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TMI Blog2017 (7) TMI 504X X X X Extracts X X X X X X X X Extracts X X X X ..... follows : 2.1 The Plaintiffs claim to be shareholders of one or more of various NSE and BSE listed companies belonging to Tata Group of Companies, which are arraigned as Defendant Nos. 21 to 27 to the suit. The present suit is filed purportedly as a representative suit under Order 1 Rule 8 of the Code on behalf of "all the non-promoter shareholders" of Defendant Nos. 21 to 27, "who have all been similarly affected by reason of the illegal actions that have been taken at the behest of Defendant No. 1 by Defendant Nos. 2, 3, 5 to 9 and 12 to 20". Defendant No. 1 is the Director and interim Chairman of Defendant No. 2, Tata Sons Ltd., which is said to be a "core investment company" that holds shares in companies of the Tata Group and oversees their governance, whilst Defendant Nos. 12 to 20 are, respectively, Tata Sons Ltd. and its Directors, and Trustees of Sir Ratan Tata Trust and/or Sir Dorabje Tata Trust, which trusts together hold about 66 percent of the paid- up capital of Tata Sons Ltd. 2.2 The grievance of the Plaintiffs is about the purported illegal ouster of one Cyrus Mistry from his position as the Executive Chairman of Tata Sons Ltd. and appointment of Ratan Tata (Defe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs' of Defendant companies, who, it is submitted, do not in fact from a class so as to enable the Plaintiffs to sue on their behalf or for their benefit. 3. Mr. Chidambaram, learned Senior Counsel appearing for the Applicants/Defendants, submits as follows: (a) Firstly, it is submitted that none of the Plaintiffs is a shareholder of Tata Sons Ltd. or could be said, as such, to be aggrieved by what was done by the Board of Tata Sons Ltd. Assuming, however, that the Plaintiffs could be said to be aggrieved by the impact of the acts or machinations of Tata Sons Ltd. in respect of the companies in which the Plaintiffs hold shares, learned Counsel submits that the grievance of each individual Plaintiff in this behalf is distinct and separate from the grievance/s of others. The Plaintiffs are not shareholders of each of the seven companies arraigned as party defendants (i.e. Defendant Nos. 21 to 27); they are shareholders of one or more of these companies, each of whom has distinct Articles of Association, and a separate and independent board of directors. It is submitted that the grievance in respect of ouster of Mistry as chairman or director in each of these companies and the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AIR 1990 SC 642 and the decisions of Madras and our High Court, respectively, in Kodia Goundar v. Velandi Goundar AIR 1955 Madras 281 and Kaira District Co.Op. Milk Producers Union Ltd. v. Kishore Shantilal Shah 1982 SCC OnLine Bom32, in support of his contentions. 5. Mr. Dwarkadas, learned Senior Counsel for Defendant No. 11 (Cyrus Mistry), also makes submissions on law, making it clear at the outset that his client does not wish to take sides in this representative suit and has nothing to say on the merits of the controversy. Learned Counsel submits that it is not necessary to consider whether or not all persons joining the suit have a cause of action in respect of each of the reliefs claimed in the suit (for that has something to do with the permissibility of joinder of causes of action), but whether each individual Plaintiff, being a non-promoter shareholder of one particular company out of seven Tata companies arraigned as Defendants, has community of interest with other non- promoter shareholders of that particular company to claim relief in respect of fall in share prices of that company as a result of ouster of Mistry from Tata Sons Ltd. Learned Counsel argues that Order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted. Any such person/s may apply for impleadment to such suit under Sub-Rule (3). Sub- Rule (4) forbids any compromise or satisfaction of such suit except with notice to all persons interested. It is permissible to the Court, under Sub- Rule (5), to substitute the person suing (or defending) with any other person having the same interest. Sub-Rule (6) makes a decree passed in such suit binding on all persons on whose behalf, or for whose benefit, the suit is instituted (or defended). The Explanation appended to the Rule makes it clear that for claiming "the same interest in one suit", it is not necessary to have the same cause of action as the persons on whose behalf, or for whose benefit, the suit is filed (or defended). That is the scheme of Order 1 Rule 8. This scheme is an exception to the general rule that all persons interested in the suit must be made parties to it. The object of this exception is clearly to facilitate the redressal of grievances in which a large body of persons are interested, but where several practical difficulties would arise if every individual so interested were to either join in one suit or file a separate suit under the general rule. The special rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bedford. The action was brought on behalf of themselves and all growers of fruit, flowers, vegetables, roots or herbs. The grievance of the respondents in the suit was that the Covent Garden Market Act gave various preferential rights in respect of the use of the market to the class of growers represented by them; that the Duke, in his management of the market as the owner, did not comply with the provisions of the Act in certain particulars and inter alia exacted excessive tolls from the growers. The respondents, accordingly, claimed declarations in the suit that they were entitled to the alleged preferential rights, an injunction to restrain the Duke from doing any acts contrary to the declarations claimed and an account of the sums charged in excess during the six years preceding the issue of the writ. Romer J, who heard the summons taken out by the Duke to set aside the writ and all other proceedings, was of the view that the plaintiffs were not entitled to sue on behalf of themselves and all other growers of fruit, etc. within the meaning of the Act and stayed the action in respect of all matters and causes alleged in a representative capacity. The learned Judge ordered dismis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a case, where four plaintiffs, who were all tenants of dwelling- houses provided by the defendants, the Corporation of Cardiff, under the Housing Act, 1936, challenged a resolution passed by the defendants to increase the rent of their tenants in order to balance their housing account in accordance with the obligations imposed on them by the Act. They served on the tenants the documents giving notice of their scheme to increase rent. The proposal was not to increase rents uniformly but having regard to the individual financial circumstances of the tenants. The scheme was not liked by the tenants and a tenants' protection association was formed. The four plaintiffs, with the support of some 9,000 other tenants, began the action for a declaration that the proposed scheme of rent increase was ultra vires the defendants and for an injunction to restrain the defendants from putting the scheme into operation. The plaintiffs claimed to be "suing on behalf of themselves and all other tenants of houses provided by the defendants under Part V of the Housing Act, 1936". The defendants applied to have the writ struck out and the proceedings stayed on the ground that the plaintiffs, in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a representative action, it was necessary to look into the nature of the dispute far enough to be able to see what the true character of the alleged grievance was. The learned Judge noted that though the grievance, for the purpose of justifying the form of pleadings, is put as a threatened increase, actual or potential, in the amounts of all the rents, the true grievance was not that. The true grievance, the learned Judge noted, was that instead of charging a uniform increase in rent "by reference to the estimated letting value of the house, and the necessity of charging an economic rent and of providing for increased outgoings, or other objective considerations of that nature", the scheme charged rent by reference to the purse, and as such it was said to be ultra vires. What was argued was that "it was beyond the powers of the defendants to charge differential rents according to the means and circumstances of the tenants, because the result of that would be that some tenants, those in more affluent circumstances, would, in effect, be subsidizing by the increases in rent imposed in their cases the tenants in less affluent circumstances in whose cases no increase was to be made a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at there may not be such others; the Plaintiffs may, for that matter, be the only ones, amongst non-promoter shareholders of these companies, who have such perception. A drop in the share price, which may be seen as a temporary phenomenon brought about by immediate circumstances, in the first place, affects different shareholders differently. It is, for example, a well known fact that shareholders holding shares on a long term basis prefer to buy shares when the prices dip due to current market forces with a view to improve their average buying price. These shareholders may welcome a temporary dip and, in fact, proceed to buy shares happily. Secondly, the other non-promoter shareholders may not be of the view that the fall in share prices is brought about for the reasons suggested in the Plaint. In fact, they may hold an exactly contrary view. They may perceive the resistance offered by Mistry and his promoter group as the root cause of all problems. After all, in a corporate democracy, more often than not, there is a sharp division amongst shareholders as to the outcome of a board meeting or a board resolution. Some may support a board decision, whilst the others may not. In short ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 'on behalf of' or 'for the benefit of', all persons interested, the two expressions conveying different ideas and used us disjunctives; either may be satisfied, and not both. There is no merit in this contention. No one can sue (or defend) on behalf of another, but not for the benefit of that person. Sueing (or defending) a suit on behalf of someone to his detriment or against his benefit, conveys scarce sense. The word 'or' must, if at all, be read as 'and' here. In any event, the two expressions cannot be read as mutually exclusive. You may sue on behalf of another, though not necessarily for his benefit, for he may concur in your benefit. But you can never sue on behalf of another, when such suit is to his detriment or against his interest. In the present case, the Plaintiffs cannot sue on behalf of others who resist Mistry's reinstatement. The relief claimed would, in that case, be in fact to the detriment of such others. As far as monetary losses are concerned, each individual shareholder clearly has a separate cause of action; the individual circumstances and loss or gain, as the case may be, may be quite different. Each individual case m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cardiff Corporation (supra). The Plaintiffs' contention there was: The person who says: "I do not want to be represented by you" can ask to be joined as a defendant. The Court of Appeal rejected the contention, holding that "such a result involves a serious inroad upon the ordinary individual's liberty to make this own terms with some other party with whom he is under no obligation to make any contract at all, if he does not want to". The rationale behind this statement of law is not far to seek. If the suit is truly a representative suit, any decree passed therein would bind every other person who is represented in the suit. A number of such other persons whom the Plaintiffs claim to represent, but who actually oppose the suit, will be forced to join the suit with a view to contest it, for if they do not, the decree, which they perceive to be to their detriment, will bind them. That would be clearly unjust, if, in the first place, there was no warrant in allowing the Plaintiff to represent them. In the present case, the non-promoter shareholders, who do not want reinstatement of Mistry, would be bound to accept his reinstatement if the Plaintiffs were to succeed and on top ..... X X X X Extracts X X X X X X X X Extracts X X X X
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