TMI Blog2004 (1) TMI 373X X X X Extracts X X X X X X X X Extracts X X X X ..... estion of law regarding maintainability of a common application by several companies who are parties to a scheme of arrangement or a scheme of amalgamation, notice was ordered to the Registrar of Companies to elicit his views in the matter. The Court also directed Sri Aditya, the learned counsel to assist the Court in deciding the aforesaid matter. 3. I have heard the learned counsel for the applicants, the learned counsel for the Registrar of Companies and Sri Aditya, the learned counsel. It is pointed out that the office objection is based on a decision of this Court in the case of Electro Carbonium (P.) Ltd., In re [1979] 49 Comp. Cas. 825 . A learned Single Judge of this Court while dealing with the question whether both the Companies can maintain a joint petition or should file two separate petitions has held as under : "...Having regard to section 394A of the Companies Act which requires that on any application made under section 391 or section 394, notice shall be taken out to the Central Government, it is indicative that both the companies which are distinct entities must take out that notice to the Central Government. Therefore, I am inclined to take the view that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Department of Company Affairs, Chennai, who is the delegatee of the Central Government and take into consideration the representation made by the Regional Director before passing any order on the proposed scheme of arrangement or compromise. The object and purpose of introducing the aforesaid mandatory provision has been explained by Madras High Court in the case of Ucal Fuel Systems Ltd., In re [1972] 73 Comp. Cas. 63. Section 394A of the Act makes it obligatory on the Court to give notice to the Central Government of every application made to it under section 391 or section 394 and to take into consideration the representations made by that Government before passing any order on the proposed scheme of amalgamation. This would enable the Central Government to study the proposal and raise objections thereto as it thinks fit in the light of the facts and information available with it, and also place the Court in possession of certain facts which might not have been disclosed by those who appear before it so that the interests of the investing public at large may be fully taken into account by the Court before passing its order. The powers and functions of the Central Governmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has been held as under : "When a Bench of the High Court gives a decision on a question of law, it should, in general be followed by other Benches unless they have reasons to differ from it, in which case the proper course to adopt would be to refer the question for the decision of a Full Bench. Law will be bereft of all its utility if it should be thrown into a state of uncertainty by reason of conflicting decisions, and it is, therefore, desirable that in case of difference of opinion, the question should be authoritatively settled. It sometimes happens that an earlier decision given by a Bench is not brought to the notice of a Bench hearing the same question, and a contrary decision is given without reference to the earlier decision. When two such conflicting decisions are placed before a later Bench, the correct procedure to follow in such a case would be for the Bench hearing the case to refer the matter to a Full Bench in view of the conflicting authorities without taking upon itself to decide whether it should follow the one Bench decision or the other." (p. 84) 9. Again the Supreme Court in the case of Dr. Vijay Laxmi Sadho v. Jagdish [2001] 2 SCC 247 has hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it would not be binding as a precedent. In support of his contention he relies on a judgment of this Court in the case of Panchaxari Shidramappa Yeligar v. Shiggaon Taluka Shikshana Samithi 2000 (5) Kar. LJ 174, where the exceptions to stare decisis , exceptions based on rule of per incuriam are laid down which reads as under : "While some of the exceptions to the rule of stare decisis can be applied to all decisions which can be called as precedents, some, like the exception based on per incuriam Rule can be applied only in regard to decisions of Coorordinate Branches of the same Court, and not to decisions of larger Benches of the same Court or the Apex Court. While a decision rendered per incuriam by a Coordinate Bench may not be binding as a precedent, a Court in a lower tier (Smaller Bench) cannot refuse to follow the ratio decidendi of a decision rendered by the Court in a higher tier (larger Bench of the same Court or the Apex Court) by stating that such decision is rendered per incuriam ." 12. The Supreme Court in the case of Municipal Corpn. of Delhi v. Gurnam Kaur AIR 1989 SC 38 dealing with the principle of per incuriam has held as under : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms of a statute or rule having statutory force. A decision should not be treated as given per incuriam , however, simply because of a deficiency of parties, or because the Court has not the benefit of the best argument and, as a general rule, the only cases in which decisions should be held to be given per incuriam are those given in ignorance of some inconsistent statute or binding authority. Even if a decision of the Court of Appeal has misinterpreted a previous decision of the House of Lord, the Court of Appeal must follow its previous decision and leave the House of Lords to rectify the mistake." 14. Therefore, the learned counsel for the petitioners contend that as the judgment rendered by the Coordinate Bench of this Court in Electro Carbonium (P.) Ltd. s case ( supra ) by omitting to consider the provisions of Order I Rule 1 CPC, the said judgment is per incuriam and is not binding as a precedent on this Court. In order to appreciate this contention we have to look into the provisions of Company Rules as well as the aforesaid provisions of Order 1 Rule I CPC. 15. Company rule 6 deals with practice and procedure of the Court and provisions of the Code to apply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fairs of the company have not been conducted in a manner prejudicial to the interests of its members or to public interest, no compromise or arrangement shall be sanctioned. There is no indication in the said proviso that the transferee and transferor companies have to make separate application at all. All that the said section says is the report of the Registrar in respect of the companies which are before the Court seeking relief is a condition precedent before sanction is accorded. On the contrary Order I, Rule 1 of CPC clearly provides for joining of all persons in one suit. It states that all persons may be joined in one suit as plaintiffs where any right to relief in respect of, or arising out of, the same act or transaction or series of acts or transactions is alleged to exist in such persons, whether jointly, severally or in the alternative and if such persons brought separate suits, any common question of law or fact would arise. In a petition under sections 391 and 394 of the Act, the scheme of compromise or arrangement or amalgamation or a scheme of reconstruction or amalgamation of any two or more companies is brought before the Court for sanction and before sanction is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, it cannot be said that the joint petition is not maintainable and separate petitions have to be filed by each of the companies. This problem could be viewed from one more angle. After the permission is granted to the companies to convene the meetings of their shareholders and creditors to approve the scheme and if the scheme is approved, then the companies move the High Court again for sanctioning of the scheme. When such an application is made for sanctioning of the scheme, the Court is called upon to decide whether the scheme placed before the Court which has been approved by the members and share- holders of the company by requisite statutory majority requires to be sanctioned. If two applications are filed and if two Judges were to decide these matters separately there is a possibility of conflict of decisions. At any rate it is possible that one learned Judge may approve the scheme without any modification and the other Judge may sanction the scheme with modifications. In a case of scheme of amalgamation, the effect of sanctioning of a scheme would be that transferor company is ordered to be dissolved without there being a winding up order. If any further directions are re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arties to the amalgamation scheme, is possibly unknown to any other jurisdiction particularly when it is realised that the order would be ordinarily made after full debate and deliberations. What is more, the possibility of conflicting orders being passed by two Courts with regard to the same scheme cannot be altogether ruled out because the scheme might be looked at by all concerned from two totally different angles. One of the Courts might sanction the scheme whereas the other might sanction it subject to certain modifications or it might altogether refuse to sanction it. This possibility is inherent in the very situation. If the Court to which the petition for according sanction is presented earlier in point of time, say by the transferor company, not only gives anticipatory sanction but also makes a conditional order giving consequential directions under section 394 including the direction as to dissolution, it might possibly be urged that it becomes functus officio upon the passing of such orders and that if any modification is made in the scheme by the Court to which a similar petition is subsequently presented by the transferee company, it would have no jurisdiction to mod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by them and after such scheme being approved by the requisite majority of shareholders and creditors they would be requesting the Court to accord sanction for the said scheme. Therefore, the companies would be seeking the relief in respect of the some transaction, namely, the scheme. Even, if those companies were to file separate, independent petitions for the same relief, the Court would be called upon to decide ultimately the validity of the scheme propounded by all of them. When Order I, Rule 1 of CPC is made applicable to the proceedings under the Act which categorically provides that all persons may be joined in one suit as the plaintiff if the condition stipulated therein in that provision is satisfied a common application/petition by all the companies who have propounded the scheme is maintainable. The language employed in section 394A do not indicate any contrary intention on the part of the Legislature. The word every application used in section 394A do not mean that each company to the scheme should make separate application. All that it means is every application made to it under section 391 or 394 should be notified to the Central Government and thereafter the view ..... X X X X Extracts X X X X X X X X Extracts X X X X
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