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TMI Blog2002 (11) TMI 655X X X X Extracts X X X X X X X X Extracts X X X X ..... . The facts giving rise to these writ petitions are similar and the issues involved are also common, hence all the writ petitions are being disposed of by this common judgment. 3. The principal question that we require to decide in these writ petitions is mainly raised in Writ Petition No. 1443 of 1995 and our decision in this writ petition will decide the fate of other writ petitions also, hence we propose to deal with the said writ petition in detail. 4. The petitioner Salim Akbarali Nanji appeared in person and efficiently argued all writ petitions at length. 5. The factual matrix giving rise to the first writ petition (Writ Petition No. 1443 of 1995) reveals as follows : ( a )Initially, this writ petition was filed by three petitioners, viz., the Development Co-operative Bank Employees Union through its Gene- ral Secretary, Shri Azim Akbarali Charania and Shri Salim Akbarali Nanji as petitioner Nos. 1, 2 and 3. Petitioner Nos. 1 and 2, however, were transposed as respondent Nos. 12 and 13 respectively by order of this court. Original petitioner No. 3 who will be hereinafter referred to as petitioner, alone contested present writ petition. ( b )Respondent Nos. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , to its shareholders and convened a special general meeting on 28-1-1995, to consider the conversion of respondent No.10-bank registered under the Multi-State Act into a joint stock banking company under Part IX of the Companies Act. ( h )According to the petitioner the period of notice was extremely short and the meeting was conducted a high-handed manner and the resolution was passed by a show of hands in the meeting held on 28-1-1995, by which the general body decided to convert respondent No.10-bank into a joint stock banking company (respondent No.11). ( i )Respondent No. 11 immediately in February 1995, filed with the Registrar of Companies (respondent No. 5) Form Nos. 37, 40 and 41 of the Companies (Central Government s) General Rules, 1966, along with the resolution passed at the special general meeting for its registration as a banking company. ( j )Before we proceed further, we may note that the petitioner had filed a dispute before the co-operative court (respondent No.8) challenging the notice dated 9-1-1995 by which a special general meeting was convened to pass the aforesaid resolution. The co-operative court by its order dated 27-1-1995, in Dispute No. CC1/95 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plied with. ( m )It appears that the Joint Secretary, Ministry of Law (Department of Company Affairs) informed by his letter dated 26-5-1995, to the Regional Director of Registrar of Companies that there should be no objection to the registration of the Development Co-operative Bank Ltd. as a company under Part IX of the Companies Act, 1956. Accordingly, in response to the application made to the Registrar of Companies in Form Nos. 37, 40 and 41 of the Companies (Central Government s) General Rules and Forms, 1956, the certificate of incorporation bearing No. 11-89008 of 1995, dated 31-5-1995, was issued by respondent No.5. As a consequence of issuance of the certificate under Part IX of the Companies Act, the Development Co-operative Bank Ltd. (respondent No. 10) stood converted and incorporated as a joint stock banking company under Part IX of the Companies Act, 1956. Resultantly, the assets and liabilities of respondent No.10 also stood vested in respondent No.11. ( n )The Reserve Bank of India also in exercise of powers conferred under section 22(1) of the Banking Regulation Act, 1949, granted a licence in favour of respondent No.11 to carry on banking business in India sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No.11 informing conversion of respondent No. 10 to all its shareholders (ext. O). The petitioner has also sought direction to respondent No. 3 to withdraw and/or cancel the permission granted by respondent No.3 by the aforesaid letter (ext.M). Notification (ext.N) and further direction to respondent No.5 to withdraw the certificate (ext.J) and the letter (ext. O). 7. After filing of the writ petition (No. 1443 of 1995), Ministry of Agriculture, Government of India, by notification dated 31-8-1995, in exercise of powers under sub-section (2) of section 99 of the Multi-State Act, exempted respondent No. 10-bank from the applicability of the provisions of section 102(1) of the said Act and in view thereof issued letter dated 7-9-1995, to respondent No. 11 informing that consequent upon its registration as a joint stock banking company, the Development Co-operative Bank Ltd. (respondent No.10) had ceased to exist as a society under the Multi-State Act from the date of registration under the Companies Act, 1956. In view of this development, the petitioner amended the writ petition and challenged the said notification dated 30-8-1995 (ext.S), and the letter dated 7-9-1995 (Ext.I). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cerned, as stated earlier, it had culminated in the order of remand and the whole issue has now been concluded before the Delhi High Court. 10. The main contesting respondent No. 11 controverted the case set up by the petitioner by filing five different affidavits from time to time. In short, it is stated in the affidavits filed by respondent No. 11 that it has been properly and lawfully converted from a co-operative banking society, previously deemed to be registered under the Multi-State Act, to the Development Credit Bank Ltd., a company duly registered under the Companies Act, vide certificate of incorporation bearing No. 89008 of 1995, dated 31-5-1995, issued by the Registrar of Companies (respondent No. 5). It is further stated that upon incorporation and registration of respondent No.11-bank, the Reserve Bank of India has issued on 31-5-1995, the licence bearing No. BUN/59 to carry on banking business under section 22 of the Banking Regulation Act. The Reserve Bank of India, vide Gazette notification dated 1-6-1995, directed inclusion of respondent No. 11-bank in the Second Schedule to the Reserve Bank of India Act in pursuance of clause ( a ) of sub-section (6) of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Akbarali Nanji in person, Mr. Chagla, learned senior counsel for respondent No.11, Mr. Tulzapurkar, learned counsel for respondent No.3, Mr. C.U. Singh learned counsel for respondent No. 12 and Mr. R.S. Desai, A Panel counsel for the State of Maharashtra for respondent Nos. 1 and 2 at length, perused the writ petitions and annexures thereto, affidavits filed by the respondents and went through the relevant provisions of various Acts referred to by the petitioner and the learned senior counsel and counsel appearing for the parties. In order to avoid repetition, we intend to refer to the submissions made by the petitioner, learned senior counsel and learned counsel appearing for the parties while dealing with the issues raised in the writ petition at the appropriate stage. 14. Before we advert to the principal issue raised in the instant writ petitions as to whether conversion of a co-operative bank registered under the Multi-State Act, into a banking company under Part IX of the Companies Act, is permissible in law we would like to examine the contention of the petitioner that the registration of respondent No.1-bank itself is illegal and void. Mr. Chagla, learned senior coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. ( d )The Reserve Bank of India after an elaborate examination of the matter enjoined upon it under section 22 of the Banking Regulation Act decided to grant its approval in principle to the conversion of co-operative bank into the Development Credit Bank Ltd. under the provisions of the Companies Act. ( e )A Perusal of section 22 of the Banking Regulation Act clearly shows that no company would be able to carry on banking business in India unless it held a licence issued in that behalf by the Reserve Bank of India and any such licence could be issued subject to such conditions as the Reserve Bank of India may think fit to impose. ( f )Respondent No.10 also obtained approval to its conversion from the Government of India, Ministry of Finance vide letter dated 9-12-1994. ( g )The impugned letter dated 2-1-1995, issued by the Reserve Bank of India and the in principle approval to the conversion of co-operative bank to the banking company reads, thus : under the Companies Act is for the purpose of deposits being made by one body corporate with another body corporate and investment being made by one body corporate with another body corporate. The expression "body corpora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of persons and it also denotes a co-operative society, such as respondent No.10. He placed reliance on the notification dated 31-8-1995, issued by the Ministry of Agriculture, Government of India and submitted that in view of the aforesaid notification, the provisions of the Companies Act would apply to a multi-State co-operative society inasmuch as the provisions of Part IX of the Companies Act could be taken recourse to for issuance of certificate of incorporation in favour of respondent No.11. Mr. Chagla, learned senior counsel further submitted that a certificate of incorporation granted by respondent No.5 is conclusive evidence and that all the requisites prior to incorporation have been complied with and the court cannot go behind the said certificate of incorporation. Mr. Chagla, further submitted that once a company is born, the only method to get it extinguished is winding up under the provisions of the Companies Act. In support of his submission, he relied upon T.V. Krishna v. Andhra Prabha (P.) Ltd. [1960] 30 Comp. Cas. 437 (AP). The petitioner as well as Mr. Chagla in support of their contentions invited our attention to various provisions of the Multi-State Act and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany formed under any Act of Parliament or Indian Law. In short, he submitted that Part IX of the existing Companies Act deals with registration of a company and not conversion of a non-company. The petitioner further submitted that section 566 of the Companies Act defines joint stock company and nowhere contemplates that an incorporated society can be converted into a company or that a joint stock company includes a co-operative society or otherwise. In substance, the petitioner submitted that the provisions of the Multi-State Act and that of the Companies Act are contrary, inconsistent and incongruous with each other and, therefore, the alleged conversion alters the basic co-operative structure of a co-operative bank. 18. Mr. Chagla, learned senior counsel on the other hand, after inviting our attention to several provisions of the Multi-State Act, submitted that there is no requirement of an express enabling provisions under the multi-State co-operative society to allow conversion of co-operative bank into a banking company under Part IX of the Companies Act. According to him, the provisions enabling conversion are contained in the Companies Act. 19. In order to apprecia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther than this Act or by any other Indian law (including a law in force in a Part B State), or by any Act of Parliament of the United Kingdom or Letters Patent in force in India, and not being a joint stock company as defined in section 566, shall not register in pursuance of this section ; ( iii )a company having the liability of its members limited by any Act of Parliament other than this Act or by any other Indian Law (including a law in force in a Part B State), or any Act of Parliament of the United Kingdom or Letters Patent in force in India, shall not register in pursuance of this section as an unlimited company or as a company limited by guarantee ; ( iv )a company that is not a joint stock company as defined in section 566 shall not register in pursuance of this section as a company limited by shares ; ( v )a company shall not register in pursuance of this section without the assent of a majority of such of its members as are present in person, or where proxies are allowed, by proxy, at a general meeting summoned for the purpose ; ****** (2) In computing any majority required for the purposes of sub-section (1) when a poll is demanded, regard shall be had to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Andhra Pradesh High Court in Vali Pattabhirama Rao v. Sri Ramanuja Ginning Rice Factory (P.) Ltd. [1986] 60 Comp. Cas. 568 , relied upon by Mr. Chagla while dealing with somewhat a similar situation held that the word "company" used in section 565 of the Companies Act, corresponding to section 263 of the Indian Companies Act, 1913, includes within its purview a partnership. Thus, it was held that the word "company" in this context could denote a partnership firm. A partnership firm could thus be registered under Part IX of the Companies Act and once it was so registered, there could be statutory vesting of title of the property of the firm in the newly incorporated company : "...The question is whether the property of the said firm had vested in the first defendant-company when the firm was registered under the provisions of the Indian Companies Act, 1913. For that it is necessary to notice the terms of section 263 of the Indian Companies Act, 1913, that corresponds to section 575 of the present Companies Act, 1956. Section 263 reads as follows : All property, movable and immovable, including all interests and rights in, to and out of property, movable and immovable, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corded earlier we are satisfied that this requirement was also satisfied as respondent No.10 had in February, 1995, itself submitted to the Registrar of Companies. Form Nos. 37, 40 and 41 of the Companies (Central Government s) General Rules and Forms, 1956, along with the resolution passed at the special general meeting held on 28-1-1995. We are satisfied that respondent No. 10 complied with all conditions as contemplated under Part IX of the Companies Act. 22. It is true that there is no express enabling provision under the Multi-State Act to allow conversion of co-operative bank into a banking company under Part IX of the Companies Act. However, it cannot be ignored that there is no express provision prohibiting such conversion if all the requirements contemplated under Part IX of the Companies Act are complied with. Section 575 of the Companies Act provides that all property, movable and immovable, including actionable claims, belonging to or vested in a company on the date of its registration in pursuance of Part IX, shall, on such registration, pass to and vest in the company as incorporated under this Act for all the estate and interest of the company therein. In view th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Union of India, Ministry of Agriculture (Department of Agriculture and Cooperation) addressed to respondent No. 11 whereby it was informed that consequent upon the registration of respondent No.11 as a joint stock banking company by the name of the Development Credit Bank, the Development Co-operative Bank (respondent No. 10) has ceased to exist as a society under the Multi-State Act, from the date of registration under the Companies Act. It is thus clear that the authorities under the provisions of the Multi-State Act have treated the registration of respondent No. 10-bank as cancelled and it ceased to exist as society under the Multi-State Act. Respondent Nos. 10 and 11 cannot be said to have committed any illegality. Even if it be assumed that there was some irregularity in conversion of respondent No. 10 to respondent No.11, it is not a suitable case for interference under extraordinary jurisdiction in larger public interest, in view of remarkable growth of respondent No. 11 during all these years and the interest of the shareholders as would be seen from our discussion a little later. We have, therefore, no hesitation in rejecting the submission of the petitioner that respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 towards 86,15,400 shares allotted to them. Moreover, the progress of respondent No.11-bank, since conversion, has been remarkable 1 as indicated below : "( a )The deposits have grown 6.34 times, i.e., from Rs. 582.67 crores on 31-5-1995, to Rs. 3,691.76 crores till 31-3-2002. ( b )The advances have grown 6.49 times i.e., from Rs. 348 crores on 31-5-1995, to Rs. 2,259.25 crores till 31-3-2002. ( c )There has been a significant increase in the number of branches. There were 31 branches in May, 1995, as of 31-3-2002, there are 55 branches and 3 extension counters, both in metropolitan and rural areas. ( d )There has been an increase in the capital from Rs. 7.33 crores to Rs. 22.97 crores i.e., an increase of 3.13 times. ( e )There has been an increase in the working capital from Rs. 791 crores to Rs. 4.189 crores i.e., an increase of 5.3 times. ( f )There has been an increase in the distribution of dividend from 155 prior to conversion to 30 per cent each year subsequent to conversion till 31-3-2001. ( g )The book value per share, since 31-5-1995, has increased from Rs. 86.29 per share to Rs. 131.85 per share. ( h )Since the conversion the respondent-bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ranted reliefs of declaration and injunction in terms of prayers made in the dispute. The issues framed by the appellate court while deciding the appeal read, thus : " Issues. (1) Whether the opponent bank proves that notice of the special general meeting dated 28-1-1995, were served to all the members ? (2) Whether the opponent bank proves that the resolution of conversion was passed in the meeting dated 28-1-1995, validly ? (3) Whether the disputants prove that there was insufficient notice, hence special general meeting dated 28-1-1995, is illegal." 29. Looking to the nature of the reliefs sought by the petitioners in this writ petition and the finding of facts recorded by the courts below, we do not require to examine the merits of the case in view of the detailed reasons recorded in the earlier writ petition, viz., Writ Petition No. 1443 of 1995 inasmuch as it covers the dispute raised in this petition. 30. In view thereof, the present writ petition is dismissed. Rule stands dis-charged. No order as to costs. (3) Writ Petition No. 2492 of 2000 : The petitioner, Salim Akbarali Nanji, has filed this writ petition challenging the legality, propriety and val ..... X X X X Extracts X X X X X X X X Extracts X X X X
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