9911796707
TMI Blog1994 (6) TMI 158X X X X Extracts X X X X X X X X Extracts X X X X ..... t of grant of injunction restraining the appellant and respondent No. 5 from obstructing respondent No. 1 to function as Chairman and Managing Director of the company. 2. The facts which gave rise to the litigation, shorn of details, are not in dispute and are required to be briefly stated to appreciate the grievance of the appellant Respondent No. 1 Rama Narang is a member of the Narang family which is in possession of several properties including holdings in several companies. The appellant and respondent No. 5 are sons of respondent No. 1 born from the first wife. Respondent No. 1 divorced his first wife and had contracted second marriage and that seems to have led to the disputes between the father and the two sons. Respondent No. 2 is a company which is a deemed public limited company under section 43A of the Companies Act, 1956 ('the Act') and is engaged in the business of hoteliering and flight catering and owns several hotels at Bombay, Madras and Aurangabad. The shares of the company stand in the name of diverse family members of Narang family and a substantial number of shares are held by respondent No. 1. Respondent No. 1 was a director of the company so appointed at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dge imposed punishment of rigorous impri-sonment for three months for offence under section 120B and punish- ment of rigorous imprisonment of 2 years and a fine of Rs. 5,000 in respect of offences under sections 420 and 114. The substantive sen- tences of imprisonment were directed to run concurrently and in default of payment of fine respondent No. 1 was directed to undergo further rigorous imprisonment for two months. Respondent No. 1 preferred Criminal Appeal No. 17 of 1987 in the Delhi High Court and the appeal was admitted by a learned Single Judge by order dated 21-1-1987. Respondent No. 1 accused preferred Criminal Miscellaneous Petition No. 15 of 1987 seeking release on bail pending the disposal of the appeal. Respondent No. 1 also sought suspension of the operation of the impugned order. The learned Judge directed respondent No. 1 to be released on bail on furnishing a personal bond in the sum of Rs. 10,000 with one surety in the like amount. The learned Judge also directed that the operation of the impugned order shall be stayed. 4. In Company Petition No. 681 of 1990 filed by the appellant in this Court, by order dated 6-12-1990, the Company Judge restrained the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as Chairman and Managing Director, issued notice to convene meeting of the Board of Directors on 13-7-1992. By this time it is clear that respondent No. 1 had fallen apart from his two sons. On 10-7-1992, respondent No. 1 informed respondent No. 5 that he has ceased to be a Director of the company. The claim was disputed and the appellant and respondent No. 5 claimed that respondent No. 1 could not continue as Managing Director in violation of provisions of section 267. The appellant indeed terminated the ap-pointment of respondent No. 1 as Managing Director and claimed that the appellant was now the Managing Director. The parties exchanged corre-spondence setting up their respective claims. The appellant, purporting to act as Managing Director, issued notice dated 13-7-1992 to convene a meeting of the Board of Directors at the registered office of the company. There is serious dispute as to whether any notice was given to respondent No. 1 in respect of this meeting or whether a meeting was at all held. The appellant claims that not only the meeting was held but several resolu- tions were passed including the one declaring that the respondent No. 1 had ceased to be the Managing Di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 21-9-1988 as Director and on 25-6-1990 as Managing Director is not void ab initio in spite of provisions of section 267 in view of order passed by the Delhi High Court in Criminal Miscellaneous Petition No. 15 of 1987. The learned Judge also held that the appellant is not entitled to challenge the validity of the appointment of respondent No. 1 as Director and Managing Director in view of the fact that the challenge raised in company petition before this Court and before the CLB was not pursued. The learned Judge thereafter exhaustively examined the affidavits and came to the conclu- sion that the meeting alleged to have been held on 13-7-1992 by the appellant was not in fact held and in any event it was not properly and validly convened and, therefore, the proceedings are not valid in law. On the strength of these findings, the learned Judge granted both the reliefs sought in the notice of motion and that has given rise to the filing of this appeal. 7. Mr. Sibal, the learned counsel appearing on behalf of the appellant, at the outset, made it clear that the appellant is not challenging the prima facie findings recorded by the learned trial Judge in respect of the meetin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at respondent No. 1 was appointed as Director and Managing Director in the board meeting after the date of conviction, i.e., after 22-12-1986. Relying on these undisputed facts, it was contended on behalf of the appellant that the learned Single Judge was in error in holding that the appointment of respondent No. 1 or continu-ation of respondent No. 1 as Managing Director is permissible in spite of clear bar under section 267. Reference was made to provisions of section 274 of the Act which deals with disqualification of a Director on a conviction being recorded by a Criminal Court for offence involving moral turpitude and in respect of which imprisonment of not less than six months is imposed. Sub-section (2) of section 274 entitles the Central Government to remove the disqualification incurred by any person either generally or in relation to any company or companies specified in a notification to be published in the Official Gazette. Such a power to remove the disqualification is not available in respect of Managing Director and the provisions of section 267 make the bar to the appoint- ment on conviction absolute. Section 283 of the Act provides that the office of a Director ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 267 is not attracted in the present case because of the interim order passed by Delhi High Court in which by appeal the conviction is challenged. Mr. Cooper submitted that the respondent No. 1 not only sought release on bail pending the disposal of the appeal but also suspension of operation of the order and such relief was granted. Mr. Cooper claims that it was open for the Delhi High Court to direct suspension of conviction itself and such a power being exercised, the conviction can have no impact or effect upon appointment or continua- tion of respondent No. 1 as Managing Director. The question which, therefore, squarely arises is whether the Criminal Court entertaining appeal against the order of conviction has power to suspend the order of conviction itself. It was contended on behalf of the appellant that sub-section (1) of section 3 89 of the Code of Criminal Procedure, 1908 entitled the Appellate Court to order suspension of execution of the sentence or order but the expression 'order' under sub-section (1) should not be construed as the order of conviction itself. Sub-section (1) of section 389 reads as follows: "Power for companies to refer matters to arbitration. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecessarily have a reference to the conviction. It is open for a Criminal Court to award costs or compensation for arresting persons without any sufficient ground. These orders are not passed by the Criminal Courts only on the basis of recording of conviction. These are the kinds of orders which are contemplated by provisions of sub-section (1) of section 389 of the Code and the powers are conferred on the Appellate Court to suspend the execution not only of the sentence imposed or conviction but also the execution of the order which may be de hors of the conviction. The powers of the Appellate Court under section 389(1) cannot be construed with reference to the expression 'order' as suspending the order of conviction itself. The powers of the Appellate Court do not entitle such a Court to direct that the order of conviction should stand suspended. The conviction can only be set aside. The contention of Mr. Cooper that the expression 'order' covers even the order of conviction cannot be accepted because the expression used by the Legislature is 'execution of the sentence or order'. The section makes it clear that the Appellate Court can suspend the execution of the sentence or the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the date of conviction or, if an appeal or revision application against the order of conviction is preferred, then until that appeal or application is disposed of by the Court. Section 11 of the Representation of the People Act confers power upon the Election Commission to remove any disquali-fication. It is, therefore, obvious that whenever the Legislature thought it fit, statutory provisions were made to lessen the rigour of the conse-quences of recording of conviction. The Legislature, in its wisdom, did not make any such provision under section 267 of the Companies Act, when conviction is recorded against a person who is Managing Director. In our judgment, it is not permissible for the Appellate Court which entertains the appeal against the order of conviction to suspend the order of conviction and the only power available under section 389(1) of the Code of Criminal Procedure is to suspend the execution of the sentence or the order and which expression does not include conviction. Mr. Cooper then submitted that even assuming that provisions of sub-section (1) of section 389 do not confer power on the Appellate Court to direct suspension of order of conviction, still such a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'order' under the Code of Criminal Procedure have to be understood in the context in which they are employed. An order of conviction is a part of the judgment and the same is followed by a sentence. The Division Bench further held that the Code has nowhere defined the expressions 'judg- ment' or 'order' and once it is accepted that a convicted person in his appeal challenges the judgment as such, pronounced against him by a Criminal Court, it is axiomatic that he can ask for suspension of execution of the sentence, if there is a sentence. It was further held that the accused can as well ask for suspension of the operation of the conviction which is a part of the judgment, if that becomes necessary in a given case. The Division Bench then observed that conviction is only a declaration declaring that the accused person is convicted of the offence or offences proved against him and the same can be set aside only by the Appellate Court. The Division Bench held that the Code provides for suspension of the rigour of the judgment passed by the Trial Court pending disposal of the appeal. There may be cases where the convicted person may seek relief by way of suspension of the conviction a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... open for the Appellate Court to suspend the order of conviction. A reference was made to a decision in Bansi v. Hari Singh AIR 1956 All. 297, but save and except some stray observations, Mr. Cooper could not point out anything to support his submission as regards suspension of order of conviction. Mr. Cooper referred to a decision in Retti Deenbandhu v. State of Andhra Pradesh 1977 1 SC 742, to urge that a convicted person challenging conviction in appeal not only seeks to avoid undergoing the punishment imposed upon him as a result of the conviction but also desires that other evil consequences flowing from the conviction should not visit him and the stigma which attaches to him because of the conviction should be wiped out. It hardly required to be stated that the purpose of appeal is to get the conviction order vacated but pending appeal it is not open to wipe out the order of conviction by claiming that the order of conviction can be suspended. The decision of the Supreme Court, in our judgment is of no assistance. 13. Mr. Cooper then submitted that Delhi High Court, after admission of the appeal preferred by respondent No. 1 against order of conviction, did order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the interlocutory stage and should not be disturbed in appeal. We are unable to accede to the submission because even at the interlocutory stage the matter was extensively debated and the decision which affects not only the share-holders but the public at large cannot be permitted to operate when found erroneous. 14. Finally, Mr. Cooper urged that respondent Nos. 1 to 3 had not specifically asked for any final relief in the suit in regard to the interim injunction sought against the appellant and respondent No. 5 restraining them from obstructing or interfering with the respondent No. 1's func-tioning as Chairman and Managing Director of the company. Mr. Cooper submitted that the issue as to whether the respondent No. 1 can function as Chairman and Managing Director does not arise on the strength of the averments made in the plaint and, consequently, it was not necessary for the trial Judge to examine the same. The submission is obviously one of desperation and cannot be accepted. In the first instance, the pleadings in paragraph 22 of the plaint clearly indicate that respondent No. 1 was keen to secure a declaration that he is entitled to function as Chairman and Managing Di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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