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TMI Blog2012 (9) TMI 422X X X X Extracts X X X X X X X X Extracts X X X X ..... m order of status quo as of that date with regard to the shareholding of the company to be maintained until further orders. The petition was kept pending. We do not find any active step being taken wither by the petitioner or by the respondents until 2006. In 2007 Sens made an application for withdrawal of the proceedings being C.P. No.252 of 1985. The application was numbered as C.A. 302 of 2007. The applications stood dismissed vide order dated April 12, 2007 as appearing from page 121 of the compilation. This particular order created so much of confusion. The order states :- "It is submitted on behalf of the applicants that the matter need not be proceeded with. Company Application No.302 of 2007 is dismissed as not pressed." 2. Sens subsequently realized, mistake crept in as the prayer for withdrawal of the proceeding was not pressed and as such the main proceeding continued to be pending. They applied for correction by making C.A. No.53 of 2010 that was opposed by the appellant who already made an application being C.A. No.40 of 2010 for being added as party respondent in the Section 397 proceeding. Company and its Shareholders 3. Nischintapur Tea Company Limited is a clo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh through Deeds of Gift executed by them respectively. The Company did not entertain such claim. According to them, Maidhan was entitled to only eight hundred shares as he did not respond to the call made for balance three thousand shares. The company also denied Omprakash having held two thousand twenty one shares. The company denied mutation for eight hundred shares of Maidhan and one thousand nine hundred forty shares of Sarbati on the ground of that Ajit must get appropriate order from the succession Court. He filed application before the Company Law Board under Section 111(A) of the said Act of 1956 in 2006 that is still pending as we are told. Section 397 Proceedings - Grievance Of Amita 8. In the year of 1985 one of the share holders Amita Sen filed an application before this Court being C.P. No.252 of 1985 inter alia, alleging mismanagement and oppression as against the persons having management and control of the said company also belonging to the same family. The principal grievance as we find from the record was, the company failed and neglected to mutate the shares held by Amita's late husband and thereby preventing her from taking part in the day to day affairs of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orrection as His Lordship was in doubt whether the main proceeding was in fact withdrawn or not. His Lordship was in doubt whether at all any mistake was committed by the Court while passing the order dated April 12, 2007. The order was carried to the appeal. The Division Bench dismissed the appeal arising out of C.A. No.53 of 2010. Another Division Bench dismissed the appeal arising out of C.A. No.40 of 2010 vide judgment and order dated September 22, 2011 appearing at pages 81-113 of the compilation. 13. It is at this juncture the company made an application being C.A. No.686 of 2010 inter alia, praying for dismissal of the proceeding under Section 397. The application was made through a judge's summons supported by an affidavit of one Sujit Chatterjee whose authority was challenged by Ajit by an application being C.A. No.721 of 2010. The learned Judge heard both the applications and disposed of vide judgment and order dated July 5, 2011 appearing at pages 116-141 of the compilation. His Lordship allowed the application made by the company and dismissed the proceeding initiated by Amita under Section 397 after holding that Sujit was duly authorised to make such application. His ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aiming to be the sole beneficiary of Agarwal's interest in the company tries to intervene in the affairs of the company. His prayer for mutation and/or transmission of shares in his name to the extent of 7761 shares is pending consideration before the Company Law Board. He is now trying to intervene in a proceeding initiated by Amita under Section 397 for a personal cause as her husband's shares were not being transmitted in her name and her interest was not being looked after in the company. On the other hand, Sens virtually disposed of their shareholdings and handed over management to Gargs who are in control of the company as well as tea estate. However, their entry is not clear, at least not officially surfaced in the records of this litigation. The learned single Judge allowed main Section 397 proceeding to be dismissed and thereby denying the prayer of Ajit to be substituted therein. Present Status 16. Company is in virtual control of Gargs. Ajit is yet to be recognized as a shareholder of the company. Contentions Pratap Chatterjee 17. Mr. Pratap Chatterjee appeared for Ajit in both the appeals. According to him, even if Ajit did not obtain probate of the Will left by Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen in 1986 when his brother died. He acquired his mother's interest in 2000. The Deeds of Gifts were also executed by his mother and brother during their lifetime. Ajit did not ventilate his grievance prior to 2006 when he approached the Company Law Board for the first time. Hence, his prayer for intervention in the proceeding under Section 397 could not be acceded. S.N. Mukherjee 22. Mr. S.N. Mukherjee leading Mr. Ratnanko Banerjee contended that the gift from the mother and brother was said to have been executed in the year 1975. The father died in the year 1968. Ajit also filed a suit for declaration that was pending on the identical issue. His prayer for interim protection was denied by the learned Single Judge that was carried in appeal that was pending. Significant to note, Ajit also filed a suit being C.S. No.10 of 2010 inter alia, making identical prayers protecting his right in respect of the shares in question. Mr. Mukherjee also drew our attention to page 142 of the paper book wherein we would find that Ajit wrote to the State Bank of India, the company's banker inter alia, instigating them not to extend financial support to the company. His attempt could not be said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Court in the case of Turner Morrison & Co. Ltd. v. Hungerform Investment Trust Ltd. AIR 1972 SC 1311 and the English decision in the case of Alemander Ward & Co. Ltd. v. Samyang Navigation Co. Ltd. [1975] 2 All ER 424. Pratap Chatterjee (while replying) 25. The learned Judge did not deal with the issue raised on the authority of Sujit Chatterjee. Even if it was contended that Sujit was allowed to represent the company in the earlier proceeding having not disclosed his authority as yet Ajit was lawfully entitled to pray for dismissal of the petition filed by the company at the behest of Sujit. He distinguished the English decision by saying, even if the company's version was accepted to the extent of forfeiture of three thousand share his right to inherit eight hundred shares of Maidhan could not be disputed by the company that would demonstrate his locus to intervene. He would refer to page 529(A) and 433(A) of the paper book to show that three thousand eight hundred shares were admitted by the then management of the company. He drew our attention to an application made before us recording the death of one of the heirs of Amita wherein the company was represented by one Chandan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the photostat copy did not have the punching mark that would doubt the genuiness of the authority. Relevant Provisions of Law : 28. Sections 397, 398 and 399 read together would enable the shareholder to bring proceeding as against the company and its management against oppression and mismanagement. As a pre-requisite, the applicant must have in aggregate 1/10th of the total shareholding or the number of shareholders. It could be said to be a representative action on behalf of the shareholders at large who subscribed to the same view as the petitioner had. To that extent, it was an action in rem. It could be an action in personem as well. In case of oppression, it might be a joinder of causes of action where different petitioners might have different grievance. What would be necessary to maintain a proceeding, is their grievance culimiated together would raise a pointer to the persons having management and control of the company and would suggest oppression of a class of shareholders and/or mismanagement of the affairs of the company. The primary requisite to maintain the proceeding was to make out a case as to a situation just and equitable for the company to be wound up in vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Computers (I) (P.) Ltd. [2011] 107 SCL 377/11 taxmann.com 172 (SC) and in the case of Piyush Kanti Guha (Supra). The Division Bench of this Court, in this case, declined to stay the proceeding brought for an identical cause of action when a proceeding under Section 155 was pending. The Division Bench held, when the main relief sought for in the company petition was on the ground of oppression and framing of scheme and appointment of Directors which was distinctly different from the relief asked for in the civil suit restraining some Directors nominated by the Government from functioning, stay of the proceeding in the company petition could not be granted. Mr. Chatterjee relied on the decision to counter act the contention raised against him about his locus to make the prayer for intervention during pendency of his suit on the identical cause of action. In our view, the contention of Mr. Chatterjee is misplaced. If we look to the original grievance of Amita it was a personal grievance against the management as her husband's shares were not being looked after. She was not allowed to be mutated in her husband's place. Such grievance was absolutely personal and Ajit could not have any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew, 'no' as the person who is challenging the authority himself has no locus to approach the Court of law. The company applied for dismissal of the proceeding. The company approached the Court through Sujit. No rival claim is made before this Court by any person competent to question his authority. The company did not deny his authority, so is the present management. Ajit is yet to acquire right to claim any interest in the company. Hence, this judgment would be of no assistance to him. In any event, a defect of the like nature could be cured through rectification/ratification as held by the Apex Court in United Bank of India (Supra). 31. Whether a proceeding has a representative character or not, three tests are suggested by the English decision in J. Bollinger S.A. (Supra), they are - (i) Commom grievance (ii) Commom interest (iii) Commom beneficial remedy 32. If all the three tests are satisfied a proceeding can be said to be representative action. The decision would also say that even if there was any common grievance and/or interest the Court had a discretion to refuse substitution and/or addition. Similar view was taken by the Madras High Court i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him should be dismissed. The records would depict that the proceeding pending for last twenty-seven years could not be disposed of as the parties did not take any effective step in getting the said matter heard. Even if no one would actively approach the learned Judge for its withdrawal or dismissal it would in course of time be dismissed as infractuous. Only question germane today is whether such eventuality can be resisted by the appellant. We have already dealt with the question and hold it 'no' that would seal the fate of the appellant. 35. The learned Judge observed, Sujit's authority was not challenged contemporaneously as the company was also represented by Sujit in earlier proceeding when Ajit did not raise any objection. Mr. S.B. Mukherjee, learned senior counsel relied on the decision in the case of Turner Morrison & Co. Ltd. (Supra). A suit was filed by the Secretary on behalf of the company. The Court found that the resolution was manipulated, even then declined to dismiss the said suit. He also relied upon the English decision in the case of Alemander Ward & Co. Ltd. (Supra). In the said decision the proceeding was held to be good when there was subsequent ratificati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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