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TMI Blog2004 (10) TMI 330X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, etc. filed by Nini Srivastava to show that prior consent had in fact been obtained. We may also note the unrebutted specific averment by the petitioners to the effect that V.K. Srivastava was personally present throughout the litigation. - CIVIL APPEAL NO. 6951 OF 2004 - - - Dated:- 26-10-2004 - MRS. RUMA PAL AND ARUN KUMAR, JJ. Ms. Tasneem Ahmadi, Santosh Dwivedi, Anurag Pandey and Sudhir Kumar Gupta for the Appellant. C.A. Sundram, Gopal Jain, Ms. Rakhi Ray, Ms. Bina Gupta, Ms. Nandini Gore, Mrs. Manik Karanjawala and Umesh Kumar Khaitan for the Respondent. JUDGMENT Ruma Pal, J. - Leave granted. 2. This appeal arises out of proceedings initiated under sections 397 and 398 of the Companies Act (hereinafter referred to as the Act ) by a group of minority shareholders complaining of mismanagement and oppression in respect of the respondent No. 1 company M/s. Gwalior Sugar Company Ltd. (referred to as the company ). The appellants are the unsuccessful petitioners. The primary question to be resolved in this appeal is whether they held the requisite one-tenth of the issued share capital of the company under section 399 (1) of the Act when th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hares. As the respondents had reservations about the value, the matter was re-heard by the valuer who reconsidered the submissions of the parties. Ultimately, the value of the equity shares was given by the valuer as Rs. 6,340 per share. The valuation for a preference share of Rs. 100 was fixed at par. The respondents objected to this valuation also. The contention of the respondents was that the other disputes relating to family properties in possession of the petitioners should be settled also. After various hearings the matter was fixed for hearing on 6-11-1998. 7. On 3-11-1998, the respondent No. 8, Mrs. Radhika Srivastava, moved an application challenging the order dated 10-6-1996. In the application it was alleged that the respondent No. 8 had no knowledge of the compromise and that she had been kept in the dark about the settlement arrived at. She prayed for recall of the order dated 10-6-1996. It was also said that the calculation of 10 per cent of the petitioner s shareholding in the Company was made only with regard to the equity share capital of the company, whereas section 399 sub-section (1) requires the petitioner to have 10 per cent of the total issued share capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all and the petition is liable to be dismissed as being not maintainable on the ground that it has been filed by the petitioners holding less than 1/10th of the issued share capital of the company i.e., 27.68 lakhs." 11. The hearing in the matter was concluded by the CLB and judgment reserved two days after the last affidavit was filed. On 18th January, 1989 the CLB passed an order rejecting the challenge by the respondent No. 8 to the consent order dated 10-6-1996. It revised the valuation and considered that a sum of 6000 per equity share would be an appropriate value and Rs. 100 would be the appropriate value for the preference shares. However, the CLB upheld the contention of the respondent No. 8 that the application under sections 397 and 398 was not maintainable on the ground that the petitioner did not hold the requisite 10 per cent shares. The CLB proceeded on the basis that the Trust held 1029 shares in the company but that it had not consented to the filing of the petition under sections 397, 398 by Nini Srivastava. According to the CLB "...The only issue for examination is whether the Trust is a party to the proceedings or whether the Trustees have given their con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l was filed from the decision of the Single Judge before the Division Bench by the appellants. The Division Bench held that the filing of the consent along with application under section 399(3) of the other shareholders was a sine qua non to the initiation of proceedings under sections 397 and 398 and that on the failure on the part of the appellants to file the alleged consents the application had been rightly dismissed. It was held that it was not necessary to determine the nature of the trust and whether the shares held by the Trust had devolved on any of the beneficiaries before the petitions under sections 397 and 398 of the Companies Act had been filed. It was said that : "If the trust contained some other properties there is likelihood that the shares may not be divided." The Division Bench was also of the view that since the second application had been filed, the CLB should consider whether the shares of the trust should be reduced and the implications of section 153 of the Act. The CLB was directed to decide the subsequent application on its merits ignoring the observations made by the CLB in its order dated 18-1-1999 as well as of the Single Judge and to decide the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that Mrs. Nini Srivastava did not have the consent of the other trustees, and that assuming that she had the consent of the trustees to file the petition, there was no such averment in the petition nor any consent letter filed with the petition in violation of the mandatory requirement of Regulation 18 of the Company Law Board Regulations. Finally, it was said that the only person who could have joined the petition as a petitioner was V.K. Srivastava who was the registered shareholder of the 1029 Preference Shares. It is said that the trust was not and could not have been a member of the company. This, according to the respondents, clearly followed from section 41(2) read with section 153 of the Act. It is said that admittedly, the application had not been filed on behalf of V.K. Srivastava. Even assuming that the Trust was the registered member of the Company, it is contended that there was no averment that the company petition had been filed on behalf of the Trust. It is submitted that there was in fact no consent and that the so called consents were subsequently obtained. 18. Any Member or members of a Company may apply under sections 397 and 398 of the Act to the CLB compl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the issue was not pressed. 21. The three courts below have concurrently found that the Trust which held the preference shares was not properly represented by Nini Srivastava. This was the only case which the appellant had to meet. Now the respondents contend that in fact it was Vijay Kr. Srivastava who held the 1029 shares and not the Trust and Nini Srivastava did not represent him. Although a passing reference was made to the fact in the counter affidavit filed by the Company as noted above, that was done in the context of denying that Nini Srivastava was a trustee. In our judgment it would not be proper to permit the respondents to raise an issue not argued by them either before the CLB or the High Court and to make out a new case at this stage. To allow a party to take grounds not urged earlier would not only result in taking the other party by surprise but it would deprive such party of any adjudication on the issue by the different courts - a right to which each party is otherwise entitled. It would also place such party at a great disadvantage as no opportunity would have been granted to it to meet the new plea. In the case of Rajahmundry Electric Supply Corpn. Ltd. v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -trustees we must make it clear that what we mean is that the decision to terminate the tenancy must be taken by all the co-trustees. The formal act of giving notice to quit pursuant to the decision taken by all the co-trustees may be performed by one co-trustee on behalf of the rest. The notice to quit given in such a case would be a notice given with the sanction and approval of all the co-trustees and would be clearly a notice given by all co-trustees." (p. 116) 24. The view has been followed by the different High Courts [ See for example Duli Chand v. Mahabir Pershad Trilok Chand Charitable Trust AIR 1984 Delhi 145 and held to be too narrow in Jain Swetambara Murthi Pujaka Samastha v. Waman Dattatreya Pukale AIR 1979 Kar. 111. 25. This Court in Shanti Vijay Co. v. Princess Fatima Fouzia AIR 1980 SC 17 held that : "...the act of one trustee done with the sanction and approval of a co-trustee may be regarded as the act of both. But such sanction or approval must be strictly proved." (p. 24) It was also held that a trustee could act on behalf of others, if there is a clause in the Trust Deed authorizing the execution of the Trust to be carried out by "on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeals, applications etc. to declare, sign and verify all plaints, written statement, memo of appeals, cross-objections, applications, affidavits etc. and to appeal at any place or places in the Union of India before any Court, office or authority to present and lodge any documents for registration and to admit disputes, differences and demands to arbitration and to adjust, approve and settle all accounts relating to the Trust Fund and to execute all releases and discharges and to do all other things relating thereto. Clause 19 : All the decisions that will be required to be taken in carrying out the Trusts herein contained shall be taken by majority of the Trustees. If the Trustees are equally divided the Chairman shall have an extra or casting vote. The Trustees present shall form a quorum for any meeting of the Trustees." These clauses clearly allow not only one co-trustee but any person to carry out the trusts and to act for the trust provided of course such person is expressly authorized [ See Killick Nixon Ltd. v. Bank of India [1985] 57 Comp. Cas. 831 (Bom.), P. Punnaiah v. Jeypore Sugar Co. Ltd. AIR 1994 SC 2258. 28. The Resolution dated 3rd June, 1955 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .K. Srivastava Family Trust, and a Petitioner with others, in the Petition to her filing/presenting the same." 31. The conclusion is inescapable that the Trustees had expressly authorized Nini Srivastava to file the petition. Additionally, the affidavit of Vijay Srivastava, who is alleged to be the registered owner of the 1029 preference shares, clearly shows that he had expressly consented and authorized Nini Srivastava in his capacity as such trustee to file the proceedings. If the respondents had fairly and squarely raised the issue as to the petition not being consented to by Vijay Srivastava as the registered shareholder of the 1029 shares, it would have been open to the appellants to have relied on this affidavit and if necessary amended the petition. The power to allow such amendments has been expressly granted to the CLB under Regulation 46. As was stated several decades ago by the Privy Council in Charan Das v. Amir Khan AIR 1921 PC 50: "Where the plaintiffs, through some clumsy blundering, attempted to assert rights that they undoubtedly possessed under the statute in a form which the statute did not permit, they should be at liberty to express their intention i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be given to prove that such consent was given. . . ." (p. 327) The reasoning in this decision would no longer be apposite having regard to the change in the language in section 399(3) and the shifting of the requirement from the Act to Regulation 18 of the Company Law Board Regulations 1991 (hereinafter refer to as the Regulations ). Regulation 18 also does not itself contain the requirement for filing the consent letters 2 . The requirement has been prescribed in Annexure III, which is referred to in Regulation 18. Serial No. 27 of the Annexure III contains a list of several documents required to be annexed to petitions relating to the exercise of powers in connection with prevention of oppression or mismanagement under sections 397, 398, 399(4), 400, 401, 402, 403, 404 and 405. The documents required to be annexed to such petition include "where the petition is prescribed on behalf of members, the letter of consent given by them." Other documents required to be filed include "documents or other evidence in support of the statement made in the petition, as are reasonably open to the petitioner(s)", as also three spare copies of the petition . These requirements can hardly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny one or more of them to produce such further documentary or other evidence as the Bench may consider necessary ( a )for the purpose of satisfying itself as to the truth of the allegations made in the petition; or ( b )for ascertaining any information which, in the opinion of the Bench, is necessary for the purpose of enabling it to pass orders on the petition." 35. In P. Punnaiah s case ( supra ), the member of the company was the daughter, Rajeshwari. She was sought to be represented as a petitioner in an application under sections 397 and 398 by her father acting as her agent. The respondents objected saying that this was no consent at all. With a view to counteract the objection taken by the respondents, the appellants filed an affidavit of Smt. Rajeshwari wherein she affirmed that she had authorized her father to act on her behalf as her G.P.A. in that behalf and to take all such steps as he deemed proper to protect her interest. This Court rejected the objection raised by the respondents. Hansaria, J. rested his concurrence with the view on the affidavit filed by Rajeshwari subsequent to the filing of the petition. He said : ". . . As Smt. Rajeshwari made he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rence shares held by the Trust as being held by the petitioners. This was also how the respondents understood the petition. In an application filed by them on 19th March, 1988 under Regulation 44 they said : "That shareholding of the respondent company is divided mainly between two groups namely, H.K. Srivastava Group in the Management holding abut 30 per cent Equity Shares and 1029 Redeemable Cumulative Preference Shares and the J.K. Srivastava group holding about 12 per cent Equity shares and 1029 Redeemable Cumulative Preference Shares... That it is apprehended that J.K. Srivastava group i.e., the Petitioners holding about 12 per cent Equity Shares and 1029 Redeemable Cumulative Preference Shares may obstruct the Resolution for enhancement of Authorised Shares Capital." 38. It appears to us that the intention of the petitioners undoubtedly was to represent the J.K. Group which admittedly has the qualifying number of shares, although the expression of such intention was not as clear as it should have been. 39. All the fora below have not proceeded on the basis that the pleading in the petition did not reflect the intention. They have rested their findings on the law ..... X X X X Extracts X X X X X X X X Extracts X X X X
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