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TMI Blog2009 (1) TMI 472X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of ₹ 1,22,71,56,840 in August, 2007 and interest on the above amount itself is very huge. When there are more than 28,000 shareholders, appellant who paid ₹ 20 as court fee and who is having only 200 shares filed the suit and caused this situation. Appellant has no right to represent other shareholders. Only two or three shareholders came forward and supported the appellant pursuant to the notice issued. The special resolution was passed unanimously in the Annual General Meeting and considering the grave injustice caused by the stay order based on patently illegal interpretation of law, we are of the view that the learned Single Judge was right in interfering with Ext. P9 by exercising supervisory jurisdiction to prevent failure of justice. A patent illegality causing grave injustice is prevented by the impugned judgment. In any event, we have already stated that learned Judge passed the impugned judgment only under Article 227 of the Constitution as expressly stated in the judgment and the writ appeal is not maintainable and even if it is maintainable, no relief can be granted in an intra court appeal as learned Judge has correctly exercised the supervisory jurisdic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... embers in the General Body Meeting. Here the special resolution was passed authorising the Board of Directors to raise additional capital by issue of equity shares on preferential basis and/or through private placement. Resolution 10( i ) reads as follows : "Resolved pursuant to section 81(1A) and other applicable provisions, if any, of the Companies Act, 1956 or any statutory amendment/modification or re-enactment thereof from time to time in force and the relevant provisions of the Articles of Association of the Bank, that the Board of Directors of the Bank be and is hereby authorised and empowered to offer, issue and allot all or any of the remaining unissued 6,59,04,921 equity shares of Rs. 10 each and 20,00,000 preference shares of Rs. 100 each in the capital of the bank at par or at such premium, at such time and on such terms and conditions as the Board may determine including by way of conversion of Debt into Equity, to any person or persons who may include Non-Resident Indians, Foreign Institutional Investors, Overseas Corporate Bodies, Financial/Investment Institutions, Qualified Institutional Buyers, Banks, Mutual Funds, other Bodies Corporate, Other Entities, whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k is at liberty to implement the resolution passed at the Annual General Meeting held on 30-6-2006 pursuant to item No. 10 of the notice dated 31-5-2006 and posted the case for further hearing. C.P. No. 36 of 2006 filed alleging oppression and mismanagement was dismissed as withdrawn by order dated 15-2-2008. Immediately after vacation of the interim order and passing of Ext. P5 order, petitioner-Bank approached the Reserve Bank of India for permission to issue the rights shares in implementation of the resolution passed in the Annual General Meeting and though there was some delay, immediately on getting the consent, the offer of Rights Share was issued by Ext. P4, letter of offer dated 27-7-2007. As per the above offer, Issue of Share was to open on 15-8-2007 and the Issue was to close on 29-8-2007. Appellant filed a suit (O.S. No. 2141/2007) before the Munsiff s Court, Thrissur to restrain the Bank from proceeding further with Rights Issue in pursuance of Ext. P4, letter of offer and for other incidental reliefs. It is stated in Ext. P6, plaint that the cause of action for that suit arose on 23-7-2007 when the offer was published in the Malayala Manorama Daily and on 11-8-2007 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he very same contentions raised in the civil suit. According to the appellant, if the order of the civil court is anyway illegal, it could have availed the appellate remedy instead of filing a writ petition under Articles 226 and 227 of the Constitution of India (for short, "the Constitution"). It is contended that if there is any vitiating factor in Ext. P9 injunction order passed by the civil court, the remedy of the Bank was to approach the appellate court as provided under Order XLIII, rule 1 of Code of Civil Procedure (for short, "the Code"). Since efficacious remedy is available, the writ petition is not maintainable. 4. By the impugned judgment, learned Single Judge found that prima facie the civil court has no jurisdiction. It is stated that there is no violation of the mandatory provisions of the Act in the issue of Rights Shares. Learned Single Judge observed that : "If better materials are supplied, the question of jurisdiction can be considered at appropriate time by the learned Munsiff." Learned Single Judge also noticed that the Company Law Board in its order dated 4-8-2006 in CP No. 36 of 2006 has permitted the Bank to implement the resolution and allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. We shall consider these questions in seriatum. 6. The preliminary question for our consideration is, whether the Writ Appeal is maintainable when relief is granted by the learned Single Judge exercising supervisory jurisdiction under Article 227 of the Constitution. Section 5 of the Kerala High Court Act, 1958 provides as follows : " Appeal from judgment or order of Single Judge. An appeal shall lie to a Bench of two Judges from ( i )a judgment or order of a Single Judge in the exercise of original jurisdiction; or ( ii )a judgment of a Single Judge in the exercise of appellate jurisdiction in respect of a decree or order made in the exercise of original jurisdiction by Subordinate Court." After considering the above provision, this question was considered by a Division Bench of this Court and it was held that supervisory jurisdiction under Article 227 is not an original jurisdiction and therefore, no writ appeal is maintainable. [ See, Arumugham Chettiar v. Joseph 1961 KLT 823; Union of India v. Vijaya Mohini Mills 1992 (1) KLT 404]. Section 5 of the Kerala High Court Act provides for intra court appeal only against orders passed by a learned Single Ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Judge in exercise of its original jurisdiction, it has to be held that no appeal will lie against the order passed under Article 227 of the Constitution. In this case, even though the writ petition was filed under Articles 226 and 227 of the Constitution of India, the learned Judge while disposing of the writ petition expressly stated that he has interfered with the impugned order by exercising power under Article 227 of the Constitution of India. Since the impugned judgment is passed under Article 227 of the Constitution, a writ appeal is not maintainable. Therefore, we are of the view that the writ appeal is not maintainable and is liable to be dismissed. 7. However, learned counsel for appellant argued that even though learned Judge has exercised jurisdiction under Article 227 of the Constitution, since the writ petition was filed under Articles 226 and 227 and many of the pleadings in the writ petition will attract the jurisdiction under Article 226, the writ appeal is maintainable. Learned counsel placed reliance on the decision of the Apex Court in Shahu Shikshan Prasarak Mandal v. Lata P. Kore 2008 (12) SCALE 792, wherein the Supreme Court has remanded the matter to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application under both these articles in fairness to justice to party and in order not to deprive him of valuable right of appeal the Court ought to treat the application as being made under Article 226 and if in deciding the matter, in the final order the Court gives ancillary directions which may pertain to Article 227, this ought not to be held to deprive a party of the right of appeal under Clause 15 of the Letters Patent where the substantial part of the order sought to be appealed against is under Article 226. Rule 18 of the Bombay High Court Appellate Side Rules read with Clause 15 of the Letters Patent provides for appeal to the Division Bench of the High Court from the judgment of the learned Single Judge passed on a writ petition under Article 226 of the Constitution. In the present case, the Division Bench was clearly wrong in holding that the appeal was not maintainable against the order of the learned Single Judge. In these circumstances we set aside the impugned order of the Division Bench and direct that the Letters Patent Appeal filed against the judgment of the learned Single Judge would now be heard and decided on merits. . . ." (p. 14) Therefore, it was argued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly barred. Such exclusion cannot be readily inferred and the presumption should be made in favour of existence of jurisdiction rather than exclusion of jurisdiction of the civil courts. In this connection, we shall refer to the Division Bench decision of this Court in Dr. T.M. Paul v. City Hospital (P.) Ltd. [1999] 97 Comp. Cas. 216. The Hon ble Supreme Court in Ammonia Supplies Corpn. (P.) Ltd. v. Modern Plastic Containers (P.) Ltd. [1998] 17 SCL 463 has held as follows : ". . . Unless jurisdiction is expressly or implicitly barred under a Statute, for violation or redress of any such right, the civil court would have jurisdiction. There is nothing under the Companies Act expressly barring the jurisdiction of the civil court, but the jurisdiction of the court as defined under the Act exercising its powers under various sections where it has been invested with exclusive jurisdiction, the jurisdiction of the civil court is impliedly bar- red. . . ." (p. 482) It is true that certain provisions are specifically stated in the Act to be dealt with by the Company Court ("Court" as defined in that Act) and certain provisions by the Company Law Board (or Tribunal). The Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 81(1A) contending that the clause that rights shares can be renounced only in favour of an existing shareholder is an act of oppression and mismanagement, but the appellant withdrew from the above case and finally that application itself was withdrawn. Since the application was withdrawn, the interim stay was vacated and the Bank was permitted to issue rights shares in implementation of the special resolution. It is true that Company Law Board (Tribunal) is vested with powers regarding relief in case of oppression and mismanagement as provided under sections 397 to 405 of the Act. What is contended in the suit is that the special resolution under section 81(1) of the Act itself is illegal as sufficient notice was not given to the shareholders as provided under the section and also because of the restriction in the right to renounce the rights shares offered, in favour of a non-shareholder. Since CP No. 36 of 2006 was finally withdrawn, and that petition was originally filed alleging oppression and mismanagement, we are of the view that merely because appellant was party along with others in the petition filed under sections 397 and 398 and later appellant withdrew from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred on the High Court is administrative as well as judicial, and is capable of being invoked at the instance of any person aggrieved or may even be exercised suo motu. The paramount consideration behind vesting such wide power of superintendence in the High Court is paving the path of justice and removing any obstacles therein. The power under Article 227 is wider than the one conferred on the High Court by Article 226 in the sense that the power of superintendence is not subject to those technicalities of procedure or traditional fetters which are to be found in certiorari jurisdiction. Else the parameters invoking the exercise of power are almost similar. 23. The history of supervisory jurisdiction exercised by the High Court, and how the jurisdiction has culminated into its present shape under article 227 of the Constitution, was traced in Waryam Singh v. Amarnath AIR 1954 SC 215. The jurisdiction can be traced back to section 15 of the High Courts Act, 1861 which gave a power of judicial superintendence to the High Court apart from and independently of the provisions of other laws conferring revisional jurisdiction on the High Court. Section 107 of the Government of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s who, at the date of the offer, are holders of the equity shares of the company, in proportion, as nearly as circumstances admit, to the capital paid up on those shares at that date; ( b )the offer aforesaid shall be made by notice specifying the number of shares offered and limiting a time not being less than fifteen days from the date of the offer within which the offer, if not accepted, will be deemed to have been declined; ( c )unless the articles of the company otherwise provide, the offer aforesaid shall be deemed to include a right exercisable by the person concerned to renounce the shares offered to him or any of them in favour of any other person; and the notice referred to in clause ( b ) shall contain a statement of this right; ( d )after the expiry of the time specified in the notice aforesaid, or on receipt of earlier intimation from the person to whom such notice is given that he declines to accept the shares offered, the board of directors may dispose of them in such manner as they think most beneficial to the company. Explanation. In this sub-section equity share capital and equity shares have the same meaning as in section 85. (1A) Notwithstandi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asses a special resolution to allot the new shares in a different manner than what is provided in the section. Here a special resolution was also passed in accordance with the provisions of section 81(1A) of the Act authorising the Board of Directors to make deviation from the provisions of section 81 of the Act. 14. It is the contention of the appellant that there is violation of section 81(1)( b ) of the Act as 15 days was not given from the date of offer. Ext. P4 is the offer for issue of rights share. It is dated 21-7-2007. The issue was open on 16-8-2007 and the closing date was on 29-8-2007. The date of offer and the date of opening of issue of shares are different. The contention of the appellant is that issue opens on 16-8-2007 and before its closing, 15 days is not there and hence it is violative of section 81(1)( b ). The wording of section 81(1)( b ) is very clear that there should be 15 days time from the date of offer so that the person offered with right share has sufficient time to mobilise money to accept the offer. In the suit, it was pleaded by the appellant that the offer was published in Malayala Manorama daily on 23-7-2007. Ext. P4 is dated 21-7-2007. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 138( b ) need not in every case be limited to the standard rent which might be fixed for the building under the Rent Control Act. Here, the non obstante clause is used in section 81(1A) of the Act with respect to a specific provision under section 81(1)( c ) of the Act. It is true that under section 81(1)( c ), the offer of shares shall include the right to renounce the shares offered to him or any of them in favour of any other person, but that clause is not applicable because as provided under section 81(1A) a special resolution was passed unanimously in the Annual General Meeting allowing curtailment of the right to renounce the shares offered to any other person. In view of the above resolution, the Directors were entitled to decide that renunciation is exercisable only in favour of existing shareholders of the Bank and this was specifically mentioned in the notice of offer and therefore, there is no violation of section 81(1)( c ) and there is no illegality and Ext. P9 order is patently illegal as it was passed in disregard to the provisions of law. We have already stated that in view of the Reserve Bank of India s circular, the bank has to increase the share capital a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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