TMI Blog2008 (3) TMI 485X X X X Extracts X X X X X X X X Extracts X X X X ..... endency of this appeal it is but appropriate that the amount received either from the highest bidders, or from the unsuccessful bidders, be returned to them. The High Court Registry shall, or such persons being identified by their respective counsel, return the money received from them by way of an account payee cheque drawn in their favour. - COMPANY APPEAL NO. 4 OF 2007 COMPANY APPLICATION NOS. 288, 289, 290 AND 291 OF 2008 AND 1042, 1109, 1171, 1190, 1303, 1320 AND 1358 OF 2007 - - - Dated:- 13-3-2008 - RAMESH RANGANATHAN, J. V.S. Raju, Gangadhar Chamarthy, Rupendra Mahendra, Ms. G. Sudha, C. Kodanda Ram, V.V. Anil Kumar, Y. Ratnakar and Murlinarayana Bung for the Appellant. S. Ravi, N. Subba Rao and V. Hariharan for the Respondent. P. Harinath Gupta and A. Sanjay Kishore for the Advocate Commissioners. JUDGMENT 1. This appeal is filed, under section 10F of the Companies Act, 1956, by 22 shareholders of the first respondent-company aggrieved by the order of the Company Law Board in C.P. No. 56 of 2002 dated 10-11-2006 ( D. Ramkishore v. Vijayawada Share Brokers Ltd. [2007] 140 Comp. Cas. 180). The appellants herein, 22 in number, holding in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 for grant of any relief to bring to an end the acts complained of, that these and other developments referred to in its order had resulted in a deadlock in the affairs of the company, that the relationship between the shareholders had not been reconciliable in view of several rounds of litigation and that the parties had lost mutual trust and confidence. In exercise of the powers conferred under section 402, the Company Law Board directed that the company should convene and hold a meeting of its members to elect directors not exceeding five in number, upon which the Board so constituted would appoint one of the directors to be the managing director, that Hon ble Justice Mr. P. Ramakrishnam Raju (Retd.) would preside over the meeting convened in terms of the order, that he was at liberty to take the services of any practising company secretary of his choice in the discharge of his functions, that the chairman should work out the entire modalities of convening and holding of a general meeting in consultation with the company, that the chairman of the meeting should forward a report on the proceedings of the general meeting within ten days of conclusion of the meeting, that the boar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sq. yard and directed that Rs. 50,000 be paid as earnest money deposit for participating in the auction. The earnest money deposit was to be made by way of demand drafts drawn in favour of the Registrar (Judicial) of the Andhra Pradesh High Court. The fee of the Advocates Commissioner was tentatively fixed at Rs. 25,000 each and they were informed that the required amount, for causing publication, and to meet incidental expenses, would be deposited by the appellants within one week. 4. This court, in its order dated 20-4-2007, noted that the Advocates Commissioner had represented that the total extent of land owned by the company was in three bits of 3,420 sq. yards, 975 sq. yards and 350 sq. yards, that these three bits were separate and distinct with different boundaries and were not contiguous and that it would be proper to sell these extents of land under separate lots. This court directed the Advocates Commissioner to effect sale of land under three separate lots, i.e., lot No. 1 consisting of 3,420 sq. yards, lot No. 2 consisting of 975 sq. yards and lot No. 3 of 350 sq. yards, fixing the minimum upset price at Rs. 35 lakhs, Rs. 11 lakhs, and Rs. 4 lakhs respectively, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted to discharge its functions and, save illegality in the discharge of their functions, they should not be replaced without just cause. 6. Sri Y. Ratnakar, learned counsel appearing for some of the members of the first respondent-company, would seek a declaration from this court that the respondents, whom he represents, are in the management of the company. Learned counsel would request this court to issue necessary guidelines to safeguard the money received on the sale of the assets and to ensure that the sale proceeds are properly distributed among all the shareholders of the company. 7. Both Sri S. Ravi and Sri V. Hariharan, learned counsel appearing on behalf of some of the respondents, on the other hand, would contend that the Company Law Board had rightly directed that a fresh board of directors be elected, in a general meeting convened for the purpose, to replace the earlier board in view of the disputed manner in which the earlier board was elected on 30-9-2003. They would contend that the Company Law Board had the necessary power and discretion to issue such a direction under section 402 of the Companies Act, and that such exercise of discretion did not constitu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e parties on an application of the appropriate principles of law to the facts ascertained. The ultimate finding on the issue must, therefore, be an inference to be drawn from the facts found, on the application of the proper principles of law, and in such cases an inference from facts is a question of law. In this respect, mixed questions of law and fact differ from pure questions of fact in which the final determination, equally with the finding or ascertainment of basic facts, does not involve the application of any principle of law. The proposition that an inference from facts is one of law will be correct in its application to mixed questions of law and fact but not to pure questions of fact. When the finding is one of fact, the fact that it is itself in inference from other basic facts will not alter its character as one of fact. [ Sree Meenakshi Mills Ltd. ( supra )]. 9. It is within this limited scope that the contentions urged on behalf of the appellants must be examined. The grievance of the appellants, with regards the sale of a portion of the land belonging to the first respondent- company by the second respondent, has been dealt with elaborately by the Company Law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... despite advertisement in the local newspapers on more than one occasion in April, 1998 and February, 1999, that in the annual general meeting held on 26-9-2002, the second respondent, as the chairman of the meeting, while giving details of the problems faced by the company on account of withdrawal of the power of attorney given by petitioner Nos. 2 and 4 in favour of the company and as a result of encroachment of 350 sq. yards of the landed property of the company by Peddireddy Peddiraju, had also furnished details of the proposal for sale of 570 sq. yards of landed property situated adjacent to the encroached property. The Company Law Board noted that the sale of 570 sq. yards of land was reportedly intended to create a buffer, between the illegal occupant and the company s remaining landed property, and that the report of the directors dated 30-8-2001, for the year ended 31-3-2001, showed that the company was pursuing the legal issues concerning its lands. The Company Law Board held that, in the above background, the market value of the property as disclosed in the valuation certificate produced by the petitioners of Rs. 7,000 per sq. yard could not be realistic, that the market ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted board of directors was constituted in the meeting held on 30-9-2003, the Company Law Board ought not to have directed that a meeting of the shareholders should be convened to elect a board of directors afresh, not exceeding five in number, one of whom was to be the managing director. According to learned counsel, the only order which the Company Law Board ought to have passed, in exercise of its jurisdiction under section 402 of the Companies Act, was to appoint a chairman for the purpose of taking appropriate steps for the sale of the landed property of the first respondent-company, distribute the sale proceeds among the shareholders according to their holding and to deliver share certificates to the members in respect of their holding in the company. Learned counsel would submit that, instead of directing a board of directors to be elected afresh, the Company Law Board should have permitted the existing board of directors to assist the chairman to implement the directives issued. 13. In its order, in C.P. No. 56 of 2002 dated 10-11-2006, the Company Law Board observed that the first respondent-company had become a member of the Bhubaneshwar Stock Exchange Ltd., and of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an order forbidding the company from making any alterations, (either at all or of a specified kind), to the memorandum or articles of association without the leave of the Court. (Palmer s Company Law : Sweet and Maxwell). 15. The powers under section 402 are residuary in nature and are in addition to the powers available to the Company Law Board under sections 397 and 398 of the Companies Act. [ Manish Mohan Sharma v. Ram Bahadur Thakur Ltd. [2006] 131 Comp. Cas. 149 1 (SC)]. The powers of the court under section 402 of the Companies Act are wide and, thereunder, the court may make any order for the regulation of the conduct of the company s affairs upon such terms and conditions as may, in the opinion of the court, be just and equitable in the circumstances of the case. [ Richardson Cruddas Ltd., In re [1959] 29 Comp. Cas. 549 (Cal.)]; Technicalities cannot be permitted to defeat exercise of the equitable jurisdiction conferred by section 402. [ Needle Industries (India) Ltd. v. Needle Industries Newey (India) Holding Ltd. [1981] 51 Comp. Cas. 743 (SC)]. 16. Having regard to the object that is sought to be achieved by sections 397 and 398 read with section 402 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le acting under section 398, read with section 402 of the Companies Act, the court has ample jurisdiction and very wide powers to pass such orders and give such directions as it thinks fit to achieve the object and there can be no limitation or restriction on such power as requiring it to be exercised subject to the other provisions of the Act dealing with normal corporate management or that such orders and directions should be in accordance with such provisions of the Act. [ Pramod Kumar Mittal v. Andhra Steel Corpn. Ltd. [1985] 58 Comp. Cas. 772 (Cal.)]. No canon of construction would permit an interpretation in which the statutory power of the court for its exercise depends upon the vote of the members of the company [ Cosmosteels (P.) Ltd. ( supra )]. The Court, under section 398 read with section 402 of the Act, can give appropriate directions which are contrary to the provisions of the articles of the company or the provisions of the Companies Act [ Debi Jhora Tea Co. Ltd. v. Barendra Krishna Bhowmick [1980] 50 Comp. Cas. 771 (Cal)]. Constitution of an Advisory Board is within the competence of the court under section 402 of the Companies Act, 1956 [Richardson and Cru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra Pradesh High Court should preside over the meeting so convened. That the Company Law Board has the power, to issue such directions, under section 402 of the Companies Act, 1956, is not in dispute. As such exercise of discretion by the Company Law Board, under section 402 of the Companies Act, in directing that a fresh board of directors be constituted to assist the chairman, (a retired Judge of the A.P. High Court), cannot be said to give rise to a question of law necessitating interference in appellate proceedings under section 10F of the Companies Act, 1956. 18. Before parting with the case, it is necessary to note the contention of Sri Y. Ratnakar, learned counsel appearing on behalf of some of the members of the first respondent-company. Learned counsel would seek a declaration from this court that the members, whom he represents, are in the management of the first respondent-company. Whether such a declaration could be given in an appeal under section 10F of the Companies Act, 1956, is, itself, debatable. Even otherwise this question does not necessitate further examination since the members, on whose behalf Sri Y. Ratnakar has entered appearance, have not even chosen t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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