant on or about September 14, 1984, duly deposited a sum of Rs. 4,00,000 with M/s. Leslie and Khettry, Calcutta. It is further alleged by the appellant that it came to learn that respondent Nos. 1 to 6 in pursuance of the said agreement duly deposited 4,457 fully paid-up equity shares of respondent No. 7 with M/s. Leslie and Khettry as stipulated in the said agreement, but failed and neglected to deposit the balance quantity of shares as was agreed to by and between the parties. It is further stated by the appellant that it had performed and has also been ready and willing to fulfil the essential terms and conditions of the said agreement and there exists no standard for ascertaining the actual damage caused or likely to be caused by non-performance of the said agreement or acts agreed to be done by respondents Nos. 1 to 6 under the said agreement. According to the appellant, the subject-m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of respondent No. 7 and to induct and appoint persons other than the nominees of the appellant as directors of respondent No. 7. The respondents are also threatening to act in such a way which was likely to cause the said 8,100 shares which form the controlling block of shares in respondent No. 7 to lose their character and be reduced to minority and the entire value of the said controlling block of shares will be lost. It is further alleged that as the reliefs asked for in the suit relate to management, control and regulation of the assets and affairs of respondent No. 7, it is necessary to make it a party to the said suit, although no specific relief is claimed against it. On the basis of the above allegations, the appellant, on or about November 30, 1984, filed the above Suit No. 810 of 1984 (East Indian Produce Ltd. v. Naresh Acharya Bhaduri) , inter alia, for a decree for specific performance of the said agreement dated September 11, 1984, and for various directions and injunctions, both preventive and mandatory, in nature. On November 30, 1984, after filing the above suit, the appellant as petitioner made an application ex parte in the court of the first instance and obta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jee J. as new motion. On that day, the appellant prayed for further interim protection until disposal of the application. Respondents Nos. 2, 4, 6 and 7 appeared and opposed the passing of any further interim order and also for vacating the interim order already made. After hearing the parties, C.K. Banerjee J., by an order dated December 5, 1984, directed that the ad interim order in terms of prayer (b) of the petition would stand vacated and the order in terms of prayer (c) of the petition would continue. Directions were given for filing of affidavits by the parties and the said application was adjourned till December 21, 1984. The said application is still pending. Being aggrieved by the said order dated December 5, 1984, the appellant has preferred the above appeal against the same and has moved the instant application in the appeal. In the petition of the instant application, the appellant has annexed a copy of the petition filed by it in the trial court. The appellant has further stated that the learned trial judge vacated the interim order in terms of prayer (b) of the said petition in view of the contention of the respondents that because of an order of the appeal court i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Respondents Nos. 1 and 3 did not allow her to look into the agreement before she signed the same. According to respondent No. 2, she never had any opportunity to look into the said agreement or to have any legal advice on the same at any point of time. She has denied that she signed the said agreement at Siliguri on September 11, 1984. According to her, on the said date, she was in Calcutta. Respondent No. 2 has alleged that the said agreement is hit by the provisions of section 372 of the Companies Act, 1956, and the provisions of the Securities Contracts (Regulation) Act, 1956. She has further stated that the sellers did not and do not hold the total number of 8,100 shares in the company, i.e., respondent No. 7. It is also stated that it was and is beyond the power of respondents Nos. 1 to 6 to cause four directors of the company, i.e., respondent No. 7, to resign or to cause 8,100 shares to be transferred in favour of the appellant. In para 9 of her affidavit filed in the trial court, she has stated that on the representations of respondents Nos. 1 and 3 as fully set out in the said paragraph and relying thereon and being induced by the said respondents, she has signed the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt No. 4 and upon whom respondent No. 4 reposed implicit trust and confidence, signed the said agreement. We may now refer to the affidavit filed by respondent No. 6, Shyamananda Saha, in this application and the affidavit filed by him in the application pending before the trial court, a copy of which is annexed to his affidavit filed herein. Respondent No. 6 has categorically denied that he made the representation as alleged by the appellant in the petition. According to him, all his shares in respondent No. 7 are recorded in his name and he made no representation to the contrary. He has categorically denied that he has authorised anybody to sign the said agreement on his behalf. In para 10 of his affidavit filed before the trial court, respondent No. 6 has stated that the agreement is hit by section 372(1) of the Companies Act and the provisions of the Securities Contracts (Regulation) Act, 1956, and the reasons why the said agreement is hit by the said Acts. According to respondent No. 6, the sellers mentioned in the said agreement never held jointly or individually 8,100 shares in the company, i.e., respondent No. 7. He has further stated that he never deposited 73 shares of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the said 'Tea Estate') and the said company is carrying on business of plantations and of manufacturing of tea at the said Tea Estate and in its own factory therein and the said Tea Estate save and except business current debts and liabilities is free from all encumbrances, attachments, lis pendens and/or trust except encumbrance in favour of any scheduled bank; Now, this Indenture witnesseth that on the basis of the aforesaid representations, it had been agreed by and between the parties as follows: (a)The sellers will sell and the purchasers will purchase the 'said shares' being 8,100 fully paid-up equity shares (which includes all the shareholdings of the sellers in the said company) in the capital of the said company at Rs. 1,071 per share and the said sale would be completed by the method of spot delivery contract as per the rules and regulations and bye-laws of the Calcutta Stock Exchange Association Ltd., and the sellers would also make over to the purchasers or their nominee or nominees the share scrips of the said shares together with the relative usual transfer deeds in respect thereof in favour of the purchasers and/or their nominee or nominees duly signed by the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany who are parties to this agreement to resign from the board of directors of the said company if they be directors as on that date and to get the nominees of the purchasers to be appointed as directors of the said company. Provided that in case the sellers are unable to get all the four nominees of the purchasers to be appointed as directors of the said company on account of any restrictions by reason of any order of court then in such event the sale and purchase of the 'said shares' as also of other shares if offered by the sellers to the purchasers in terms of clause (c) hereof are to be completed notwithstanding such failure of the sellers. Notwithstanding anything to the contrary herein contained, in case of the failure of the sellers to get any nominee of the purchasers to be appointed as director of the said company as hereinbefore stated, then in such an event, such of the sellers as the purchasers may desire shall continue to act as nominee director or directors of the purchasers in the board of directors of the said company; (f)As have been represented to by the sellers to the purchasers, it has also been agreed by and between the parties hereto that on the date of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and their part to be observed and performed and the sellers fail to complete the sale of the said shares as hereinbefore stated, then in any event, the purchasers shall also be entitled to specifically enforce this agreement for sale". Mr. S. K. Gupta, appearing with Mr. B. L. Jain and Mr. Pratap Chatterjee, has argued this case on behalf of the petitioner, the appellant, in the above appeal. Mr. S. B. Mookherjee, appearing with Mr. Anindya Mitra, has argued this case on behalf of respondents Nos. 2, 4 and 7. Mr. P. C. Sen, appearing with Mr. Jayanta Mitra, argued this case on behalf of respondent No. 6. Mr. Bimal Chatterjee has appeared in this case for respondent No. 1 but he has not advanced any argument. Various contentions were urged on behalf of the parties appearing in this application. Mr. Gupta, appearing for the appellant, has argued that the agreement dated September 11, 1984 (hereinafter referred to as "the said agreement"), is an agreement for sale of shares, and as such it will not come within the purview of section 372 of the Companies Act. It is also his argument that in any event, the board resolution to the approval of the Central Government as stipulated i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent company. As it appears from the said agreement itself, admittedly, the share capital of the company, i.e., respondent No. 7, is 20,000 fully paid-up equity shares of Rs. 100 each and the appellant proposed to purchase 8,100 shares of respondent No. 7. Therefore, Mr. Mookherjee submits, it is much more than ten per cent, of the subscribed capital of the other company, namely, respondent No. 7. Mr. Mookherjee has further submitted that the investment made by the appellants exceeds twenty per cent, of its subscribed capital. Further, according to Mr. Mookherjee, the investment made by the board of the investing company, i.e., the appellant, in all other bodies corporate exceeds thirty per cent, of its subscribed capital. It is the further contention of Mr. Mookherjee that uptil now there is nothing on record to show that the appellant has sought for or obtained the approval of the Central Government in respect of such proposed investment by the appellant company in the shares of respondent No. 7 nor has such investment sought to be made by the appellant company (investing company within the meaning of section 372 of the Companies Act) been sanctioned by a resolution passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bed by the section has not been denied by the appellant. Mr. Sen has further submitted that Ramesh Chandra Roy in para 35 of the affidavit-in-reply filed or to be filed in the trial court (a copy of which is annexed to the affidavit-in-reply filed in this application) has not specifically denied the allegation of excess investment as made in para 10(a) and (b) of the said affidavit of respondent No. 6. It is also stated by Mr. Sen that the said purported agreement or pretended investment has not been sanctioned by a resolution of the appellant company in a general meeting and has not been approved by the Central Government. Mr. Sen has also drawn our attention to the said affidavit-in-reply and has submitted that in para 35 of the said affidavit, it has been stated that no such resolution or approval is necessary under the provisions of section 372 of the Companies Act, 1956. Mr. Sen has submitted that such resolution of the board of directors and approval of the Central Government are conditions precedent to any such investment in shares by any such investing company, and if there is any agreement for such investment or such investment in shares is made contrary to such mandatory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of directors of an investing company in pursuance of sub-section (2), unless it is sanctioned by a resolution passed at a meeting of the board with the consent of all the directors present at the meeting, except those not entitled to vote thereon, and unless further notice of the resolution to be moved at the meeting has been given to every director in the manner specified in section 286". Communication No. 48(50)-Ch-IV/61, dated February 12, 1962, provides, inter alia, that the previous approval of the company in general meeting and of the Central Government is required to be obtained before a company invests in the shares of another body corporate in excess of the limits prescribed in the section. As the Central Government will not accord ex post facto approval to any investment attracting section 372(4), any such investment made without the prior approval of the Government would attract the penal provisions of section 374. In the case of Mathura Prasad Saraf v. Company Law Board [1979] 49 Comp Cas 371 (Cal), it has, however, been held that the previous approval of the Central Government is not necessary under section 372(4) of the Companies Act. There is a good deal of forc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re according approval, the Central Government may have to examine whether the investing company has exceeded the prescribed ceiling and further whether there is any proper resolution sanctioning such investments. These are requirements to be taken into consideration before such investments are given effect to. At this stage, it is not necessary to express any final view as to whether approval of the board of directors of the investing company or of the Central Government subsequently obtained amounts to compliance with the requirement of the provisions of section 372 of the Companies Act. On behalf of the appellant company it has not been stated that its investment in shares of the said company, i.e., respondent No. 7, has been approved by a resolution of the appellant company in a general meeting and that it is also approved by the Central Government. Therefore, at present, it can be taken that there is no approval of the investment by the appellant company as required by sub-section (4) of section 372 of the Companies Act, 1956. Hence violation of section 379 has prima facie been established. Another point was taken by Mr. P.C. Sen that it is a well-established principle of law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompanies Act. The above clause, it appears, does not affect the retirement, removal and appointment of directors of the company, i.e., respondent No. 7, according to the provisions of the Companies Act, 1956. Considering the above clause, we are prima facie of the view that the said agreement does not affect the provisions of sections 255, 256 and 284 of the Companies Act, 1956. Both Mr. Mukherjee and Mr. Sen have submitted that the said agreement is hit by various provisions of the Securities Contracts (Regulation) Act, 1956 (hereinafter referred to as "the Securities Act"). In this connection, our attention was drawn to the affidavits of respondents Nos. 2 and 6 filed in the trial court. In her affidavit affirmed on January 9, 1985, respondent No. 2, has stated that the said agreement is hit by the Securities Act and is void and unenforceable. In his affidavit affirmed on January 11, 1985, respondent No. 6 has stated that the said agreement does not provide for the actual delivery of shares and payment thereof on the same day of the agreement or on the next day and as such is not a "spot delivery contract". The said agreement is contrary to the provisions of the Securities A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 6 of the Civil Procedure Code, facts relating to compliance with condition precedent have to be pleaded and that has not been done in the instant case. In the absence of an averment that no permission of the Central Government was obtained, it is not open to the opposing respondents to allege that there is no permission of the Central Government and as such the contract is hit by section 16 of the Securities Act. It is also the submission of Mr. Gupta that in any event, the said agreement is a "spot delivery contract" as denned in section 2(i) of the Securities Act and by the bye-laws and regulations of the Calcutta Stock Exchange Association Ltd. According to Mr. Gupta, it is an agreement for sale, but the actual sale is spot delivery. Mr. Gupta has further submitted that "cash delivery contracts" do not come within the purview of the notification issued under section 16 of the Securities Act. Mr. Gupta has further submitted that if, as contended on behalf of the respondent company, the said notification issued under section 16 of the Securities Act applies to "spot delivery contracts", then his submission will be that such notification is ultra vires section 16 of the Securi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions and bye-laws of the Calcutta Stock Exchange Association Ltd."... cannot and does not mean that actual delivery of securities and the payment of a price therefor would be made either on the same day as the date of the agreement or on the next day. Therefore, it is his argument, that the said agreement cannot by any means be a "spot delivery contract". Mr. Mookherjee further argues that the said agreement being "a contract for or relating to the purchase or sale or securities" or "a contract for the purchase or sale of a right to buy or sell, or a right to buy and sell, securities in future", is clearly hit by the provisions contained in sections 13 and 16 or in any event hit by the provisions of section 20 of the Securities Act. Mr. Mookherjee contends that admittedly the said agreement for the sale or purchase of securities was entered into by the appellant without the permission of the Central Government and in clear violation of the notification dated June 27, 1969, issued under section 16 of the Securities Act. According to Mr. Mookherjee, it is also not a "spot delivery contract" within the meaning of section 2(i) of the Securities Act. Therefore, according to Mr. Mookher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the permission of the Central Government, enter into any contract for the sale or purchase of securities other than such spot delivery contract or contract for cash or hand delivery or special delivery in any securities as is permissible under the said Act, and the rules, bye-laws and regulations of a recognised stock exchange". It, therefore, appears that under the above notification, bar under section 16 of the Securities Act applies to the whole of India. Definition of "spot delivery contract" under section 2(i ) of the Securities Act is as follows: " 'Spot delivery contract' means a contract which provides for the actual delivery of securities and the payment of a price therefor either on the same day as the date of the contract or on the next day, the actual period taken for the despatch of the securities or the remittance of money therefor through the post being excluded from the computation of the period aforesaid if the parties to the contract do not reside in the same town or locality". Article 48 of the bye-laws of the Calcutta Stock Exchange Association Ltd. provides that: "For purposes of these bye-laws and regulations, the term 'bargain', 'transaction', 'deali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for the purchase or sale of a right to buy or sell, or a right to buy and sell, securities in future, and includes a teji, a mandi, a teji mandi, a galli, a put, a call or a put and call in securities. Giving our careful consideration to the relevant provisions of the Securities Act, which, according to Mr. Mookherjee and Mr. Sen, are applicable to the instant case as stated hereinbefore, we are of the opinion that, prima facie, the said agreement does not appear to be a "spot delivery contract". On our careful reading of the said agreement, we do not find any term therein which provides for the actual delivery of securities (which includes shares within the meaning of section 2(h) of the Securities Act) and the payment of a price therefor either on the same day as the date of the contract or on the next day. The words "as the date of the contract" make the position clear. It is not provided anywhere in the agreement that actual delivery of shares and payment therefor would be made on September 11, 1984, the date of agreement or on the next date. Hence, in our view, prima facie, it is not a spot delivery contract. As at present, there is no permission of the Central Government, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same cannot be said to be valid or legal. Acting by the parties upon a contract, which is contrary to any provision of law or statute and as such is illegal, invalid and not unenforceable cannot make the same legal, valid and enforceable. The above decision is also distinguishable because in the instant case, it prima facie appears that respondents Nos. 2, 5 and 6 have not partly performed the said agreement as stated hereinafter. Mr. Mookherjee has further submitted that the said agreement is vague, uncertain and unworkable, and, therefore, it cannot be specifically enforced. Further, the appellant's application is pending before the trial court and shall be heard soon. Hence, the appellant is not entitled to any interim order at this stage. According to Mr. Mookherjee, parties do not know who are the holders of the 8,100 shares. Further, it is not known what are the distinctive numbers of the share scrips of the 8,100 shares. He has also submitted that respondents Nos. 1 to 6 do not hold the 8,100 shares in the company, i.e., respondent No. 7. The agreement does not say the shareholding of each one of the six sellers. Admittedly, the sellers are not registered holders of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares. According to Mr. Gupta, respondents Nos. 1 to 6, by their declaration, act or omission intentionally caused the appellant to believe that the said respondents are the owners of the said shares. In view of their representation, the said respondents cannot now contend otherwise and are estopped from denying that the respondents are owners of the 8,100 shares under section 115 of the Evidence Act. Referring to page 2 of the said agreement to the effect that: "Whereas the sellers have approached the purchaser with an offer for sale of 8,100 fully paid-up equity shares of Ambari Tea Co. Ltd..". Mr. Gupta has submitted that the same amounts to an implication that the said respondents are the owners or are in a position to become owners of the said shares. Further submission of Mr. Gupta is that respondents Nos. 1 to 6 are owners of the 8,100 shares but some of them are being held by and registered in the name of nominees or benamidars of the said respondents. Mr. Gupta has further submitted that from the letter dated October 26, 1984, of respondent No. 1, letter dated October 29, 1984, of respondent No. 3 and letter dated November 30, 1984, of respondent No. 5 all addressed to M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and he had no occasion to represent and never represented to the appellant to the contrary. He has not specifically stated the number of shares held by him but as the number of shares held by respondent No. 6 is mentioned by respondent No. 2 as stated above, it can be said that he is the owner of those shares. The agreement does not contain any express representation by respondents Nos. 1 to 6 that they are the owners of the 8,100 shares. In the plaint and the petition filed in the trial court, the appellant has mentioned about various representations made by respondents Nos. 1 to 6, but all of them do not appear from any document. In view of what has been stated above, the question regarding the ownership of the shares of each one of respondents Nos. 1 to 6 is a very much disputed question of fact. Similarly, whether respondents Nos. 1 to 6 hold their shares in the names of their respective nominees or benamidars as alleged by the appellant is also a very much disputed question of fact. All these disputed questions of fact cannot be decided merely on affidavit evidence at this stage. Further, the question of benami cannot be decided on the basis of affidavit evidence at this sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the part of the contesting respondents. If, however, the representation as recorded in the said agreement to the effect that 8,100 fully paid-up equity shares in the company, i.e., respondent No. 7, offered for sale include all the shareholdings of the sellers in the company (i.e., respondent No. 7), means that the said respondents are the owners of 8,100 shares, then, in our view, the interest of the appellant is fully protected by the order in terms of prayer (c) of the petition filed in the trial court. But, in the absence of particulars of those shares as also about the shareholding of each one of respondents Nos. 1 to 6 and further in view of the various infirmities and unworkability of the said agreement as fully stated hereinbefore and hereinafter, in our prima facie view, an order in terms of prayer (b) of the appellant's petition filed in the trial court cannot be granted at this stage. Next question for consideration is whether respondent No. 2 was authorised to sign the said agreement for respondent No. 6. Mr. Sen argued that admittedly the said agreement was not signed by respondent No. 6, Shyamananda. According to Mr. Sen, the appellant's case is that respondent N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant's advocates-on-record, M/s. Leslie and Khettry, against the appellant or respondent No. 2 or A. K. Pradhan, the secretary of respondent No. 7, who, according to respondent No. 6, must have made over illegally 73 shares belonging to respondent No. 6 to M/s. Leslie and Khettry. Respondent No. 6 has also not taken any steps with regard to 2,222 shares seized by the police pursuant to the order of search and seizure passed in the criminal proceedings instituted against respondents Nos. 1 to 6 by Ramesh Chandra Roy (in the criminal case it is stated "Roy Chowdhury"), secretary of the appellant, who was the complainant in the said proceedings. Let us now examine the respective stands of the appellant and respondents Nos. 2 and 6 on this issue. In its plaint and petitions filed in the trial court and in this application, the appellant has not alleged that the said agreement was signed and executed by respondent No. 2 as the authorised agent or for and on behalf of respondent No. 6. In paras 8 and 11 of the plaint, paras 8 and 11 of the appellant's petition filed in the trial court and in para 7 of the petition of the instant application, it is alleged that the said agreeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said letter of M/s. Leslie and Khettry dated October 18, 19, 1984, respondent No. 6, in para 24 of his affidavit filed in the trial court, has stated that the petitioner (i.e., appellant) has caused the said letters to be written on its behalf knowing that the contents thereof were false only to create a ground for criminal proceedings and to insult him. He has denied the allegations contained in the said letter. An affidavit affirmed on February 28, 1985, by one Ramesh Chandra Roy, said to be the secretary of the appellant, has been filed in this application as affidavit-in-reply of the appellant to the affidavits-in-opposition filed by respondents Nos. 2 and 6 in this application. A copy of the affidavit-in-reply proposed to be filed by and/or on behalf of the appellant in its application before the trial court has been annexed to the affidavit-in-reply filed in this application. In the affidavit-in-reply filed or proposed to be filed by and/or on behalf of the appellant (hereinafter referred to as "the affidavit-in-reply"), it is stated that respondent No. 2 signed the said agreement on behalf of respondent No. 6 and respondent No. 2 was fully aware of the contents of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said agreement dated September 11, 1984, was between respondents Nos. 1 to 6 and the appellant. But in his evidence given on October 29, 1984, he stated that respondent No. 6 was a party to the said agreement, Juthika Saha (respondent No. 2) signed the said agreement on behalf of herself as well as on behalf of Shymananda Saha (respondent No. 6). On the last occasion, Ramesh Chandra Roy stated that his evidence that all the accused persons (i.e., respondents Nos. 1 to 6) signed the said agreement was not correct. Due to hurry, Ramesh Chandra Roy made that misstatement and he wanted that his previous statement should be corrected. It is to be noted that if Ramesh Chandra Roy was present at the time when the said agreement was signed by the parties as will appear from his affidavit-in-reply filed in the trial court, how could such a mistake occur. We have stated in detail the materials before us on the question whether respondent No. 2 had any authority to sign the said agreement for and on behalf of respondent No. 6. On the materials available before us at this stage, it appears that the question regarding the authority of respondent No. 2 to sign the said agreement for respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 1 dated October 26, 1984, and the statement of Ramesh Chandra Roy in the affidavit-in-reply filed in the trial court. Mr. Mookherjee has further submitted that pursuant to an order of search and seizure made in the criminal case initiated wrongfully and with ulterior motive by Ramesh Chandra Roy against respondents Nos. 1 to 6, 135 shares of respondent No. 2 were seized by the police. Mr. P. C. Sen has submitted that respondent No. 6 has not in any way performed the said agreement. He has not deposited any share with M/s. Leslie and Khettry. Respondent No. 6 in his affidavit filed in the trial court has fully explained the circumstances in which his 73 shares were made over to M/s. Leslie and Khettry. Regarding the deposit of shares by appellants Nos. 1, 3 and 5, there is no dispute. Respondent No. 2 has not deposited any share belonging to her with M/s. Leslie and Khettry. Deposit of 73 shares of respondent No. 6 by him or respondent No. 2 is disputed. In the plaint and the petition filed in the trial court, the petitioner (i.e., the appellant) has stated that it has come to know that respondents Nos. 1 to 6 in pursuance of the said agreement duly deposited 4,457 fully paid- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y final view on this point. But, on the materials now before us, it can be said, prima facie, at this stage, that the appellant has not proved acting upon the said agreement by respondent No. 6. In this connection, it should be noted that respondents Nos. 2 and 4 did not deposit any share with M/s. Leslie and Khettry. It further appears that the respondents have not taken any benefit under the contract. In the above view of the matter at this stage, no prima facie conclusion can be arrived at to the effect that all the respondents have partly performed the said agreement. Mr. Mookherjee has further submitted that the appellant is not a shareholder of the company, i.e., respondent No. 7. The suit is not a representative action by a shareholder. Mr. Mookherjee has also submitted that admittedly, the respondent company, being respondent No. 7, is not a party to the said agreement dated September 11, 1984. He has submitted that there are provisions in the said agreement which directly or indirectly impinge on the rights of the respondent company. Further, according to him, if the court is inclined to restore the order in terms of prayer (b) of the notice of motion before the trial cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petition of the trial court can be passed. By the said prayer, an injunction has been asked against respondents Nos. 1 to 6, their servants, agents and/or nominees and it will not affect the company. It appears that there is a good deal of force in the arguments advanced by Mr. Mookherjee and Mr. Sen as stated above. The company, i.e., respondent No. 7, admittedly, is not a party to the said agreement. The appellant in para. 27 of the plaint has stated that reliefs asked for in the plaint relate to management, control and regulation of the assets and affairs of the company, i.e., respondent No. 7, and, as such, it is necessary to make respondent No. 7 a party to the suit although no specific relief has been claimed against it. Prayer (b) of the petition which has been set out earlier, it appears, involves acts relating to the constitution and management of the company, i.e., respondent No. 7. In the case of Jiwan Kumar Lohia v. Durgadutt Lohia (Matter No. 223A of 1977-19-9-1979), a reference was made to a judgment of Salil K. Roy Chowdhury J. in Special Suit No. 25 of 1971 (Hamurilall Santhalia v. Mohanlal Kakarania) . In the said case, which related to arbitration, Salil K. Roy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany constitute a controlling block of shares of the said company and the said agreement in essence intended to transfer the controlling interest and power of respondents Nos. 1 to 6 in the said company to the appellant and/or its nominees. Mr. Gupta has referred to para. 18 of the petition in the trial court. He has also relied upon Explanation ( ii) to section 10 of the Specific Relief Act, 1963, and the case of Bank of India Ltd. v. Jamsetji A. H. Chinoy, AIR 1950 PC 90. Therefore, according to him, in the instant case, no alternative remedy is available to the appellant. Mr. Mookherjee has submitted that in the instant case, as damages are adequate remedy to the appellant, it is not entitled to a decree for specific performance of the said agreement. He has further submitted that parties themselves have provided for the remedy in the agreement in case it cannot be performed. In the case of Bank of India Ltd. v. Jamsetji A. H. Chinoy, AIR 1950 PC 90, the Privy Council, while dealing with a case of specific performance relating to the sale and purchase of shares in a limited liability company, observed that having regard to the nature of the company and the limited market for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to any further relief at this stage. Mr. Sen has further submitted that the instant suit for specific performance of the contract is not maintainable. There is no proper pleading in the plaint. He has submitted that Form No. 47 of Appendix A to the First Schedule to the Civil Procedure Code which specifies the form of the plaint for specific performance has not been complied with. In the instant case, the appellant has not stated in the plaint that it has applied to the respondents specifically to perform the agreement on their part, but the respondents have not done so. In this connection, he has referred to the case of Ouseph Varghese v. Joseph Alley [1969] 2 SCC 539. Mr. Gupta has submitted that Form No. 47 was framed on the basis of section 24 of the Specific Relief Act, 1877. He has also submitted that under Order 48, rule 3, of the Civil Procedure Code, forms given in the appendices, with such variation as the circumstances of each case may require, shall be used for the purposes therein mentioned. He has also referred to Form No. 42 of Appendix A of the First Schedule to the Civil Procedure Code and submitted that the decision of the Supreme Court applies to Form No. 47 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht to participate in the profits. In this connection, he relies on the case of Mrs. Bacha F. Guzdar v. CIT [1955] 27 ITR 1; 25 Comp Cas 1 ; AIR 1955 SC 74. According to Mr. Mookherjee, an order in terms of prayer ( b) would affect the constitution, management and assets of the company, i.e., respondent No. 7, at the instance of some of its shareholders. Admittedly, the company is not a party to the said agreement. Mr. Mookherjee has further submitted that the sellers, being some of the shareholders of the company, i.e., respondent No. 7, have only the right to participate in the profits of the company. They have no right in the assets of the company before its liquidation. If respondents Nos. 1 to 6 are not entitled to the assets of the company and are not entitled to do any act affecting the constitution, management and assets of the company, they cannot be compelled to do so at the instance of the appellant which is not yet a shareholder of the company and the said agreement prima facie suffers from various other infirmities mentioned earlier. On this point, Mr. Sen has submitted that if an order in terms of prayer (b) is made, there is every possibility of interference in the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... affect the management, affairs and assets of the company. The assets belong to the company and the shareholders are entitled only to participate in the profits of the company. The affairs of the company will be managed by its board of directors. Prima facie it is a disputed question of fact whether the 8,100 shares belong to respondents Nos. 1 to 6. Further, neither do the 8,100 shares constitute a controlling block of shares, nor is there any representation in the said agreement that the same is a controlling block of shares. It has not been prima facie established, out of the said 8,100 shares, how many shares are held by respondents Nos. 1 to 6 through their nominees or benamidars nor does the agreement mention about sellers' nominees or benamidars. At present, the board of directors of respondent No. 7 is functioning under a chairman appointed by the court. Prayer (b) of the petition filed in the trial court is very wide and if granted it will affect the management and administration of the company, i.e., respondent No. 7. The appellant's application before the trial court is pending. In the above view of the matter and for reasons mentioned earlier, according to us, prima fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directors may, by a resolution passed at a meeting, delegate to, inter alia, any other principal officer of the company the power specified in clause (c) of sub-section (1) of section 292 that is, power to invest funds of the company. The principal officer, according to Mr. Gupta, includes a secretary and in the instant case there is a board resolution investing upon the secretary the power of the board contained in sub-section (1)(c) of section 292 of the Companies Act.
In the instant application, we do not think it is necessary to go into or decide the above question and we, therefore, leave it at that.
For all the reasons stated hereinbefore and particularly, as in our view, it has been prima facie established that the said agreement contravenes the provisions of the Companies Act, 1956, and the Securities Contracts (Regulation) Act, 1956, no order should be made in this application. This application is, therefore, dismissed. In the facts and circumstances of this case, there will be no order as to costs.
The learned trial judge will be at liberty to dispose of the application pending before him on its merits.
Prabir Kumar Majumdar, J.-I agree. X X X X Extracts X X X X X X X X Extracts X X X X
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