TMI Blog1958 (5) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... hty and has been argued on their behalf by Mr. S. N. Dutt. The other appeal, Letters Patent Appeal No. 13 of 1957, is on behalf of about twenty-five employees of the corporation who are represented before us by Mr. Sankat Haran Singh. The aforesaid application for reconstruction, which was exclusively on behalf of Sri Arjun Prasad, respondent No. 1, had been admitted on October 6, 1953. along with the following directions : "The petitioner is directed to arrange for holding separate meetings ( a ) of the debenture holders and of the other secured creditors of the company, ( b ) of the unsecured creditors of the company, ( c ) of the preference shareholders of the company and ( d ) of the ordinary shareholders of the company on November 9, 1953, at 10 a.m. and 4 p.m. and on November 10, 1953, at 10 a.m. and 4 p.m. The meetings of item ( a ) will be held at 10 a.m., on November 9, 1953, of item ( b ) at 4 p.m. on the same date, of item ( c ) at 10 a.m., on the 10th November, 1953, and of item ( d ) at 4 p.m. on the same date. Mr. S.N. Dutt, barrister-at-law, if he does not consent, Mr. G.C. Banerji, an advocate of this court, is appointed to act as chairman of the meetings with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f whom in that meeting had been represented by respondent No. 1, Sri Arjun Prasad in person. The claim of Sri Arjun Prasad is that the directors of these two companies had by their respective resolutions authorised respondent No. 1 to vote on their behalf in person. Accordingly he acted as such on their behalf and voted for them in person and not by proxy. Now the objections, which are the subject-matter of these appeals, against this report of Mr. G.C. Banerji are three-fold. The first is that the chairman wrongly allowed Sri Arjun Prasad to represent the aforesaid two companies in person. The second objection is that Sri J.N. Mustafi was wrongly allowed by the chairman to represent Bihar Sugar Mills Association, who were creditors to the extent of Rs. 2,833-12-0 and the Indian Sugar Mills Association, who were creditors to the extent of Rs. 956 on the basis of proxies executed in his favour inasmuch as the same had not been done in conformity with rule 147 of the Patna High Court Rules. The third objection is relating to Sri N.N. Sahay and it is said that he too was wrongly allowed to represent the Standard Vacuum Oil Co., as in his case also the proxy submitted was not in orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsel in support of the order under appeal is based on two grounds. The first ground is that the objections raised by the appellants are too belated and as such not now entertainable in law. The second ground is that rule 150 of the Patna High Court Rules is not at all applicable to a proceeding under reconstruction inasmuch as that rule as also others framed by this court under the Companies Act is exclusively meant for a proceeding in liquidation. In other words, the way in which a creditor corporation may vote at a meeting of the creditors held in the course of a reconstruction proceeding of a debtors' company is not controlled by rule 150 of the Patna High. Court Rules. What Mr. Chaudhary contends is that the provision of law, as laid down in section 153 of the Indian Companies Act, 1913, for the purpose of meetings held in the course of a reconstruction proceeding, is an exhaustive code and as within the terms of that section the power given to the creditors to appear in person or by proxy is not subject to any qualification or limitation, there is no reason why in this respect any distinction or discrimination should be made between a creditor who is a natural person and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the matter. Therefore, if the court finds or the attention of the court is drawn to the fact that the report as submitted by the chairman about the approval of the compromise or arrangement in the meeting is on the very face of it contrary to law as laid down in section 153(2) of the Companies Act, 1913, the court has no option but to look into it and not to give any sanction to it unless that is disposed of. In other words, the sanction of the court, which is a sine qua non for the compromise or arrangement being binding on all the parties concerned, is dependent on the fact that at least on the very face of it the report does not suffer from any non-compliance of the rule of law as laid down in section 153 of the Companies Act, 1913. On the question of sanction, Halsbury's Laws of England (Hailsham Edition) in article 1354 of Volume V at page 794, while dealing with this subject, says : "The court must be satisfied that the statutory provisions have been complied with, that the classes of creditors or members have been fairly represented by those who attended and that the statutory majority approving the scheme is acting bona fide in the interest of the class it profes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the class whom they purport to represent; and then see whether the scheme is a reasonable one or whether there is any reasonable objection to it, or such an objection to it as that any reasonable man might say that he could not approve of it." Likewise in the case of In re English, Scottish, and Australian Chartered Bank [1893] 3 Ch. 385 Lopes L. J. observed : "Now, the mode in which this power is to be exercised has, to my mind, been very well and correctly laid down in the Alabama, C. Railway Company's case [1891] 1 Ch. 213, which has already been referred to. What I understand to be decided by that case is this, that it is not sufficient for the court to ascertain that the statutory conditions have been complied with ; the. court must go further than that, and be satisfied that the statutable majority which are to bind the dissentient minority have acted bona fide, that they have not acted adversely to those whom they professed to represent, and, lastly, that the arrangement contemplated is a reasonable arrangement, such as that which a man of business would reasonably approve. With regard to the word 'reasonably' it must always be borne in mind, the word 'reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ..the court . must be satisfied that the proposal was at least so far fair and reasonable, as that an intelligent and honest man, who is a member of that class, and acting alone in respect of his interest as such a member, might approve of it.' In In re English, Scottish, and Australian Chartered Bank [18931 3 Ch. 385, Lindley L.J. does not seem to have had his attention drawn to the fact that what he had said in In re Alabama, New Orleans, Texas and Pacific Junction Railway Co. [1891] 1 Ch. 213 , was not quite the same as what Bowen L.J. and Fry L.J. had said, but he plainly approved of what Bowen L.J. and Fry L.J. had said, for he so stated, and he quoted what Fry L.J. had said : He also said this ( In re English, Scottish, and Australian Chartered Bank case ( supra )): 'If the creditors are acting on sufficient information, and with time to consider what they are about, and are acting honestly, they are, I apprehend, much better judges of what is to their commercial advantage than the court can be... While, therefore, I protest that we are not to register their decisions, but to see that they have been properly convened and have been properly consulted, and have considere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roof of his authority before the chairman of the meeting held on November 9, 1953 has to be held as rather belated ; for it is not denied that no such objection had ever been raised before Mr. G.C. Banerji nor was it ever mooted in any manner by the appellants before the learned company Judge until the hearing of the report had already been taken up. Therefore, on that technical ground alone this part of the argument; has to fail. Further, I think that the right of a person to vote as the representative of a company under such circumstances depends essentially on the question whether he has been validly appointed or not and not upon evidence produced by him in support of that authority. And so far as the evidence is concerned, it is meant only to satisfy the chairman that he is the person duly authorised so that he may be in a position to admit the vote cast by such a representative which is generally done by the simple production of the copy of the authorised resolution : In re Kelantan Coconut Estates Ltd. [1920] W.N. 274 ; 64 S.J. 700. Then on merits also I think there is no substance in this objection. It is quite understandable that in the meetings, wherein those resolut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is founded purely on the interpretation of law, it cannot be thrown out on the simple ground of delay, for delay in such a case is not likely to take others by surprise or to place them in any disadvantageous position. The exact objection raised by Mr. Dutt appearing for the appellants in this connection is that the chairman should not have at the meeting of the unsecured creditors held on 9th November, 1953, allowed Sri Arjun Prasad to represent in person the said two companies, Bhadani Brothers and Hindustan Coal Co., and in the absence of any proxy having been filed on their behalf, their votes should not have been counted in calculating the requisite statutory majority for the approval of the scheme. This raises a question as to the mode in which a creditor corporation Can exercise votes in a general meeting of the creditors held in the course of a proceeding under section 153 of the Indian Companies Act, 1913. Now under common law, votes at all meetings are taken by show of hands, and it is only when a poll is taken that regard is to be had to voting power according to number of shares. That means', unless a poll is demanded, the voting is to be done by numerical majori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laid down in rule 144 framed by this court in exercise of the powers given under section 246 of the Indian Companies Act, 1913, provides: "A creditor or contributory may vote either in person or by proxy", which substantially is the same as the opening part of rule 146 of the English Companies (Winding-up) Rules, 1949. Therefore, it is manifest that on a poll, may it be in the case of a general meeting of the shareholders of a going concern or may it be in the case of a general meeting of creditors or contributories and that too either when the concern is in the course of reconstruction under section 153 or in the process of winding up, the mode of voting at least in form is the same, namely, either in person by proxy. "A proxy", as defined in Stroud's Judicial Dictionary, "is a lawfully constituted agent (per Smith LJ. in In re English, Scottish, and Australian Chartered Bank [1893] 3 Ch. 385 , an agent properly appointed (per Lindley LJ.) and semble (from the judgments of the Court of Appeal in that case), he need not, in the absence of a contrary regulation, be appointed in writing. However, in the court below, Williams J., said, ' Under the Companies Act, generally, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in English law in the year 1929 and it is only since then that in English law in the matter of voting in person a corporation whether it be in the position of a member or a creditor has been placed on equal footing. But in the Indian system of law the position even thereafter remained the same as it was under the Act of 1913, and it was only recently that under the new Companies Act, 1956, a similar provision has now been made in section 187, which for all practical purposes in this respect is the same as what was provided in the English law so far back as 1929. Section 187 of our new Companies Act, 1956, reads: "(1)A body corporate (whether a company within the meaning of this Act or not) may ( a )if it is a member of a company within the meaning of this Act, by resolution of its board of directors or other governing body, authorise such person as it thinks fit to act as its representative at any meeting of the company, or at any meeting of any class of members of the company; ( b )if it is a creditor (including a holder of debentures) of a company within the meaning of this Act, by resolution of its directors or other governing body, authorise such person as it think fit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 53 of the Indian Companies Act, 1913, is a proceeding independent by itself and is not in any way related to a proceeding which is one for a concern going or for a concern in liquidation. And if that is so then section 153 of the Indian Companies Act ex proprio vigore implies that a corporation creditor like any other creditor may vote not only by proxy but in person also, and if there is any lacuna in the section about the procedural part of it then that lacuna, according to learned counsel, can be very conveniently removed with the help of the general provisions of company law and specially those provided in regulations 71 and 91 of the Indian Companies Act, 1913. In my opinion, this contention is not correct. When properly analysed, this will be found to be based on the assumption that the word "person" as used in section 153 of the Indian Companies Act, 191.3, means not only a natural person but also an artificial person like a corporation unlike its implication as used in section 79 or regulation 64 of the Indian Companies Act, 1913, or as used in rule 144 of the Rules framed by this court. But I think there can be no justification for such an assumption, either in law or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s was substantially right; that if a statute provides that no person shall do a particular act except on a particular condition, it is, prima facie, natural and reasonable (unless there be something in the context, or in the manifest object of the statute, or in the nature of the subject-matter, to exclude that construction) to understand the Legislature as intending such persons, as, by the use of proper means, may be able to fulfil the condition ; and not those who, though called ' person' in law, have no capacity to do so at any time, by any means, or under any circumstances, whatsoever." Thirdly, it has to be remembered that this part of the provision for voting as is stated in section 153 is much the same as the one provided for a winding up concern in rule 144 or the one provided for a going concern in section 79( e ) or in regulation 64 of the Indian Companies Act, 1913. And if it is to be accepted that the phrase "a member or a creditor may vote either in person or by proxy", when read with regulations 71 and 91 of the Indian Companies Act, 1913, provides an exhaustive Code on the subject then I see no reason why the same phrase when used in section 79( e ) of the Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the background of its section 80 wherein the provision made for a corporation to vote in person is confined to its capacity as a member corporation only and is not in relation to its capacity as a creditor corporation. That means, in the case of a proceeding like the one before us, which is controlled exclusively by the Act of 1913, a creditor corporation, as contemplated under section 153 of that Act, can vote only by proxy and not in person. Further, as pointed out by Mr. Dutt, the only provision wherein a reference has been made in relation to the Indian Companies Act, 1913, as to how a creditor corporation is to vote is to be found in rule 150 alone which has been framed by this court under the powers given to it there under. That rule provides : "Where a corporation is a creditor, any person who is duly authorised in writing by the corporation to act generally on behalf of the corporation at meetings of creditors and contributories and to appoint himself or any other person to be the corporation's proxy, may fill in and sign the form of proxy on the corporation's behalf and appoint himself to be the corporation's proxy and a proxy so filled in and signed by such a person s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nion, this want of clarity in these rules is there and Mr. Dutt also to that extent concedes. But his submission is that though strictly speaking it may be so and in the absence of any specific provision to that effect therein it may be difficult to hold that they as a rule apply to all proceedings under section 153 of the Indian Companies Act, 1913, yet that cannot be a ground for saying that they do not apply at least to the present proceeding and that for two reasons. The first is that though section 153 of the Indian Companies Act, 1913, does provide that the meeting held there under shall be called, held and conducted in such manner as the court directs, but in the present case there was no such direction ever made by the learned company Judge. The second is that the present proceeding under section 153 of the Indian Companies Act, 1913, was after all one which was taken up while the company was already in the process of winding up. Therefore, according to Mr. Dutt, in the absence of any other provision on the subject, this rule 150 can alone be a proper guide for a proceeding like the one before us. In my opinion, on principle this argument seems to be correct, and if tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therein, is applicable both to a going concern as also to a concern which is already in the process of winding up. Therefore to the extent to which it applies in a case where a winding up order has already been passed, there is an overlapping between a proceeding taken in the course of winding up and one taken up for reconstruction thereafter. Therefore, in the absence of any direction given in that behalf by the court or so long as there is no specific provision made by this court under the rules framed by it for a meeting under section 153 of the Indian Companies Act, 1913, there is no reason why the rules as framed by this court cannot be held applicable at least mutatis mutandis to such a proceeding if taken after an order of liquidation has already been passed. In the present case it is not claimed that Sri Arjun Prasad in voting on behalf of the aforesaid two companies acted as their proxy ; rather the specific claim made on his behalf is that he acted on their behalf in person and that on the basis of the resolutions passed in his favour to that effect by those corporations. Therefore, in the absence of any proxy having been filed by Sri Arjun Prasad, the votes cast b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hini Mazdoor Sangh and Mr. G.G. Dubey were not in accordance with law and as such not admissible then on the parity of reasoning Mr. P.K. Bose and Mr. G. K. Verma should also not have been allowed to take part in the voting. In my opinion this reasoning given in support of the alternative argument is rather too academic and is essentially based on the question as to whether the findings given by the learned company Judge on the validity of the proxies filed by Mr. P.K. Bose and Mr. G.K. Verma are still open to be attacked in the manner and on the ground as it has been attempted to be done here. In my opinion not and that for two reasons. First on the ground that the appeals before us on behalf of the appellants are directed against that specific part of the order whereby the learned company Judge has dismissed their objection relating to some particular creditors who had voted in support of the scheme and not against any of that part of the order which deals with the votes cast against the scheme. If the respondents were dissatisfied with the order passed by the learned company Judge as to the votes cast by Mr. P.K. Bose on behalf of the Eastern Railway and by Mr. G.K. Verma on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilar is the position in regard to Mr. G.K. Verma. He represented the Sales Tax Department and the authority produced by him is included in the paper book at page 7. There is nothing therein to show that that authority was in any respect invalid. Therefore, the objection as against the votes cast by him on behalf of the Sales Tax Department also fails. Lastly, I may mention here that so far as the votes cast by Mr. J.P. Singh on behalf of Chini Mazdoor Sangh and Mr. G.G. Dubey on behalf of Pranlal Valji are concerned, they had been rejected on a ground entirely different and not on one which is now said to be applicable in the case of proxies filed by Mr. Bose and Mr. G.K. Verma. In the case of Mr. J.P. Singh, who voted for Chini Mazdoor Sangh there was no proxy received from that Sangh at all. It is true that the learned company Judge has observed that: "It is possible that some authority was submitted by Shri J.P. Singh before the chairman, authorising him to represent the Chini Mazdoor Sangh." But this observation on the very face of it is based on mere supposition; though as a matter of fact there is nothing on the record to show that Chini Mazdoor Sangh had given proper a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er is not a 'judgment' within the meaning of clause 10 of the Letters Patent." The decision reported in Asrumati Debi v. Rupendra Deb [1953] SCR 1159 , related to the question whether an order for transfer of a suit made under clause 13 of the Letters Patent of the Calcutta High Court was or was not a judgment within the meaning of clause 15. In answer thereto their Lordships held that such an order was not appealable and in support of that order they opined: "The order in the present case neither affects the merits of the controversy between the parties in the suit itself, nor does it terminate or dispose of the suit on any ground. An order for transfer cannot be placed in the same category as an order rejecting a plaint or one dismissing a suit on a preliminary ground as has been referred to by Couch C.J. in his observations quoted above. An order directing a plaint to be rejected or taken off the file amounts to a final disposal of the suit so far as the court making the order is concerned. That suit is completely at an end and it is immaterial that another suit could be filed in the same or another court after removing the defects which led to the order of rejection. O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, final or preliminary, or interlocutory, decree, order or sentence ', while in dealing with appeals from one judge to a bench of the same court only the word ' judgment.' has been used. There being no appeal under the Letters Patent in criminal matters from one Judge to a larger number of Judges the word ' sentence ' could easily be omitted. There is also no appeal from an order passed: by a single Judge in the exercise of revisional jurisdiction. Appeals only lie from judgment in civil matters, in the exercise of ordinary or extraordinary original jurisdiction of the court and, with the leave of the Judge, against a decree or order made by him in the exercise of appellate jurisdiction against a decree or order made by a subordinate court. In section 205, Government of India Act, providing for appeals to the Federal Court the words used are 'judgment, decree or final order'. In Mohammad Amin Brothers Ltd. v. Dominion of India AIR 1950 FC 77 , the point arose whether an order under the Letters Patent setting aside an order of a single Judge directing the compulsory winding up of a company was a final order against which an appeal lay to the Federal Court and, it having been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at least include those orders which finally determine a dispute between the parties. If that is so then in the present appeals it is difficult to hold that the order under appeal does not determine a dispute between the propounder of the scheme on one side and the objecting creditors on the other at least to the extent to which it decides the question as to how far the proposed scheme was or was not approved by the statutory majority as contemplated in law. It is the admitted case of the parties that on the poll taken in the meeting held on 9th November, 1953, the result would have been otherwise had the votes cast by Sri Arjun Prasad on behalf of Bhadani Brothers and Hindustan Coal Co., in person been rejected and eliminated from the poll. In other words, in the latter case the scheme could not be placed before the court for the necessary sanction as contemplated under section 153 of the Indian Companies Act, 1913. Therefore, it is manifest that in such circumstances any order dismissing the objection raised on behalf of those who were in opposition to the scheme finally determines and concludes their right of dissent to the same. That being so, I have no hesitation to hold ..... X X X X Extracts X X X X X X X X Extracts X X X X
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