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TMI Blog2015 (11) TMI 133X X X X Extracts X X X X X X X X Extracts X X X X ..... the aspect of demerger for the present cannot ipso facto be an impelling factor to conclude in favour of allegation of oppression and mis-management as made by the respondent No. 1. As in the course of hearing, some grievance was expressed on behalf of respondent No. 1 that her status as the Executive Director of the company, stands undermined due to uncalled for surveillance imposed at the instance of the existing Board of Directors, we make it clear, as has been assured before us, that she ought to be allowed to function in the aforesaid capacity being provided with all facilities and privileges attached to the office as permissible in law, so much so that she does not have any occasion to complain in this regard. This indeed ought to be in accord with the letter and spirit of the undertaking offered by the Board of Directors to the CLB. The respondent No. 1 too would cooperate in the day to day management of the affairs of the company in her said capacity. The existing Board of Directors would also abide by the undertaking as recorded in the order dated 6.8.2014 of the CLB qua the alienation of the assets of the company. The set-up of the Board of Directors and the arrangemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is recorded in the order dated 21.7.2015, on instructions, vouched that the day-to-day functioning of the company, however would be allowed to continue. The appeals, in this backdrop have, thus, been analogously heard on merits for disposal. 4. We have heard Mr. P.S. Raman, learned senior counsel for the appellants in Civil Appeal arising out of S.L.P. (C) No. 12831 of 2015 (who are also respondent Nos. 4 5 in SLP (C) No. 12835 of 2015 and 5 6 in SLP (C) No. 20338 of 2015), Mr. Shyam Divan, learned senior counsel for the appellant in Civil Appeal arising out of S.L.P. (C) No. 12835 of 2015 (who is also respondent No. 5 and 4 in SLP (C) No. 12831 of 2015 and SLP (C) No. 20338 of 2015 respectively), Mr. P.P. Rao, learned senior counsel for the appellant in Civil Appeal arising out of S.L.P. (C) No. 20338 of 2015 (who is also respondent No. 6 in S.L.P. (C) Nos. 12831 of 2015 and 12835 of 2015) and M/s. Parag P. Tripathi and Sajan Poovaiah, learned senior counsel for Dr. Renuka Datla ( respondent No. 1 in all the three Appeals). 5. Since the judgment under challenge is same in all the appeals, for the sake of convenience, the facts are being taken from Civil Appeal arising ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted as the Director of the company to fill up the casual vacancy caused by the death of Dr. Vijay Kumar Datla. Mr. G.V Rao (respondent No. 6), was authorised, inter alia, to verify all acts and deeds as would be necessary, expedient and desirable to give effect to the resolutions adopted. 10. Thereafter, on 10.4.2013 and 11.4.2013 as well, meetings of the Board of Directors of the company were held. In these meetings also, respondent No. 1 did not attend and leave of absence was granted. In the meeting dated 10.4.2013, along with two directors namely; Mr. G.V. Rao (respondent No. 6) and Ms. Indira Pusapati (respondent No. 5), Mrs. Purnima Manthena (respondent No. 4) and Ms. Mahima Datla (appellant), amongst others, were present. The meeting took note of a will dated 14.2.2005, said to be executed by Dr. Vijay Kumar Datla in favour of Ms. Mahima Datla (appellant) and resolved to transmit the equity shares held by him and as referred to in the aforesaid will, in favour of Ms. Mahima Datla (appellant). In the same meeting, it was further resolved to appoint Ms. Mahima Datla (appellant) and Ms. Purnima Manthena (respondent No. 4) as the Additional Directors of the company, to hold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, a Memorandum Of Undertaking to this effect and requested the company to effect transmission of shares in their favour, on the said basis. 14. Incidentally on the same day i.e. 24.5.2013, a meeting of the Board of Directors was convened in which, as respondent No. 1 was absent, leave of absence was granted to her. In the said meeting, amongst other, taking note of the Memorandum Of Understanding referred to in the aforementioned letter dated 24.5.2013 signed by the respondent No. 1 and Mrs. Purnima Manthena (respondent No. 4), Mrs. Indira Pusapati (respondent No. 5) and Ms. Mahima Datla (appellant), 4594 equity shares held by Dr. Vijay Kumar Datla (HUF) were transmitted in their favour in equal shares. 15. A meeting of the Board of Directors was thereafter convened on 22.8.2013 of which a notice was served on the respondent No. 1. She did attend the meeting albeit with reservations, whereafter through a host of letters, addressed to the Board of Directors, she highlighted her objections, inter alia, to the validity of the meetings held on 9.4.2013, 10.4.2013 and 11.4.2013 in particular and the resolutions adopted therein. 16. On the receipt of notice of the Annual Genera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w management taking over the company nor any change in the shareholding pattern of the company and concluded in the context of Section 409 of the Act that respondent No. 1 had not made out any ground for grant of any interim relief, as prayed. Noting the assertion of the respondents therein that the company had the necessary reserves to meets its debts and that Mahima Datla (appellant herein) had stood as a guarantor for the loans obtained from the banks, the CLB was, thus, of the view that the apprehension of the respondent No. 1, as expressed, was not substantiated by any documentary evidence. Having recorded that the respondent No. 1 was continuing as the Executive Director of the company and that Mahima Datla (appellant herein) being associated with its affairs was well acquainted therewith and that in the proposed Annual General Meeting to be held on 18.12.2013 (which got deferred to this date from 28.11.2013), the company was going to transact the business, as notified, which did not disclose any proposed change in the management or the ownership or taking over by external agency, the CLB declined to grant stay of the said meeting. This was more so, in view of the statutory m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1956 and Sections 58 and 59 of the Companies Act, 2013. As the pleaded assertions made therein would attest, those were in substantial reiteration of the facts narrated hereinabove, with the added imputation that the respondents therein were contemplating to transfer and consign the undertakings of the company to other companies incorporated and managed by the appellant herein and other Directors so as to enable them, to dispose of the said assets through their companies and appropriate the proceeds to their benefits to the irreparable loss and detriment to the company i.e. Biological E. Limited and its genuine shareholders. She, however admitted, that the concerned Directors in the meanwhile, had filed a scheme of arrangement under Sections 391 to 394 of the Act before the High Court of Andhra Pradesh for demerger of the undertakings of the company as listed out in the said petition. A copy of the scheme of arrangement was also appended to the petition alleging over all mis-management and oppression by the Directors therein in particular, consciously driving the company and its shareholders to a state of ruination chiefly through the process of demerger. The respondent No.1 praye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enation of immovable properties of the company, the CLB recorded the submission on behalf of the respondents therein that there was no intention to do so vis-a-vis the movable and immovable properties of the company except that may arise under the scheme of demerger. In response to the submissions made on behalf of the respondent No. 1 that she ought not to be removed from the post of Executive Director, it was submitted on behalf of the respondents therein that no step would be taken to dislodge her without the leave of the CLB. Taking note of these submissions/undertakings, the CLB ruled that the respondent No. 1 had not been able to make out any case for grant of interim relief at the time of mentioning of the Company Petition and permitted the respondents therein to file their counter within a period of six weeks and fixed 9.10.2014 to be the next date. 23. The respondent No. 1 herein, being aggrieved, preferred an appeal being Company Appeal No. 17 of 2014 which has since been allowed by the judgment and order dated 15.4.2015 impugned in the instant batch of appeals. 24. The High Court, as the decision assailed would reveal, traversed the entire gamut of the facts invo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also of the Annual General Meeting conducted on 18.12.2013, the claim made by the respondent No. 1 in her suit based on a will claimed to be executed in her favour by Dr. Vijay Kumar Datla (since deceased), the letter dated 15.4.2013 written by the respondent No. 1 as well as the accusation of manipulation of the transfer of the majority of the shares of the company in favour of Ms. Mahima Datla (appellant). It held in no uncertain terms, that in fact there was no Board of Directors legally in existence, thus necessitating a workable arrangement for regulating the conduct of the affairs of the company. Having regard to the contesting claims to the shares on the basis of two wills and the pendency of the suit instituted by the respondent No. 1, the High Court construed it to be appropriate to proceed on the premise that the appellant, her sisters and the respondent No. 1 had more or less equal shares. In the backdrop of this determination, the High Court, being of the view, that it would be preferable to make an interim arrangement to conduct the administration of the company, without the induction of an outsider as an administrator/receiver, issued the above-mentioned directions t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the issues, taking note of the undertaking offered on behalf of the appellants regarding the alienation of the properties of the company and the assurance of the office of the Executive Director of the respondent No. 1, there was no finding based on any adjudication and thus no question of law did emanate to permit an appeal therefrom under Section 10F of the Act. 31. Without prejudice to these demur, the learned senior counsel for the appellants emphatically argued that not only in the attendant facts and circumstances, Mr. G.V. Rao did lawfully continue as the Director of the company, he having withdrawn his resignation prior to the date of the meeting on 9.4.2013, they urged as well that all the meetings of the Board held on or from 9.4.2013 including the Annual General Meeting were to the full knowledge of respondent No. 1 and the contentions to the contrary, are factually untenable. Referring to the letter dated 15.4.2013 of the respondent No. 1, whereby she acknowledged the induction of the Mahima Datla (appellant) as the Managing Director of the company and her two other daughters as the Directors of the company, wishing them success on the new venture, they maintaine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erfered with. 32. To endorse the above pleas, the following decisions were pressed into service: 1 . V.S. Krishnan and Others etc. v. Westfort Hi-tech Hospital Ltd. and Others etc . (2008) 3 SCC 363 2. Wander Ltd. and Another v. Antox India P. Ltd. 1990 (suppl.) SCC 727, 3. Election Commission of India and Another v. Dr. Subramaniam Swamy and Another (1996) 4 SCC 104 4. The Commissioner of Income Tax, Bombay v. The Scindia Steam Navigation Co. Ltd. 1962 (1) SCR 788 5. Lalit Kumr Modi v. Board of Control For Cricket in India and others (2011)10 SCC 106 6. Banku Chandra Bose and another v. Marium Begam and another AIR 1917 Cal 546 7. Gokaraju Rangaraju v. State of A.P. (1981) 3SCC 132 8. State of Punjab and others v. Krishan Niwas (1997) 9 SCC 31. 9. A.R. Antulay v. R.S. Nayak Another (1988) Suppl. 1 SCR1 33. In emphatic repudiation, the learned senior counsel for Mrs. Renuka Datla (respondent No. 1) assiduously insisted in favour of the maintainability of the appeal before the High Court under Section 10F of the Act. They urged, that the denial of interim relief by the CLB in the attendant factual conspectus, was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 10F of the Act was unquestionably maintainable. According to the learned senior counsel, the contemplation of the demerger of the company did signal imminent cleavage of its vital assets to reduce it to a carcass for the unlawful gain of a selected few though unauthorisedly at the helm of affairs, warranting the substitution of Board of Directors by the ad hoc body as effected by the impugned order. The following decisions were cited in buttressal: 1. Raj Kumar Shivhare v. Assistant Director, Directorate of Enforcement and Another (2010) 4SCC 772, 2. Waman Shriniwas Kini v. Ratilal Bhagwandas Co. (1959) Suppl. 2 SCR 217. 3. V.S. Krishnan and Others etc. v. Westfort Hi-tech Hospital Ltd. and Others etc . (2008) 3 SCC 363 4. Dale Carrington Invt. (P) Ltd. and Another v. P.K. Prathapan and Others (2005) 1 SCC 212. 5. Pankaj Bhargava and Another v. Mohinder Nath and Another (1991) 1 SCC 556 . 34. In their short reply, the learned senior counsel for the appellants maintained that not only the issue of demerger is subjudice in a different proceeding before the High Court under the Act, and thus could not have been taken note of qua the allegatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reference is extracted hereunder: 10F: Appeals against the order of the Company Law Board. Any person aggrieved by any decision or order of the Company Law Board [made before the commencement of the companies (Second Amendment) Act, 2002] may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. 38. As the quoted provision would reveal, a person aggrieved by a decision or order of the CLB, may file an appeal before the High Court within 60 days from the date of communication of the decision or order to him on any question of law arising out of such order. The period of limitation prescribed, however, is extendable by the High Court by another 60 days on its satisfaction that the appellant had been prevented by sufficient cause in doing so. 39. The expression decision or order and any question of law arising out o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question as to whether on the facts as noticed by the Company Law Board and as placed before it, its conclusion was against law or was founded on a consideration of irrelevant material or was as a result of omission to consider the relevant material. 43. Adverting to the right of appeal, as a creature of statute, as provided by Section 35 of the Foreign Exchange Management Act, 1999, this Court in Raj Kumar Shivhare (supra) held that the expression any decision or order did mean all decision or order . While extending this interpretation to the expression any decision or order applied in Section 35 as above, to dismiss the plea that such an appeal is contemplated only from a final order, this Court distinguished a right of appeal as a creature of statute from an inherent right of filing a suit, unless barred by law. It was underlined that while conferring such a right of appeal, a statute may impose restriction or condition in law, limiting the area of appeal, to question of law or sometime to a substantial question of law and ruled that whenever such limitations are imposed, those are to be strictly adhered to. 44. This Court in Wander Ltd. (supra), while dealing with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained, to ascertain the emergence and existence of a question of law, the scope of examination thereof by a court of appellate jurisdiction and the balancing of the competing factors in the grant of interlocutory remedy, hallowed by time, indeed are well settled. A question of law, as is comprehended in Section 10F of the Act, would arise indubitably, if a decision which is the foundation thereof, suffers from perversity, following a patent error on a fundamental principle of law or disregard to relevant materials or cognizance of irrelevant or non-germane determinants. A decision however, on the issues raised, is a sine qua non for a question of law to exist. A decision logically per-supposes an adjudication on the facets of the controversy involved and mere deferment thereof to a future point of time till the completion of the essential legal formalities would not ipso facto fructify into a verdict to generate a question of law to be appealed from. However, an omission to record a finding even on a conscious scrutiny of the materials bearing on the issues involved in a given case, may be termed to be one. Be that as it may, in any view of the matter, the appellate forum though ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceeding before the lower forum, if the order impugned is purely of interlocutory nature, and does not decide any issue on a consideration of the rival assertions on merits, stands aborted and is rendered superfluous for all intents and purposes. 47. Reverting to the present facts, noticeably the parties are contentiously locked on several issues, legal and factual, a brief outline whereof has been set-out hereinabove. While seeking the intervention of the CLB on the key accusation of oppression and mis-management as conceptualised in Sections 397 and 399 of the Act, the respondent No. 1 had retraced the march of events from 9.4.2013, the date on which, according to her, when the meeting of the Board of Directors, invalid in law, was convened and conducted by Mr. G.V. Rao , who allegedly had no authority to do so, he having resigned from the company. She had asserted her express and implicit reservation in this regard and her disapproval not only of the constitution of the Board of Directors since then but also of the decisions taken from time to time. Without recapitulating the stream of developments that had occurred, suffice it to mention, that after a series of intervening ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of judicial discretion at the stage of mentioning, in our view, bearing in mind the permissible parameters of exercise of appellate jurisdiction in such matters, the elaborate pursuit so undertaken by it, is neither contemplated nor permissible. The High Court, in any view of the matter, was not dealing with a regular appeal under Section 10F of the Act on a question of law from a decision rendered by the CLB on merits, after a complete adjudication. The appeal before it, being one on principle and from an order rendered by the CLB in the exercise of its discretion at the preliminary stage awaiting the pleadings of the respondents therein, we are of unhesitant opinion that the scrutiny in the appeal ought to have been essentially confined to the aspects of which the CLB had taken cognizance, to pass its order at that stage, and not beyond. 49. As it is, though a colossus of facts with the accompanying contentious issues are involved, having regard to the stage at which the order of the CLB had been passed, no exhaustive examination of the factual and legal aspects ought to have been undertaken by the High Court to record its conclusive deductions on the basis thereof. Keeping in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he High Court, without observing any final opinion on the merit of the contrasting assertions. In our comprehension, having regard to the relief provided by the CLB by its order dated 6.8.2014 to the parties, it ought to be left to decide the petition on merits after affording them a reasonable opportunity of furnishing their pleadings. As in the course of hearing, some grievance was expressed on behalf of respondent No. 1 that her status as the Executive Director of the company, stands undermined due to uncalled for surveillance imposed at the instance of the existing Board of Directors, we make it clear, as has been assured before us, that she ought to be allowed to function in the aforesaid capacity being provided with all facilities and privileges attached to the office as permissible in law, so much so that she does not have any occasion to complain in this regard. This indeed ought to be in accord with the letter and spirit of the undertaking offered by the Board of Directors to the CLB. The respondent No. 1 too would cooperate in the day to day management of the affairs of the company in her said capacity. The existing Board of Directors would also abide by the undertaking a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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