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TMI Blog1998 (5) TMI 344X X X X Extracts X X X X X X X X Extracts X X X X ..... said Board recorded the undertaking given by the appellant-company that pending the disposal of the interim applications and without prejudice to its rights and contentions, it would not make any investment or disinvestment and/or borrow and/or give loans and advances, otherwise than in the ordinary course of business of the appellant-company and its subsidiaries of an amount or value exceeding Rs. 50 lakhs at a time, unless approved by its Board of Directors in a meeting to be attended by a Director representing the financial institutions. 3. While recording such undertaking, the CLB directed the appellant- company to ascertain from the financial institutions the name of their nominee and such person would always be invited to meetings of the board of directors and he would also, without fail, attend the Board meetings. The financial institutions were directed to ensure his atten- dance at the Board meetings. The appellant-company was also restrained from inducting any Directors into the Board of directors without the specific approval of the CLB. 4. The All India Shaw Wallace Employees Federation preferred an appeal to this Court against the aforesaid order of the CLB an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatus on the Board of Directors of Shaw Wallace Co. as on 30th December, 1997." Although, the said application has been described as an application for interim orders and further appropriate directions/orders, from the reliefs prayed for it will be evident that he same was primarily an application for invoking the contempt jurisdiction of the CLB and for orders consequent upon alleged violation by the appellant company of the order passed by the said Board on 27-10-1996. The said application was disposed of by the CLB on 21-1-1998, and without entering into the controversy as to whether its order of 27-9-1996, had been violated, the said Board observed that since the financial institutions were holding over 25 per cent shares in the appellant company and have always had a nominee on the Board of the company for a long time, they should continue to have such nominee on the Board. The financial institutions were, accordingly, directed to nominate their nominee within ten days for being appointed on the Board of the company and to ensure his attendance at all Board meetings without fail. 9. Pursuant to the said directions, the Life Insurance Corporation of India by its lette ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ature to the financial institutions to name their nominee who was to be appointed to the board of directors of the appellant company, although, there was no basis for such directions. 14. In support of this contention, Mr. Dewan referred to the decision of the Supreme Court in the case of Gappulal v. Thakurji Shriji Dwarkadheeshji AIR 1969 SC 1291, wherein while considering, inter alia, the provisions of order 6 rule 2 and Order 14 rule 2 of the Code of Civil Procedure, 1908 the Supreme Court observed that in the absence of pleadings on a particular point, the Courts below erred in coming to a finding on such point. Other decisions were also cited in this regard to which reference will be made, if necessary. 15. Mr. Dewan urged that the question as to whether the CLB was empowered to pass interim orders in a proceeding under section 408 is a question of Law of considerable importance arising out of the order impugned in the instant appeal which was, therefore, maintainable under section 10F of the said Act. In addition to the above, it was also urged that this Court was also required to consider whether in a proceeding under section 408 the CLB could give a dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the number of persons to be appointed by the Central Government to hold office as Directors of the company for such period not exceeding three years on any one occasion. Mr. Mukhrjee urged that without conducting such inquiry, the CLB could not give any direction to the Central Government to appoint Directors to the Board of a company much less itself direct the company to make such appointment. Mr. Mukerjee submitted that in a proceeding under section 408, the CLB is only entitled to decide whether, in order to safeguard the interest of the company, its shareholders and the public, any Additional Directors are required to be inducted to the Board. The actual appoint- ment of Additional Directors is, however, required to be made by the Central Government and the CLB cannot pass orders directing a third party to nominate a Director on the Board. Mr. Mukherjee submitted that the effect of the impugned order of the Board was to amend the constitu-tion of the company by giving a right of representation on the Board to the financial institutions, even though they held only 25 per cent of the share capital. Mr Mukherjee also urged that since Mr. Pandit had retired from the Board by rot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will also be a question arising out of its order. ( 4 ) When a question of law is neither raised before the Tribunal nor considered by it, it will not be a question arising out of its order notwithstanding that it may arise on the findings given by it. Stating the position compendiously, it is only a question that has been raised before or decided by the Tribunal that could be held to arise out of its order." (p. 1645) 23. Mr. Mitra urged that since the objection relating to the jurisdiction of the CLB to pass interim orders in a proceeding under section 408, had not been raised before the Board and since the Board had not considered such a question, the case fell within the fourth category of circumstances indicated by the Supreme Court in the above case and such objection could not, therefore, be said to be a question arising out of the order of the CLB. Mr. Mitra then submitted that the interim direction given by the CLB to the financial institutions to nominate a person to be appointed to the board of directors of the appellant company, was in exercise of its inherent powers. Mr. Mitra urged that rule 44 of the Company Law Board Regulations, 1991, vests the CLB with i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... name their nominee for appointment to the Board of the appellant company pending a final decision in the said application. 26. Mr. Mitra also referred to and relied upon a Bench decision of the Madhya Pradesh High Court in the case of Ram Sahai Pandey v. State Industrial Court 1973 LLJ 553, where the jurisdiction of the Industrial Court to pass interim orders fell for consideration and it was held following the decision of the Supreme Court in ITO v. M.K. Mohammed Kunhi AIR 1969 SC 430, that an express grant of statutory power carries with it by necessary implication the authority to use all reasonable means to make such grant effective. Mr. Mitra also referred to the decision of the Supreme Court in the case of Arjun Singh v. Mohindra Kumar AIR 1964 SC 993, and a Bench decision of this Court in Sri Sri Radha Krishnaji Thakur v. Sankar Lal Khettry 88 C.W.N. 507, in support of his submission that even where no express provision has been made in a statute for passing interim orders and no prayer for interim orders has been made, the Court in appropriate cases has jurisdiction to pass interlocutory orders to preserve the rights of the parties and to prevent irre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s an appeal and not a reference. The jurisdiction was appellate and not advisory. 29. Upon the said finding, the Division Bench, held that a question of law arising out of the findings in the judgment of the Companies Tribunal may be raised for the first time in an appeal under section 10D(1)( b ), although, the question of law may neither have been raised before or dealt with by the Tribunal in its judgment or order. 30. Mr. Mukhrjee submitted that in view of the aforesaid decision, this appeal must be held to be maintainable. Mr. Mukherjee also submitted that since the order dated 27-9-1996, had been passed in the proceedings under sections 397 and 398 and not in the proceedings under section 408 thereof, the application for contempt filed on behalf of the Central Government in the proceedings under section 408 was not maintainable and should have been summarily dismissed by the CLB. Mr. Mukherjee urged that since on behalf of the appellant company the very jurisdiction of the CLB to give directions to the financial institutions to nominate a person to be appointed to the Board of directors of the company in a proceeding under section 408 was under challenge, the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Metal Press Works Ltd ( supra ) and we are in agreement with the views expressed therein. While the Supreme Court was considering a matter involving the advisory jurisdiction of the High Court under section 66(1), in the instant case we are concerned with the appellate jurisdiction of this Court. In this case, no reference on any question of law was required to be made to this Court and we have only to see whether there exists a question of law arising out of the order of the CLB impugned in the appeal. It was not possible for the appellant company to foresee and/or to anticipate the order that was passed by the said Board since no relief had been sought for by the Central Government in conformity with the said order. In its application, the Central Government had alleged that by not re-electing Mr. Pandit to the Board of directors of the appellant company, the direction given by the CLB on 27-10-1996, in the proceedings under sections 397 and 398 had been violated and hence contempt proceedings should be drawn up against the persons responsible for such violation and status quo ante should be restored by allowing Mr. Pandit to continue on the Board of directors of the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of not less than one hundred members of the company or of the members of the company holding not less than one-tenth of the total voting power therein, is satisfied, after such inquiry as it deems fit to make, that it is necessary to make the appointment or appointments in order to prevent the affairs of the company being conducted either in a manner which is oppressive to any members of the company or in a manner which is prejudicial to the interests of the company or to public interest: Provided that in lieu of passing an order as aforesaid, the Company Law Board may, if the company has not availed itself of the option given to it under section 265, direct the company to amend its articles in the manner provided in that section and make fresh appointments of directors in pursuance of the articles as so amended, within such time as may be specified in that behalf by the Company Law Board." As indicated hereinbefore, the Central Government filed an application before the CLB seeking direction to appoint Additional Directors on the Board of the appellant company, as contemplated under section 408. In making the order impugned in this appeal, the said Board acted outside t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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