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TMI Blog2013 (7) TMI 1135X X X X Extracts X X X X X X X X Extracts X X X X ..... echnologies Ltd. (hereinafter referred to as C.T.L.) and Castron Mining Ltd. (hereinafter referred to as C.M.L.) are companies run by members of the Agarwalla family who are the shareholders of the companies. C.T.L. applied for the grant of a lease of a coal mine known as the Brahmadiha coal mine located in the State of Jharkhand on April 18, 1996. It was agreed under a family arrangement entered into on May 26, 1999, that the mining lease which C.T.L. had applied for would be assigned in favour of Parameshwar Kumar Agarwalla or his nominees. By the family arrangement it was decided that in case the lease of the coal mine was granted in favour of C.T.L. the directors of C.T.L. would assign and transfer the right, title and interest in the lease hold property in favour of C.M.L., which is the transferee company. A joint petition was filed on March 8, 2002, by C.T.L. and C.M.L. under sections 391 and 393 of the Companies Act 1956, for sanctioning the scheme of arrangement in view of the family arrangement between the parties. A mining lease was executed in respect of the aforesaid coal mine in favour of C.T.L. on June 18, 2002, by a registered deed. The scheme of arrangement was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tute the name of C M. L. in the mining lease held by C.T.L., provided certain terms and conditions were accepted. On June 8, 2009, the State of Jharkhand executed a deed of rectification, substituting the name of C.M.L. for that of C.T.L. with respect to the mining lease granted on June 18, 2002. All these documents were brought on record before the learned single judge of this court when the application for recalling the earlier order was being heard. 4. The learned single judge has held that the application moved by C.T.L. under sections 391 and 392 of the Companies Act was not maintainable as such an application for recalling the scheme of arrangement could not be filed. The learned judge held that C.M.L. had never authorised Mahendra Kumar Agarwalla to move the application although the application indicated that both C. M. L. and C.T.L. had authorised him to move the application for recalling the order. It was held that since the scheme of arrangement was arrived at by consensus it amounted to a consent decree which could not be recalled at the instance of one party. The court then observed that the basic objection of C.T.L. to the scheme of arrangement was that it had been ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e application was not maintainable as it had been filed by only one party, that is, the C.T.L. for recalling an order which had been passed on an application filed with the consent of C.M.L. He submitted that the order sanctioning the arrangement was a decree and, therefore, no application would lie for recalling the decree which has been acted upon and implemented. The order sanctioning the arrangement having been drawn up and completed this court had no jurisdiction to recall the order. Learned counsel then urged that sections 391, 392 and 394 of the Companies Act provide a complete code for sanctioning a scheme and the company court has no jurisdiction to pass any order, post sanction, except as provided under section 392 of the Companies Act. Learned counsel submitted that when the order of sanction became effective from October 31, 2001, i.e., the appointed date, only the application for the grant of the lease was pending, which was transferred under the scheme to C.M.L. He, therefore, submitted that rule 37 of the Rules is not attracted in the present case as it does not contemplate transfer of an application for obtaining a mining lease. Learned counsel then, by relying on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court of Jharkhand had granted permission to approach this court in an order passed on a writ petition filed by C.T.L. These submissions of Mr. Mookherji are untenable. The High Court of Jharkhand had only observed that no relief could be granted to C.T.L. so long as the order passed by this court sanctioning the scheme of arrangement subsists. That does not however mean that any kind of application for recalling the scheme can be entertained if it is not permissible in law to do so. Therefore, the submission of Mr. Sarkar that the application for recalling the order sanctioning the scheme of arrangement cannot be filed by one party, that is C.T.L., must be accepted. The judges' summons indicates that it has been taken out by C.T.L. and without the consent of C.M.L. for filing of such an application. The affidavit in support of the judges' summons has been filed by one Mahendra Kumar Agarwalla who was only a director of C.T.L., claiming that since he was a director of both C.T.L. and C.M.L. he was competent to submit the application for recalling the scheme of arrangement as it was no longer possible to give effect to the same. Had both C.T.L. and C.M.L. who were parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... substituting the name of C.M.L. in the place of C.T.L. in the mining lease on the request made by C. T. I. Moreover, permission has been granted for such a transfer. The Central Government did not oppose the prayer for sanctioning the scheme of arrangement. In fact both the Central Government and the State Government acted upon the scheme. The parties, C T. L. and C M. L. also acted pursuant to the scheme to perfect it and, therefore, the scheme of arrangement became final. There is no dispute that after the scheme was sanctioned the decree was drawn up. 12. In the case of Bank of Mymensingh Gauripur Ltd., In re reported in (1949) 53 CWN 143, a learned single judge of this court held that once a scheme was sanctioned by the company court and the order granting the sanction was perfected, it becomes a final order. It has further been held that the company court has no jurisdiction thereafter to alter or amend the scheme except by sanctioning a fresh scheme. Similarly, in the case of Nanatal M. Varma and Co. (Gunnies) P. Ltd. v. Gordhandas Jerambhai reported in AIR 1965 Cal 547 this court has held that when an order dismissing the suit has been drawn up and filed, the court ceases t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it, the court does not become functus officio although the order was drawn up, completed and filed. 16. On considering the aforesaid judgments what emerges is that where a suit is dismissed and the decree is drawn up, completed and filed it can be restored if an application has been filed within the period of limitation in view of the inherent power of the court. 17. However, the inherent power of the court to recall an order can be exercised only in certain cases. In Budhia Swain v. Gopinath Deb reported in (1999) 4 SCC 396 held that a Tribunal or court may recall an order passed by it earlier if (i) the proceedings culminating into an order suffer from the inherent lack of jurisdiction and such lack of jurisdiction is patent; (ii) there exists fraud or collusion in obtaining the judgment; (iii) there has been a mistake committed by the court prejudicing a party; or (iv) a judgment was rendered in ignorance of the fact that a necessary party had not been served at all or had died and the estate was not represented. It was further held that the right to invoke the inherent power to recall a judgment might be lost by waiver or estoppel or acquiescence. The court observed that when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act, the court has the power to make modifications in the compromise or arrangement as it may consider necessary and this power would include the power to approve what has been put forward by LBPL who has come forward to discharge the liabilities of the company on the rights in the properties of the company other than in the office building and in the godown, being given to it for development and sale. As we read section 392 of the Act, it only gives power to the court to make such modifications in the compromise or arrangement as it may consider necessary for the proper working of the compromise or arrangement. This is only a power that enables the court to provide for proper working of compromise or arrangement, it cannot be understood as a power to make substantial modifications in the scheme approved by the members in a meeting called in terms of section 391 of the Act. A modification in the arrangement that may be considered necessary for the proper working of the compromise or arrangement cannot be taken as the same as a modification in the compromise or arrangement itself and any such modification in the scheme or arrangement or an essential term thereof must go back to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the court ought to have exercised its inherent power as the appellants had invoked the provisions of rules 6 and 9 of the Companies (Court) Rules. This judgment is of no avail to the appellants as they are seeking the revocation of a scheme of arrangement sanctioned by the company court which as we have seen is permissible only in consonance with the provisions of section 392 of the Companies Act. The Companies (Court) Rules cannot override the provisions of the Act. 23. The main plank of Mr. Mookherjee's argument has been that the court while sanctioning a scheme of arrangement has to ensure that it does not violate any provision of law. It has also to ascertain whether the scheme is unconscionable or contrary to public policy. A scheme will not be sanctioned by the court if there is a breach of the aforesaid conditions. He submitted that rule 37 of the Mineral Concessions Rules requires a prior sanction from the Government for the transfer of a mining lease. Since there was none when the scheme envisaging the transfer of the mining lease was sanctioned, it cannot be said to be in consonance with law or public policy, urged learned counsel He has relied on the judgments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y itself that members or class of members or creditors or class of creditors, as the case may be, were acting bona fide and in good faith and were not coercing the minority in order to promote any interest adverse to that of the latter comprising the same class whom they purported to represent. (8) That the scheme as a whole is also found to be just, fair and reasonable from the point of view of prudent men of business taking a commercial decision beneficial to the class represented by them for whom the scheme is meant. (9) Once the aforesaid broad parameters about the requirements of a scheme for getting sanction of the court are found to have been met, the court will have no further jurisdiction to sit in appeal over the commercial wisdom of the majority of the class of persons who with their open eyes have given their approval to the scheme even if in the view of the court there could be a better scheme for the company and its members or creditors for whom the scheme is framed. The court cannot refuse to sanction such a scheme on that ground as it would otherwise amount to the court exercising appellate jurisdiction over the scheme rather than its supervisory jurisdiction. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ructified into a scheme of arrangement between the two companies and became effective from October 31, 2001, on which date only the application for the grant of the mining lease was pending. He drew our attention to the recitals of the scheme indicating that there was no mining lease in favour of either party at that point of time. According to him the scheme contemplates the transfer of the application for issuance of a mining lease and such an application does not fall within the mischief of rule 37 of the Mineral Concessions Rules. He, therefore, submits that rule 37 of the Mineral Concessions Rules is not applicable at all in the facts and circumstances of the present case. The appointed date according to learned counsel is the date on which the scheme became effective, that is, when the assets of the company of C.T.L. were transferred to C.M.L. under the scheme of arrangement. According to him though the scheme may have been sanctioned on a particular date the assets would stand transferred on the appointed date, i.e., October 31, 2001. Therefore, according to Mr. Sarkar the assets including the application for transferring the mining lease stood transferred from the appointed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that a party who enters into a scheme of arrangement which has become effective cannot contend later that the settlement was signed in breach of the provisions of law. The party cannot recover damages or get any relief on account of such wrong doing, if any. He invokes the principle of in pari delicto potior est conditio possidentis and fortified his submission by relying on the judgment of this court in Ferojuddin Mullick v. Hiren Roy Chowdhury reported in (1979) 2 Comp. LJ 301; Sajan Singh v. Sardara Ali reported in (1960) 1 All ER 269 (PC) and B. O. I. Finance ltd. v. Custodian reported in (1997) 89 Comp Cas 74; (1997) 10 SCC 488. In Ferojuddin Mullick v. Hiren Roy Chowdhury (1979) 2 Comp. LJ 301, this a court considered whether an agreement to surrender a stall in which the plaintiff, a licensee, was running his business in favour of the defendant, despite the restrictive clause in the licence, was valid. The court observed that by reason of the doctrine of in pari delicto the property which was transferred by one to another remains vested in the transferee, not withstanding its illegal origin. The court then considered the conspectus of decisions cited before it and held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licto would not be applicable. Where a transaction is vitiated by illegality the person left in possession of goods cannot be allowed to retain them. 36. Great emphasis has been placed by Mr. Mookherjee on the judgment of the Patna High Court in the case of Sudhansu Kanta v. Manindra Nath, AIR 1965 Pat. 144 on the ground that any violation of rule 37 of the Mineral Concession Rules which is mandatory results in a void contract for transfer of the mining lease and therefore the maxim in pari delicto is not applicable. 37. The Patna High Court in the aforesaid judgment has held that the purpose of rule 37 of the Mining Concession Rules is to prevent a person who has not been approved by the Government from working a mine or carrying on mining operations in a particular mine area. If a lessee hands over the working of a mine to another person by merely transferring his right, title or interest in the lease it would be a devise to avoid the requirement of the statute and therefore cannot be upheld, according to the Patna High Court. The court has further held that the contract being void there is no scope for post facto ratification by the Government. The court held that the doctrine ..... X X X X Extracts X X X X X X X X Extracts X X X X
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