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High Court Of Calcutta
I.P. Mukerji, J.
Nischintapur Tea Co. Ltd. - Appellants
Vs
Subrata Sen - Respondents
C.A. No. 686 of 2010 In Connection With C.P. No. 252 of 1985
Decided on: July 05, 2011
COMPANIES ACT - SECTION 397, 398 - WITHDRAWAL OF APPLICATION - LOCUS STANDI OF INTERVENOR - COMPANY'S APPLICATION FOR DISMISSAL - COMPETENCE OF AFFIDAVIT - SHARE REGISTER RECTIFICATION - STATUS QUO ORDER - REPRESENTATIVE PROCEEDINGS - LEAVE OF COURT - TRANSPOSITION OF PARTY.
Fact of the Case:
An application under Section 397 and 398 of the Companies Act, 1956 was filed in the Calcutta High Court in 1985 by one Amita Sen, who has since died. In her place, her three sons Subrata, Ranjan and Sanjay are now substituted as petitioners. The company, Nischintapur Tea Company Ltd., filed an application for dismissal of the Section 397, 398 application. One Ajit Kumar Agarwal, opposed this application as an intervenor. The company and the petitioners submitted that Ajit Kumar Agarwal had no locus standi to make the application. Similar submission was made on behalf of Ajit Kumar Agarwal that the alleged application by the Company was made by an incompetent person.
Finding of the Court:
1. The application for withdrawal of the Section 397, 398 application was dismissed as not pressed by brother Sanjib Banerjee J. on 12th April, 2007. 2. The intervenor had filed an application in the Company Law Board (C.P. No. 582(IIIA)/ERB/2006) for rectification of the share register of the Company, under Section 111A of the Act. 3. The intervenor also filed a suit in the High Court against, inter alia, the Company and the petitioners claiming, inter alia, a declaration that the forfeiture of 3000 shares against the plaintiff and/or his predecessors in interest are bad; the transfer, if any, of 3000 shares to parties other than the plaintiff and/or his predecessors in interest hereinabove are bad and void; the transfer of 2021 shares as pleaded in paragraphs 14, 15, 16, 26 and 37 in favour of persons other than the plaintiff and/or his predecessors in interest are bad and void; Non-registration and non-transmission of 3000 equity shares as pleaded in paragraphs 11, 12, 13, 25 and 36 hereinabove and 2021 equity shares as pleaded in paragraphs 14, 15, 16, 26 and 37 hereinabove as also 800 shares as pleaded in paragraphs 8, 11, 12 and 34 hereinabove and 1940 shares as pleaded in paragraphs 2, 4 and 11 in favour of the Plaintiff are bad and void; etc. 4. The appeals filed by the company and the petitioners from the judgment and order dated 11th March, 2010 of brother Sanjib Banerjee, J., were dismissed by a common judgment and order made on 5th August, 2010 by the Hon’ble Appeal Court comprising of brothers Pinaki Chandra Ghose and Harish Tandon, JJ. 5. An appeal was also preferred by Ajit Kumar Agarwal from the said judgment and order dated 11th March, 2010. 6. The Section 397, 398 proceedings are representative proceedings and the judgments cited on behalf of the company and the petitioners Shiv Prasad v Durga Prasad and another, reported in (1975)1 SCC 405, M/s Hulas Rai Baij Nath Vs Firm K.B. Bass and Co., AIR 1968 SC 111 and Panvel Municipal Council, Panvel and another, reported in AIR 2003 Bombay 238 will not apply as they were not representative proceedings. 7. The dicta of the Hon’ble Supreme Court and the Bombay High Court in the above cases that a suitor has an unqualified right to withdraw proceedings will not apply, because if a proceeding is representative, it represents the interest of the petitioner, as well as all those persons whose interests are sought to be represented. 8. The intervenor's father died in 1968. He claims that his mother and brother transferred shares to him in 1975. His mother died in 2000. Ever since the death of his father in 1968 till 2006 no steps were taken by the intervenor. If he is transposed as a petitioner he will be given the right to prosecute a petition, which he does not now have right to file, by efflux of time.
Issues: 1. Whether the intervenor had the locus standi to make the application? 2. Whether the affidavit in support of the Judges Summons on behalf of the Company was competent? 3. Whether the instant proceedings are representative and whether leave of the Court is specifically required to withdraw them, under the Code of Civil Procedure read with Rule 88(2) of the said Rules? 4. Whether the intervenor has the right of transposition?
Ratio Decidendi: 1. A constituted attorney of a Company and even, any officer authorised by the board have the competence to sign a pleading. 2. The Courts will be reluctant to defeat a proceeding on the technical ground that a pleading of a corporation has not been signed by the proper person. 3. Even if such act of signing is irregular or the authority not supported by proof, it can be cured by ratification. 4. Such ratification can be implied. 5. Section 397, 398 proceedings instituted by a person or persons with the support of others was representative. 6. All the provisions of the Code of Civil Procedure and the said rules will apply to these proceedings. 7. The consent of those persons who supported the petitioners was the minimum requirement, in the facts of this case, before applying to the Court for withdrawal of the Section 397, 398 application. 8. Being a legal heir of his parents, he had a theoretical right to prosecute a Section 397, 398 proceeding relating to a Company where his parents were shareholders. 9. But, in my judgment that right was conditional upon existence of a cause of action in the petition, relating to the deceased and survival of the cause of action when an application or prayer for substitution was made.
Final Decision: 1. The application for withdrawal of the Section 397, 398 application was dismissed as not pressed. 2. The intervenor's application for being added in the Section 397, 398 proceedings was dismissed by the said order of this Court against which an appeal is pending. 3. The application C.P. No. 252 of 1985 is dismissed. 4. However, the order of status quo may have had far reaching consequences. Therefore, while dismissing the petition I say that any rights which have accrued to any person by reason of existence of the status quo order till today are preserved. 5. C.A. No. 686 of 2010 is allowed to the above extent. 6. C.A. No. 721 of 2010 is dismissed. 7. C.A. No. 541 of 2011 is disposed of accordingly. 8. The status quo order dated 21st June 1985 is discharged.
I.P.MUKERJI
1. AN application under Section 397 and 398 of the Companies Act, 1956 (hereinafter the Act) was filed in this court way back in 1985. It was numbered as C.P. No. 252 of 1985. It is still pending. The petitioner in that application was one Amita Sen, who has since died. In her place, her three sons Subrata, Ranjan and Sanjay are now substituted as petitioners being petitioner nos. 1(a), (b) and (c).
2. TWO applications were heard by me for several days. They were most seriously contested. One of them (C.A. No. 686 of 2010) was an application by the company for dismissal of the Section 397, 398 application. One Ajit Kumar Agarwal, opposed this application as an intervenor. It was strenuously argued on his behalf that the company should not be granted the prayers. Neither, the petitioners in the Section 397, 398 application should be allowed to withdraw from the application. He made an application (C.A. No. 721 of 2010) for dismissal of C.A. 686 of 2010.
The company and the petitioners in the Section 397, 398 application were together on one side. They were represented by a battery of counsel. One set of counsel represented the company. Another set represented the petitioners. Ajit Kumar Agarwal, was also very well represented.
3. THE learned counsel for the company and the petitioners submitted that Ajit Kumar Agarwal had no locus standi to make the application. Similar submission was made on behalf of Ajit Kumar Agarwal that the alleged application by the Company was made by an incompetent person. It was submitted that Sujit Kumar Chatterjee, who affirmed the affidavit in support of the Judges Summons, on behalf of the company had no competence to do so. Therefore, the application for dismissal made by the company was incompetent and should be dismissed. This point had to be decided by the court first. So much so, that at the close of submissions a separate application was made by Ajit Kumar Agarwal being C.A. No. 541 of 2011 imploring me to decide the question first when I delivered the judgment. At the time of close of arguments, I reserved judgment in that application also to be delivered with the judgment in the other two applications.
4. THE whole dispute between the parties concerns the Company, Nischintapur Tea Company Ltd. It was incorporated on 12th February, 1950. Sometime in 1985, the said application under Section 397, 398 of the Act was made by Amita Sen. She stated that she was the registered holder of 3472 equity shares of the company which was 15.10% of its total paid up capital. She had the support of other shareholders who held 7.11% of the total paid up capital. They were six in number and held 1635 shares as stated in paragraph 7(i) of the Section 397, 398 petition. Therefore, the petitioner and the shareholders supporting her had together 5107 shares.
As I have been able to understand, on reading the very voluminous petition, running into almost 100 pages, that 3240 shares were alleged to be beneficially belonging to the deceased husband of the petitioner but were held by the respondent Nos. 2,4 and 5 benami and that there should be appropriate orders regarding those shares. There were also allegations that those in control of the company had not rectified its register by substituting the names of the legal heirs of some other deceased shareholders who held 5940 equity shares. It is true, that in paragraph 7(iii) of the petition it is stated that out of those 5940 equity shares, 3800 belonged to Maithan Das Agarwal, the father of the intervenor, Ajit Kumar Agarwal. It is also mentioned in paragraph 28(i) and (ii) of the petition that the company had not registered 2021 equity shares purchased by Om Prakash Agarwal, the brother of Ajit.
5. THESE allegations are in the midst of a web of very complex allegations against those controlling the company, of not maintaining and rectifying the share register, of not accounting for the call money paid, crediting shares as fully paid when call money
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