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TMI Blog2013 (7) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... did not apply His Lordship’s mind on the issue. His Lordship did not assign any reason why it would be unsafe to rely on the support of Gaggar when it was in consonance with the wishes of the beneficial owners. Mr. Gaggar never raised his finger towards the transactions. He denied having read the petition. Even if we give full credence to what he had said, such positive averment on behalf of Chatterjees in their petition would be superfluous as it was not the legal necessity. Thus the petition filed by Chatterjees maintainable. Hence, BDPL would be entitled to be transposed and/or substituted in place of Chatterjees in the proceeding & direct the department to substitute BDPL as the petitioner with permission to proceed with the application - request the Single Judge to give priority to the matter as it was pending for last 22 years. - A.P.O. No. 346 of 1996, A.P.O No. 347 of 1996,C.P. No. 222 of 1991 - - - Dated:- 10-6-2013 - Ashim Kumar Banerjee And Mrinal Kanti Chaudhuri,JJ. For the Appellant : Mr. S.K. Kapoor, Senior Advocate, Mr. Jishnu Saha, Advocate,Mr. Debangshu Basak, Advocate, Mr. Ravi Kapoor, Advocate, Mr. Pawan Kumar Jhunjhunwala, Advocate For the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Power of Attorney Lodha was empowered to deal with the shares. Gaggar, by a subsequent letter, confirmed having executed the power of attorney as irrevocable one. LITIGATION: The dispute arose between Chatterjee family and Roy family. Chatterjees wanted to bring action against the company. They did not have the requisite shareholding. They obtained support from Lodhas. Lodhas gave consent to Chatterjees to file the petition. With the support of Lodhas, Ajit Kumar Chatterjee and his brother Arghya Kusum Chatterjee filed an application to this Court under Section 397 and 398 of the Companies Act 1956 inter-alia alleging mismanagement of the affairs of the company and complaining oppression to the minority shareholders. They also challenged allotment of 30,000 equity shares. The learned Judge passed interim order as against Peerless. Peerless filed an application for dismissal of the proceeding questioning its maintainability. The learned Judge concluded the hearing on the preliminary issue and proceeded to hear the matter on merit. Peerless filed an appeal. The Court of appeal did not interfere. The learned Company Judge concluded the hearing and delivered the judgment holding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oy by themselves and through their associates. The petitioners were critical about allotment/issuance of 30,000 equity shares that would tilt the balance, according to them. In 1987, the authorized paid up Share Capital was Rs,73,61,200 however, with a Special Resolution passed under Section 81A of the Companies Act 1956, the Board of Directors issued 30,000 shares. No notice of such meeting was given to Chatterjees. Moreover such issuance of shares would require appropriate approval from the authorities under the MRTP Act that the management failed to obtain. His Lordship recorded each and every contention of the parties as well as the citations relied on by them. The learned Judge, after recording the rival contentions held, the petition was not maintainable as the petitioners did not have requisite share qualification. On the issue of supporters, His Lordship observed, It would be unsafe on the part of the Court to entertain this application on behalf of R.L. Gaggar as also Bhagwati Developers Private Limited as supporters of the petitioners in instituting these proceeding. Thirty one pages judgment would record the rival contentions of the parties and an observation of Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Timblo Irmaos Limited, Margao Vs. Jorge Anibal Matos Sequeira and another reported in All India Reporter 1977 Supreme Court Page-734. 3. Syed Abdul Khader Vs. Rami Reddy and others reported in All India Reporter 1979 Supreme Court Page-553. 4. Killick Nixon Limited Ors. Vs. Bank of India Ors. reported in Bombay High Court 1985 Volume-57 Company Case Page- 831. 5. M/s. World Wide Agencies Private Limited and another Vs. Mrs. Margarat T. Desor and others reported in All India Reporter 1990 Supreme Court Page-737. 6. P. Punnariah Ors Vs. Jeypore Sugar Company Limited Ors. reported in 1994 Volume-4 Supreme Court Cases Page- 341. 7. Dale Carrington Invt. Private Limited Another Vs. P. K. Prathapan Others reported in 2005 Volume-1 Supreme Court Cases Page-212. 8. J. P. Srivastava Sons Private Limited Others Vs. Gwalior Sugar Company Limited Others reported in 2005 Volume-1 Supreme Court Cases Page-172. Citing the decisions Mr. Kapoor would contend, Section 153C was diluted by Section 399 of the new law that would not put any obligation on the supporter to read the petition and take responsibility of the averments. In the case of Rajahmundry Electric Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to him, the company and all concerned would only recognize someone as a member of the company having distinctive share, once his name entered into the shareholders Register. So long shareholder was not registered with the company, the company was not obliged to recognize him. According to him, such position of law was prevalent till the date when the corporate law was amended to give right to the beneficial owner. Mr. Gupta would contend, we should not take any note of such amendment as this petition was filed admittedly before the amended law coming into force. Section 399(3) would require consent in writing from members to have their support. Under Rule 88 the Letter of Consent was to be annexed to the petition. Elaborating his submissions on the point of law as discussed above, Mr. Gupta was critical about the decision in P.Punnariah (supra). According to him, the Apex Court perhaps misconstrued the provision before making the observations, the law was changed with regard to the support. Significant to note, Section 153 C of the old law and Section 399(3) of the new law would both require consent in writing to extend support to the petitioning member for oppression and mism ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etson) and 1987 Volume-II Supreme Court Cases page-654 (Skandia Insurance Co. Ltd. Vs. Kokilaben Chandravadan Ors.). On the construction of the Power of Attorney he would also rely on Killick Nixon (supra) particularly the observation of the Bombay High Court appearing at page-853 wherein the Bombay High Court considered the Power of Attorneys to find out the true purport of it. Deliberating on the Power of Attorney, Mr. Gupta would contend, in case clause 1 could not help, the general clause could not extend the power as the general clause could not override the main clause describing the main purpose. He would lastly draw support from the Apex Court decision in the case of Timblo Irmaos Limited (supra). Paragraphs 11 and 18 were relied upon to support, general words cannot be construed so as to enlarge restricted powers therein mentioned. He would lastly distinguish Rajahmundry (supra) by observing, in view of his argument so advanced with regard to shares of R.L. Gaggar, the decision would have no application. He would lastly contend, the shares of Chatterjees should also be kept out of the purview as they did withdraw their grievance against the company. He informed, the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be disputing the well settled rule of construction of a document. OUR VIEW LAW ON THE SUBJECT : Considering the cases cited at the bar, our understanding of the law is: i) Section 399 would make a petition maintainable even if the petitioners do not have the requisite share ratio provided they would get support from others to make good the short fall. ii) The Section would only require express consent being given to he made part of the petition in Form No. 43 and 44 of the Company (Court) Rules 1959. It would not be necessary for the supporter either to file petition and/or pleadings expressing their support or read and confirm the petition that would be filed by the petitioner. A letter of consent would be enough that should be annexed with the petition. iii) The shares held as on the date of filing of the petition should only be considered while filing and/or supporting a petition under Section 397 and 398. Subsequent change in ratio, is immaterial. iv) Once the Chatterjees were already in the roll of the shareholders having distinctive number of shares that would be enough to extend support on the basis of the shares held by them. There would be no FERA violatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same. If we look to the age old decision in the case of Glynn (supra) we would find, looking at the whole of the instrument, and seeing what one must regard, for a reason which I will give in a moment, as its main purpose, one must reject words, intend whole provisions, if they are inconsistent with what one assumes to be the main purpose of the contract . The Apex Court in Timblo Irmaos Limited (supra) observed in paragraph 18, general words following words conferring specifically enumerated power cannot be construed so as to enlarge the restricted powers there mentioned . The words highlighted and underlined in clause 1 of the general Power of Attorney quoted (supra) could not run contrary to the main purpose of the Power of Attorney. On a plain reading of the Power of Attorney, it would appear the Power of Attorney was signed by Gaggar to facilitate compliance all formalities of registration of the shares as also the utilization of shares so long it was not registered with the company. Mr. Gupta would contend, the company could not recognize someone who would claim to be the beneficial owner. Share is a moveable property. Once the share was sold the purchaser would have e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the erstwhile owner was appropriate. We wish to view this problem from a different angle. Could Gaggar do anything contrary to the interest of the purchasers? The answer is definitely in the negative. Existing right cannot be unlawfully suspended. A shareholder has every right to support a petition of the like nature. Gagar admittedly sold his shares to Lodha being BDPL. We do not find any reason or hindrance in getting their support to file the petition by the Chatterjees. RATIO DECIDED IN P. PUNNARIAH (SUPRA): Two Judge Bench decision of the Apex Court was placed by Mr. Gupta as well as by Mr. Kapoor with different connotation. Mr. Gupta would say, Justice Hansaria while concurring, made observation, he accepted the argument of Mr. Sibal that would support him. Mr. Kapoor would however contend, Justice Jeevan Reddy categorically rejected the contention of Mr. Sibal. Justice Hansaria concurred the said decision, agreed with the ultimate conclusion that rejected the contention of Mr. Sibal. Hence, Mr. Gupta s interpretation was not correct. Since controversy arose we need to discuss in detail the decision in P. Punnariah (supra). The daughter was holding the shares. She was s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us statute. Section 153C may not be of so much importance to us as it would relate to the repealed law. Section 399(3) would require consent in writing from the shareholders Mr. Gupta would contend, such consent must be backed up by application on mind and such application of mind could never be had once the supporters would not go through the petition and appraise themselves about the allegations made by the petitioners. We do not subscribe to the said idea. The law would require, consent must be in writing. The Letter of Consent should be annexed. It is true, such consent must have application of mind when supporters would give consent to the petitioner. The Court would presuppose, the supporters applied their mind unless the supporters themselves come to Court and say otherwise. Once support was given in writing that must be taken into account while computing the total holding of the petitioner in maintaining a petition of the like nature. The law would not require supporters to read the petition and vouch for the same. Mr. Gupta s argument on the issue might sound logic. It would be for the Legislature to consider. We do not find any scope to deny a supporter who applied the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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