9911796707
TMI Blog1964 (12) TMI 58X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 under the India Companies Act, 1913 [VII of 1913]. The Memorandum of Association and the Articles of Association of the petitioner - company are annexed and document No.2 to the petition. It appears that the authorized capital of the company is Rs. Ten lakhs divided into [a] 38,000 ordinary shares of ₹ 25/- each and [b] 25, 000 Deferred shares of ₹ 2/- each. The issued and subscribed capital of the company is ₹ 7, 88,175/- divided into 31,257 ordinary shares of ₹ 25/- each and ₹ 50,000/- divided into 25,000 deferred shares of ₹ 2/- each admittedly, the Table A in the first schedule to the Indian Companies, Act 1913, was adopted in the large way, and as regard the voting right in respect of the these shares, the result was that each holder of an ordinary of share of ₹ 25/- each holder of the deferred share of ₹ 2/- was entitled to the same voting rights, namely, one vote for the each share owned by him. The whole of the deferred share capital of ₹ 50,000/- was owned by the five person. In anticipation of the coming into the force of the companies Act 1956, the petitioners company made an application to the central Government in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioner - Company and that the exemption of who no longer required in the public interest, and on the basis of these recitals and in purported exercise of the powers reserved to it under sub - section [4] of the section 89, the central Government of rescinded on the order of exemption dated July 29, 1957 certain correspondence and representations of behalf of the petitioners - Company were therefor addressed to the central Government details of which it is unnecessary to refer here. Having not succeeded in its representations the petitioners company ultimately filed in this petition of July 4, 1962, Challenging the validity of the above order of rescission of the exemption dated March 24, 1962. (4) The substances of the main contention made in the petition is as follows: There is no power under sub - section [4] of section 89 of the act in the Central Government to revoke and withdraw an exemption of granted under the sub -section. Having regard to the time - limit mentioned in sub - section [1] and [3] of section 89 and in respect whereof exemption could be granted under sub - section [4] upon expire of the time limit specified in sub - section [1] there can be no power expre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the contentions made in the petition on the footing of the contents of section 85 to 90 of the Act. The arguments advanced have all been about the true effect and constructions of the provision of in Section 89. It is therefore convenient to refer in to these section first before mentioned how to the arguments of were developed. These section fallen part IV of the act relating to share Capital and Debentures . This part begins with S. 82. The first three sections relate to the nature of the shares. Numbering of shares and certificate of shares. The headings of the portion beginning with section 85 is Kinds of the share capital Section 85 defines preference share capital and equity share capital section 86 provides that the share capital of a company limited by shares formed after the commencement of this act, or issue after the such commencement shall be of two kinds only, namely [a] equity share capital and[b] preferences of share capital section 85 to 89 have a bearing and affect of voting rights attached to bearing and inter ail deferred to shares issued i.e. brought into existence's prior of the date of the commencement of the Act. These voting right are specifical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore voting rights in excess of what would have been exercisable by the if the capital paid up on respect of the following resolutions of placed before the company. [The resolutions of mentioned relate to the appointment of a director or of a managing agent of the secretaries and treasurers of agreements in respect of the these matters to the appointment of buying or selling agents, and to the grant of loan's such other matter.] [3] If by reason of the failure of the requisite of proportion of the any class of members of the agree it is not found possible to comply with the provisions of sub section [1] the company shall within one month of the expiry of the period of one year mentioned in that sub - section apply to the court for an order specifying the manner in which the provisions of the that sub section shall be complied with and any sub section shall be complied with behalf of shall bind the company and all its share holder. If default is made in complying with this sub section the company of any ever y officer of the company who is in default, shall be punishable with fine which may extend to one of thousand rupees. [4] The Central Government of may in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons is one fulfilled apply to the facts and circumstances of 'at the date of the commencement of the act . These circumstances is granted. He submitted at one stage that the orders of exemption of would be quasi - judicial orders but has at a later stage of the proceedings not pressed that contention. His submission is that the power of exemption vested under sub - section [4] in the central government to be exercised for the interest of the company is to be exercised for the reasons of [I] public interest, or [ii] the interests of the company, or [iii] of any class of shares - holders and this powers when exercised decides finally matter which cannot be reconsidered. These adjudications of and opinion, deal, finally and once for all with rights to property and for the reason there can be no warrant for revoking and / or rescinding them. In developing his arguments, he has mainly emphasized the consequences of the period of the one year mentioned in sub section [1] and [3]. He relied upon the fact that the orders made on the Table of the Parliament. He relied upon the provisions of in section 25[3][b] and 250[5] of the act. He has relied upon section 637-A which was pointed out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of the sub section [3] shall within one month of the expiry of the period of the one years of mentioned in that sub section apply to the court meant the should be read as Within one month of he expiry of the period of the one year from the revocation and / or rescission of he order the exemption . He developed this contention by referring to some authorities of where the phrase the commencement of the this act has been considered. We will presently of refer to these authorities. His case was that having regards of the provisions in section 14 of the General Clauses of act he power of contained in sub -section [4] could from time to time be exercised and that under section 21 of the same act there was implied right to withdraw orders made of previously. It is not necessary that the conditions of the time - limit of contained in sub section [1] should continue to exist for exercising the powers of exemption under sub -section [4]. He denied that the provisions of the section 637-A were held full to the petitioners. (9) The clients of Mr. Bobde being a groups of share - holders had applied to be made parties of this petition on 8-9-1964. That application was first made in A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the section 10[1] of the act arguments of he relied upon section 21 of the General Clauses act. It is convenient to quote the section here : Where, by any Central Act or Regulations, a power to issue notifications orders, rules or bye - law is conferred then that powers includes a power, exercisable in the like manner and subject to the like sanction of and condition [if any], to add to, amend vary of rescind any notifications orders, rules or bye - laws so issued. Now, in connection with this contention the supreme court observed. It is well settled that this section embodies a rule of constructions of the question of whether or not it applies to the provisions of a particular statutes, would depend on the subject - matter, context, and the effect, of the relevant of provisions of the said statute. In other words it would be necessary t examine carefully the scheme of the Act, its object of the and all its relevant of material provisions of before deciding whether by the applications of the rule of construction enunciated by the Section 21, the on construction of justified that the powers to cancel the reference made under section 10[1] can be said to vest in the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies holding shares issued before the date of the commencement of the act. It is clear note reading of section 90 that nothing in the above two section or even section 89. This provision of in section 90 is clear and unambiguous. In considering the rights of deferred of share - holders of any company of the courts would-be bound to give effect of the to above I saving provisions is section 90. Now it is also clear on a reading of section 90 that the voting rights of existing companies are liable to the altered in the only prescribed manner that section 89 and not otherwise. If the above is the effect of the predicate of arguments that the provisions sub section [1] and [3] of section 89 of the do not created in fresh obligations and are merely Machinery sections . It is difficult to accept of this contention of the rights of the offered share holder are to not protected by section 90 and that they are infact and for all purposes having regard to the provisions section 87 and 89 of the act governed by section 87. The contention of that there is now obligations the created under section 89, and seem to us justice having regard to the languages of sub section [1] and [3] of section 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period of one year mentioned of the that sub section. The question is. It is the permissible to construe this provisions of the read within one month of the expiry of he period of one years from the date of the revocation of exemption granted under sub section [4] as suggested by the Mr. Bhabha? The languages the sub section is clear. The obligations of that is cast on the defaulting companies sub section within on with in one month of the expiry of the period of one year. The provisions has relation with the next sub paragraph in the sub section which makes it an offense of not to make such an application. This phrase in the sub section directly refers to the period of the one years mentioned in sub section [1]. That period as we have already pointed out is if one years from the amendment of the Act. Obviously the date of the commencement of the act must for all purpose remain the same. In this case it was April 1, 1956 According to Mr. Bhaba, when this phrase is incorporated in sub section [3] the period of mentioned in sub section [1] is the refereed to any incorporating in sub section [3] the period of the one year has no relevancy of the date of clear commencement of the act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and the direct application of these section was specified avoided. It was for this reason that in sub section [3] courts were invested with the powers which are altogether of new. The memorandum of association and articles of associations of law of the and articles of association of law at all. In regard to companies which defaulted in carrying out the obligations created by section 89, provision was made in sub - section [3] to empower the court to get the memorandum and articles altered, and in that connection, to make orders specifying the manner of in which the same had to be done. In other words the court was empowered to overlook if necessary the relevant provisions of the memorandum and articles of different of companies as also the scheme of the Act for the alternation of these documents. It is thus clear that the provisions of in section 87 were not made [directly] applicable so as to affect voting rights of the share - holders of in respect of the shares issued before the commencement of the Act. (18) What we have discussed above goes to emphasize the fact that on the true construction of sub - section [4] of section 89 the exemption that can be granted under that s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the method and manner of alteration of association. Reference of this connection can be made by Section 16 and 17, as also section 31. It is necessary to remember that where rights of different of classes of share holders are to be affected the provisions for alternation of articles are more stringent of as can be ascertained by reading section 106 and 107. Indirect reference of to theses section is contained in sub section [3] of section 89 and when it state 'If, by reason of the failure of the requisite of proportion of any class of members of the agree its not found possible to comply with the provisions of sub section [1]. (21) The rights of the voting in an important of right and by study of the various of relevant of section of the Act, it can with ease be ascertained that protection of such right is the subject matte of the diverse of section of the act. There is provision of for exerting right to vote so as to affect the whole administration of companies. (22) The consequence of provisions in act relating to general meetings of the share holders of and the rights of voting of the share holders at these meetings and that rights of the general meetings of appoint di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 89 was of apparently to deal with the mischief held of disproportionately of excessive of voting rights held by share holders by in proportion of the capital contributed by them as against other share holders who made excessive other share holders larger contribution of to the capital of the company. Even so, under sub section [4] of section 89 a right has been conferred on the Central Government to exempt of the previously of existing companies of from the obligations created under sub section [1] of section 89. The opinion of therefore the that the central Government has to from under sub section [4] primarily relates of the question as to whether for any of the reasons mentioned in sub section [4], is was desirable, inspite of the provisions of in section 87, that the previously of existing companies of should carry on the management and business of the company under the control of a few share holders having disproportionately excessive voting of rights as compared to the proportion of their capital contribution of as against the theory groups of result of exemption ofto portion of capital contribution of as against the other groups or groups of share holder. The obvious resul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he power created under sub -section [4]. In our view the situation that would be created by holding exemptions of granted under sub - section [4] could be revocable would be entirely are entirely contrary and repugnance to the whole administration, management and affairs of the limited company are liable to be controlled by the group of share - holders owning majority of votes it appears to us of that it was never intended that the rule of construction in section 21 of the General Clauses act should be applicable to the power to under sub - section [4]. It is difficult to find that it was permissible fort he central Government under sub - section 14 of the General Clauses act from in time to time to pass and revoke orders of exemption under sub section [4]. (24) It needs to be repeated that the circumstances on the this where of the central Government is to form is opinion that exemption be granted under sub section [4] will be which the obligation of the case under sub section [1] commenced and continued to exist. That period must expire within one year from that date of the commencement of the Act. It is necessary of state that we do not want the rights of the court of as make ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mencement of the companies act ,1956 f new of the provision of section 9. The company could not by refuings to carry out the provision voting rights provided under the old Articles of Association. It was only for a period of year from the date of the commencement of the companies act 1956 that the old voting rights could continue and therefore the with the had to exercised in accordance with the provisions of section 87. With respect, we regards that we are unable to agree with the observation of in the last quoted passage. The court has not given due effect to the provisions of in section 90 that the voting rights attached to the shares issued prior to the commencement of the 1956 act could not be affected except of in the manner prescribed by S. 89. The court hasn't considered that fact that connection in accordance of with the procedure of prescribed by the act. (26) Reliance's has been placed in connection with the true effect of the provision in section 21 of the General Clauses Act on the case of the Bhola Prasad v. U.A. Goswami . The observation in that case are to the effect that the provisions of section 21 contain a rule of the construction relating to powe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kedar Nath v. Krishan Lal . The question before the court in that case related to the provision in section 15 and U.P. Temporary control of Rent and Eviction Act. 1947 section 15 of that act provided: In all suits for eviction of tenant from any accommodation pending on the date of the commencement of this act, on decree for eviction shall be passed except on one or more of the grounds mentioned in section 3 . The Act provided for the extension of applicability of the provisions of the Act to the case are as notification under the provisions of the Act. The suit for ejectment of related to property of situate in the area of which the Act had not been applied much subsequent to the date of the institution of the suit by a notification issued under the Act the provision of the Act were applicable of to area to in question. The question that arose before the course was whether the suit was pending on the date of the commencement of the Act. On behalf of the plaintiff it was pending on the date of the commencement of the act. On behalf of the plaintiff, it was contended that the suit was not pending . On date of the commencement of the Act . In that connection, the court of obse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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