TMI Blog2003 (5) TMI 418X X X X Extracts X X X X X X X X Extracts X X X X ..... or not. The plaintiffs/petitioners are holders of equity shares in the defendant No. 3. Yule Financing and Leasing (hereinafter referred to as Yule) being the defendant No. 7 was floated in the year 1981 by Andrue Yule and Company (the fourth defendant). The defendant Nos. 1 and 2 had been the Directors of Yule who had accepted deposits from public under various schemes but failed to repay on their respective dates on maturity. 3. They were appointed Directors on 28th June, 1999 and 26th June, 1998 respectively and had been till 15th of October, 2001 and 26th September, 2001 respectively, when, the aforesaid two persons are said to have been resigned from the Office of the Director of the defendant No. 7. Now these two persons are sought to be appointed Directors in the defendant No. 3. It appears that during their tenure of directorship the defendant No. 7 is alleged to have defaulted in repaying the amount of deposit together with interest to the public upon maturity. So, the defendant No. 7 approached Company Law Board for suitable order for reschedulement of repayment under the Companies Act, 1956. 4. By an order in August 2000 pursuant to the scheme submitted by defen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act, is associated with any defaulting company, he would be inviting this disquali fication. In support of his aforesaid submission he has relied on number of decisions of the Supreme Court in Union of India v. Madan Gopal Kabra AIR 1954 SC 158, Rafiquennessa v. Lal Bahadur Chetri AIR 1964 SC 1511, Bashiruddin Ashraf v. Bihar Subai Sunni Majlis-Awaqf AIR 1965 SC 1206 and T.K. Lakshmana Iyer v. State of Madras AIR 1968 SC 1489 and an English decision in A Solicitor s Clerk, In re [1957] 3 All ER 617. 8. He contends that the aforesaid amending Act namely section 132, which is a relevant one, came into force on 14th December, 2000. In this case even assuming the defendant Nos. 1 and 2 having retired on 21st May, 2002 and 11th September, 2002 have been Director of the defendant No. 7 on the date of commencement of the aforesaid Act. Admittedly, the defendant No. 7 fails to repay the deposit amount to the respective depositors for a period of one year or more on and from the date of notification. The respective fixed deposits became matured on 31st December, 1999. As such, there is clear default on part of the defendant No. 7. 9. He submits that the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection. 13. Mr. Joyantya Mitra learned Senior Counsel also opposes this application and has advanced the same argument and in support to their arguments they relied on the following decisions of the Supreme Court and other Courts : Jagir Kaur v. Jaswant Singh AIR 1963 SC 1521, Kanai Lal Sur v. Paramnidhi Sadhukhan AIR 1957 SC 907, State of Maharashtra v. Nanded-Parbhan Z.L.B.M.V. Operator Sangh AIR 2000 SC 725, Harbha jan Singh v. Press Council of India AIR 2002 SC 1351, Pakala Narayana Swami v. Emperor AIR 1939 PC 47, Rananjaya Singh v. Baijnath Singh AIR 1954 SC 749, Nelson Motis v. Union of India [1992] 4 SCC 711, Mahadeolal Kanodia v. Administrator General of West Bengal AIR 1960 SC 936, Ganesh Wire Industries v. CESC Ltd. AIR 2003 Cal. 138, Films Raver International Ltd. v. Cannon Film Sales Ltd. [1986] 3 All ER 772, Luke v. IRC [1963] AC 557 and (1884) 13 QBD 337 ( sic ). 14. Mr. Joyanta Mitra adds that the aforesaid section operates for disqualification and has got civil consequences. So, the construction of the section should be very restrictive and the clear and literal meaning should be given. 15. Mr. Sudipta Sarka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in totality of the facts and circumstances of this case and without resorting to technicality, whether this can be maintained till the disposal of the suit or not. 20. The moot question in this case is, on the facts and circumstances of this case whether this section has retrospective operation or prospective operation. Even if it is made prospective operation, then, because of the language employed therein the effect thereof can be given for the failure of the company that has already taken place on the date of commencement of the Act or not. I think argument of Mr. Sarkar has to be considered first, as to whether the aforesaid section can be applied in view of the order passed by the Company Law Board, rescheduling the date of repayment. 21. On the factual score it appear that had there been no order of the Company Law Board then due date of maturity of all the deposits would have been for the various slabs of the deposits from 31st December, 1998 till 30th June, 2000. However, these dates of repayment have been rescheduled by the order of the Company Law Board and it appears that this has been done for all slabs of deposits. 22. Mr. P.C. Sen argues that the effect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shape of an order, unless the same is set aside by the appropriate forum. It is true that due date for repayment is fixed in terms of the certificate of deposit by the agreement between the parties and such due date cannot be changed and/or modified without the consent of both the parties. 24. It appears to me from the order of the Company Law Board that deposit holder appeared and they participated in the hearing, after hearing them the Company Law Board passed order. So, this order had got the effect of consent as it has not been challenged nor set aside. When the parties themselves, namely company and shareholders have agreed mutually to reschedule the payment with the mode of instalment, in my view due date initially fixed has been changed and/or varied. 25. The Oudh High Court case cited by Mr. Sen is not applicable in this case as in that case on fact the case proceeded in a different footing. 26. The provision of section 45QA, sub-section (2) of the Reserve Bank of India Act is intended to provide measure in case of default in repayment of the deposits on maturity to the depositors and it subserves two purposes ( i ) when the company deliberately fails and negl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the rescheduled date of repayment for various categories of deposits are stated hereunder : Categories of Deposits Schedule of Repayment of Deposits Up to Rs. 5,000 One instalment within 4(four) months from the date of maturity or the date of the order, whichever is later. Rs. 5,001 to Rs. 15,000 Two equal instalments within 6(six) months, commencing from the date of maturity or the date of the order, whichever is later in the manner - 50% within 3(three) months and the balance 50% within next 3(three) months. [[ Categories of Deposits Schedule of Repayment of Deposits Rs. 15,001 to Rs. 25,000 Two equal instalments within 8(eight) months, commencing from the date of maturity or the date of the order, whichever is later in the manner - 50% within 4(four) months and the balance 50% within next 4(four) months. Rs. 25,001 to Rs. 50,000 Three instalments within 12(twelve) months, commencing from the date of maturity or the date of the order, whichever is later in the manner - 30% within 4(four) months, 35% within next 4 (four) months and the balance 35% within 4(four) months ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re consistent with the alleged object and policy of the Act. The words used in the material provision of the statute must be interpreted in their plain grammatical meaning, and it is only when such words are capable of true construction the question of giving effect to the policy or object of the Act can legitimately arise. When the material words are capable of two constructions, one of which is likely to defeat or impair the policy of the Act, whilst the other construction is likely to assist the achievement of the said policy, then the Courts prefer to adopt the latter construction. It is only in such cases that it is relevant to consider the mischief and defect which the Act purports to remedy and correct. 37. The Supreme Court in the case of Kanai Lal Sur ( supra ) while dealing with the interpretation of section 5(1) of the Calcutta Thika Tenancy Act (2 of 1949) (as amended by Act 6 of 1953) has applied and further laid down the aforesaid principle. 38. Later in a decision of the recent past of the Supreme Court in case of Nanded-Parbhan Z.L.B.M.V. Operator Sangh ( supra ) has held amongst other than "When the language of a statute is fairly and reasonably clear, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court has reiterated in paragraph 8 that ".........if the words of a stat ute are clear and free from any vagueness and are, therefore, reasonably susceptible to only one meaning, it must be construed by giving effect to that meaning, irrespective of consequences." 45. In case of Mahadeolal Kanodia ( supra ) the Supreme Court has laid down the rule of interpretation of statutory provision in the manner as follows : "The principles that have to be applied for interpretation of statutory provisions of this nature are well established. The first of these is that statutory provisions creating, substantive rights or taking away substantive rights are ordinarily prospective; they are retrospective only if by express words or by necessary implication the Legislature had made them retrospective; and the retrospective operation will be limited only to the extent to which it has been so made by express words, or necessary implication. The second rule is that the intention of the Legislature has always to be gathered from the words used by it, giving to the words their plain, normal, grammatical meaning. The third rule is that if in any legislation, the general object of which is to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acquired is precluded from making a retroactive law. The question must depend upon the scope of the powers conferred, and that must be determined with reference to the terms of the instrument by which affirmatively, the legislative powers were created and by which negatively, they were restricted." 48. Again in paragraph 14 it is observed "It could not be assumed that such a Legislature had the power of making a law having retrospective operation in relation to a period to its birth unless the Constitution itself clearly and explicitly conferred such power." 49. In the case of Rafiquennessa ( supra ) it has been held in paragraph 9 amongst others that "In order to make the statement of the law relating to relevant rule dealing with the effect of statutory provisions in this connection, we ought to add that retrospective operation of a statutory provision can be inferred even in cases where such retroactive operation appears to be clearly implicitly in the provision construed in the context where it occurs. In other words, a statutory provision is held to be retroactive either when it is so declared by express terms, or the intention to make it retroactive clearly follows ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... examined in which way section 274, sub-section (1), Clause G(A and B) is to be operated. The said section as amended is reproduced below : "274. Disqualification of Directors. (1) A person shall not be capable of being appointed a Director of a company. If...... (G) such person is already a director of a public company, which, (A) Has not filed the annual accounts and annual returns for any continuous three financial years the commencement on or after the date of April, 1999 or (B) Has failed to repay its deposit or interest thereon on due date or redeem its debentures on due date or any dividend and such failure continues for one year or more. Provided that such person shall not be eligible to be appointed as a director of any other public company for a period of 5 years from the date on which such public company, in which he is a director, fail to file annual accounts and annual returns, under sub-clause (A) or has failed to pay its deposit or interest or redeem its debentures on due date or pay dividend referred to in Clause (B)." It appears to me the governing language of the aforesaid section is "such person is already a director.............." and "such company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interpretation of the words and language of the section itself. The aforesaid Supreme Court decisions as referred to above has clearly held that interpretation of the words of any statute cannot be given effect to frustrate or defeat the object of the Act or to lead to an absurdity [ see Mahadeolal Kanodia s case ( supra )]. 55. So, I think in this case this provision will be applicable against the respondent Nos. 1 and 2. From the records I find prima facie that even after rescheduling of date of repayment of the deposit the company has failed to repay within one year or more. The company was obliged to repay on or before 30th October, 2000 as far as deposit holders of Rs. 5,000 are concerned and even after filing of the suit this default continues as in the affidavit-in-opposition of the defendant No. 7 nor in the affidavit-in-opposition of the defendant Nos. 1 and 2 have stated that repayment has been affected even after order of the Company Law Board. I do not find any statement or averment whether any instalment has been paid with regard to other category of deposits. 56. Therefore, it is clear that default of the company has been continuing. The defendant No. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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