9911796707
TMI Blog2010 (12) TMI 1066X X X X Extracts X X X X X X X X Extracts X X X X ..... rliest atleast within a period of six months from the date of the said order. Accordingly, main matters are taken up for hearing. 3. The applicants took out judge's summons praying reliefs, inter alia, that opponents, Reliance Industries Ltd. (RIL) be restrained from operating or implementing office memorandum dated March 8, 2007, issued by Mr. A. P. Singh for Indian Petrochemicals Co. Ltd., (IPCL) reducing superannuation age from 60 years to 58 years for supervisory employees and same be quashed and set aside and further be declared that the office memorandum dated March 8, 2007, is violative of the scheme of amalgamation between IPCL and RIL sanctioned by the learned company judge of this court vide judgment and order dated August 16, 2007, in Company Petition No. 93 of 2007. The applicants by way of amendment, in the alternative, prayed for monetary compensation as if the applicants were continuing in service till 60 years of age. The applicants further amended the applications by incorporating the facts relating to disinvestment policy, the shareholders' agreement executed in compliance with the disinvestment policy and, inter alia, further contended that the clause relating t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to compensation clearly stipulated that for the purpose of calculating the compensation, with regard to balance period of service left, the age of superannuation, shall have to be considered in accordance with the circular dated March 8, 2007, i.e., considering the age of superannuation to be 58 years. 6. The company application was filed by IPCL, the transferor company in this court on March 14, 2007, under section 391 for convening meetings of shareholders and creditors. The order was passed by this court on March 16, 2007, directing convening of meetings of shareholders, secured creditors and unsecured creditors. Advertisements were published in newspapers on March 20, 2007 and meetings of the shareholders and creditors were held and the scheme of amalgamation was approved at the meeting on April 14, 2007. Report of the chairman was filed in the proceedings of company application on April 18, 2007. On the same day, a substantive petition was filed by IPCL, the transferor company for sanction of the scheme of amalgamation in this court. The petition was admitted on April 23, 2007 and final hearing was fixed on June 19, 2007. 2,700 employees who had opted for VRS were relieved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of shares take place between 3 to 5 years thereafter. The stand taken by the opponent was that the service conditions were changed (i) on March 8, 2007 (ii) by IPCL and not by RIL (iii) the same were changed by competent authority of IPCL, i.e., the board of directors of IPCL and (iv) prior to sanctioning of the scheme and, therefore, there is no breach of the scheme as sanctioned by the court. This is not a correct stand. Mr. Shah further submitted that the main argument of the opponent is that the scheme contemplates two dates one dated April 1, 2006, i.e., appointed date and another date is when the certified copy of the order is filed upon sanction of the scheme by the High Court, i.e., September 5, 2007, the effective date. For the purpose of determining what were the terms and conditions of service according to the opponent, the relevant date is not April 1, 2006, but it is September 5, 2007. He submitted that this contention is misconceived for the following reasons : (i)Taking the language as it is of clause 8.1, the effective date is confined only for the purpose of identifying the employees, who were to be treated as the employees of RIL. Hence, September 5, 2007, is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as 455 wherein it is held that the court cannot interpret the scheme contrary to the Government policy and, therefore, clause 8.1 should be interpreted in consonance with the terms and conditions of the disinvestment policy. 8. Mr. Shah further submitted that the court has power under section 392 of the Act to go into disinvestment policy and read into the scheme and, therefore, RIL had no power or authority to alter the terms and conditions of the service of the applicants and other employees after June 4, 2002, including the superannuation age, which was 60 years. He further submitted that RIL cannot take a defence that it was done by IPCL and not by RIL. As per disinvestment policy and the shareholders' agreement, RIL had taken over the control from June 4, 2002 and since then, IPCL was merely a legal entity that remained in existence till amalgamation had taken place. The defence of RIL is further hit by the doctrine of lifting the corporate veil. The court is always empowered to pierce the legal entity and look into the reality and, therefore, this contention does not survive. He further submitted that it is not open for the RIL to raise a contention that the supervisory offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r submitted that the only contention raised is with regard to delay. However, that contention is not acceptable in view of the peculiar facts of the present case because the applications are filed on or around March 31, 2009 and it was the case of the opponents that the superannuation age was not the subject-matter of the scheme and hence, the question of not taking the contention at the time of passing of the scheme or at the time of sanctioning of the scheme by this court does not arise. Even otherwise, it is a matter of legal and equitable right and same cannot be defeated. On the contrary, the opponents are estopped from reducing superannuation age in view of disinvestment policy and shareholders' agreement. 11. Mr. Shah further submitted that reduction of superannuation age results into discriminatory treatment because service conditions of the employees of public undertakings are governed by the bureau of public enterprise (BPE) and BPE fixes terms and conditions of public enterprise. Pursuant to the direction of the Central Government, 60 years of age are prescribed for the employees of public sector enterprises. Even after privatisation, constitutional mandate continues ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A's service with the Ruler of the Wadhwan State was initially during the pleasure of the Ruler, the Ruler put a fetter upon his powers to dispense with the services of A when Dhara No. 29 of St. 2004 was enacted by him. This obligation of the Ruler passed to the Saurashtra State and the Saurashtra State also could not dispense with the services or compulsorily retire A before he attained 60 years of age. If the Saurashtra State chose to compulsorily retire A, it could only do so on payment of reasonable compensation. 15. Mr. Shah further relied on the decision of the apex court in the case of Mohinder Singh Gill v. Chief Election Commissioner, AIR 1978 SC 851, for the proposition that decision is to be judged as what is written therein and not to be supplemented by affidavit. The court held that (page 858) : when a statutory functionary makes an order based on certain grounds, its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reasons in the shape of affidavit or otherwise. Otherwise, an order bad in the beginning may, by the time it comes to court on account of a challenge, get validated by additional grounds later brought out. 16. Mr. Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsferred employees and employees appointed after September 1, 1956, is reasonable and not arbitrary and that there is a reasonable nexus between the classification and the object to be attained thereby. It cannot be said that regulation 19(2) is violative of articles 14 and 16 of the Constitution of India. The transferred employees who are treated favourably belong to a vanishing group and perhaps, within a period of few years none of them would be in the service of the Corporation. Thereafter, only one class of employees would be in the service of the corporation, namely, those appointed subsequent to September 1, 1956, by the corporation in respect of whom the corporation has fixed the age of retirement as 58 years which correspondence to the age of retirement in almost all the public sector establishments, the Central Government services and the State Government services. 19. Mr. Shah further relied on the decision of the apex court in the case of B.S. Yadav v. Chief Manager, Central Bank of India, AIR 1987 SC 1706, 1713, wherein it is held that there was good reason to make a distinction between the employees who had entered service prior to nationalisation and those who joine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt servant will offend against the provision of article 14 of the Constitution. Admittedly, the employees of CORIL were not given an opportunity of hearing or representing their case before the impugned circular altering conditions of service was issued by the board of directors. The impugned circular could not, therefore, be sustained as it offends against the rules of natural justice. The court further held that the fact that after the circular was issued, an opportunity of hearing was given to the employees with regard to the alterations made in the conditions of their service by the impugned circular would be immaterial. The post-decisional opportunity of hearing does not sub-serve the rules of natural justice. The authority who embarks upon a post-decisional hearing will naturally proceed with a closed mind and there is hardly any chance of getting a proper consideration of the representation at such a post-decisional opportunity. Once a decision has been taken, there is a tendency to uphold it and a representation may not yield any fruitful purpose. Thus, even if any hearing was given to the employees of CORIL after the issuance of the impugned circular, that would not be any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovision except sections 391 to 394 which deal with procedure and power of the company court to sanction the scheme which fall within the ambit of the requirements as contemplated under these sections. In the absence of any other provisions except section 392, it is difficult to accept the contention as raised that the present application under section 392 of the Companies Act is without jurisdiction. On the other hand, sections 391 to 394 has ample power and jurisdiction to supervise the scheme as sanctioned under the Companies Act. The exigencies, facts and circumstances, play dominant role in passing appropriate order under sections 391 to 394 after sanctioning of the scheme. The company court is not powerless and can never become functus officio. Sections 391 to 394 are interconnected and it can pass appropriate order for sanctioning of any scheme including of arrangement, demerger, merger and amalgamation. Therefore, the application filed by RNRL under section 392 is maintainable. Nevertheless, the power of the court does not extend to rewriting the scheme in any manner. 25. Mr. K.S. Nanavati, learned senior advocate appearing for M/s. Nanavati Associates for the opponents ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mumbai and not this court at Ahmedabad. To substantiate his argument, Mr. Nanavati further invited the court's attention to the provisions of section 391(2), which provide that if the court is satisfied that the compromise or arrangement sanctioned under section 392 cannot be worked out satisfactorily, it may make an order of winding up of the company and such order shall be deemed to be an order under section 433 of the Companies Act. IPCL is now no more in existence and it is only RIL which is in existence. The registered office of RIL is at Mumbai. If any winding up order is to be passed by the court while exercising the provisions of section 392(2) of the Act, it will be RIL which may be required to be wound up. In such a case, it will be the Bombay High Court alone which will have jurisdiction to wind up RIL and not this court. In that view of the matter, he has submitted that assuming without admitting that the jurisdiction under section 392 is exercisable, for the purpose of reliefs as prayed for in the present applications, then also, it will not be within the territorial jurisdiction of this court to pass any such order. 28. Mr. Nanavati further raised an issue with rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Municipal Council, Ahmednagar v. Shah Hyder Beig [2000] 2 SCC 48, wherein the court held that it is now a wellsettled principle of law that while no period of limitation is fixed but in the normal course of events, the period during which the party is required for filing a civil proceeding ought to be the guiding factor. While it is true that this extraordinary jurisdiction is available to mitigate the sufferings of the people in general but it is not out of place to mention that this extraordinary jurisdiction has been conferred on the law courts under article 226 of the Constitution on a very sound equitable principle. Hence, the equitable doctrine, namely, "delay defeats equity" has its fullest application in the matter of grant of relief under article 226 of the Constitution. The discretionary relief can be had provided one has not by his act or conduct given a go-by to his rights. Equity favours a vigilant rather than an indolent litigant and this being the basic tenet of law, the question of grant of an order as has been passed in the matter as regards restoration of possession upon cancellation of the notification does not and cannot arise. 30. Mr. Nanavati further sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elieving the supervisory employees from April 1, 2009, by virtue of office memorandum dated March 8, 2007, does not amount to altering the service conditions so as to be less favourable than those which were prevailing as on September 4, 2007, inasmuch as the age of superannuation stood already reduced from 60 years to 58 years as on September 4, 2007. Therefore, the said action cannot be said to be in breach of the provisions of the scheme of amalgamation. 32. Mr. Nanavati has further submitted that the learned company judge in his judgment and order dated August 16, 2007, has observed that the employees of the transferor company who joined the transferee company shall be governed by the scheme with modification that such employees shall be continued to be paid the same salary and other perquisites and benefits as they are being paid and given by the transferor company before the amalgamation. The learned company judge has also directed that the payment and other benefits including the salary as well as the provident fund that are to be paid and given to such employees shall be paid and given to them as at present it is paid. He further submitted that as per the said direction, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause 4.2 deals with transfer of assets, which says that on coming into effect of the scheme, the assets, properties, licence, permits, etc., shall be transferred to the transferee company with effect from the appointed date April 1, 2006. Clause 4.3 deals with transfer of liabilities, debts, loans and other obligations of the transferor company, which shall be transferred to the transferee company with effect from the appointed date (April 1, 2006). Clause 5 deals with contract, deeds, etc., and provides that the contracts, agreements, arrangements, deeds, etc., shall be taken over to the transferee company from the transferor company with effect from the effective date (September 5, 2007). Thus, the part of undertaking of transferor company comprising of contracts, deeds, arrangements, etc., is being merged or amalgamated or transferred from the transferor company to the transferee company with effect from the effective date (September 5, 2007). Clause 6 deals with legal proceedings and it contemplates that with effect from the effective date, the legal proceedings which were being prosecuted or defended by the transferor company shall be continued and/or enforced by or against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncluded in the fresh salary and other perquisites and other benefits, then also, such reversion had taken place much before the amalgamation of the employees' part of undertaking of IPCL with RIL and hence, giving effect to the said reversion, does not in any way, violate the direction/clarification issued by the learned company judge in his judgment and order dated August 16, 2007 and also in the proceedings of Company Petition No. 93 of 2007. He has, therefore, submitted that the grievances made by the applicants are ill-founded, baseless and devoid of any merits not entitling them to any of the reliefs as prayed for. 37. Mr. Nanavati further raised an issue regarding significance of the appointed date. As per the scheme of amalgamation of IPCL with RIL, the appointed date is April 1, 2006, as provided in clause 1.2. While clause 1.3 gives meaning of effective date to mean the last of the date on which the conditions as referred to in clause 18.1 of the scheme have been fulfilled and the orders of the High Court sanctioning the scheme are filed with the respective Registrar of Companies by the transferor company and by the transferee company. Admittedly, the order of this court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of assets on a particular date which were sought to be transferred to the transferee company. Clause 20 of the scheme in terms provided that the scheme shall take effect finally upon and from the date on which the necessary sanction or approval was obtained. 39. Mr. Nanavati has also canvassed an argument that scope of section 392 of the Companies Act is very limited so far as the present case is concerned. Though the power of the court under section 392(1) is of wide amplitude, it cannot be said that such power is without any limitation. Such power can be invoked only for the purpose of proper working of the compromise or arrangement. It cannot be invoked for the purposes of determination or adjudication of any right or interest claimed by any party flowing from the scheme. It would not be within the ambit of section 392 that the company court is called upon to adjudicate the dispute or claims arising from the scheme under the guise of supervising the scheme. Such powers are not contemplated under section 392 of the Companies Act. The jurisdiction under section 392 can be invoked only for the purpose of issuance of direction with regard to matters in respect of which the di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... condly, the power of issuing directions in the course of exercise of such a power of superintendence in regard to any matter or for modification, as may be necessary, is only for the proper working of the compromise or arrangement. The rights or claims of a company carrying on a scheme of compromise or arrangement between itself and the creditors and/or members, or any class of them, can only be enforced in the manner in which such rights or claims can be enforced under the law. Merely because a scheme of compromise or arrangement has been made between a company and its creditors or members, it cannot claim that its disputed rights or claims can be adjudicated upon by a company court which may be supervising such scheme. Thirdly, if the Legislature had intended that the company court supervising the scheme of compromise or arrangement between a company and its creditors or members should have the power of an ordinary court to hold trials for adjudication or determination of disputed rights or claims of that company against third parties as if it is a court of ordinary civil jurisdiction, it would have appropriately provided in the section and invested the company court with the nec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be said that in directing payment of the amount claimed by the petitioner the court was either supervising "the carrying out of the compromise or arrangement" as contemplated by clause (a) of the said sub-section or taking any steps "for the proper working of the compromise or arrangement" as envisaged by clause (b) of that sub-section, because the scheme of amalgamation made no provision regarding the manner in which the transferee company would have to discharge the liability of the transferor company and the only provision it contained was that of merger of the two companies and the consequential direction by which the liability of the transferor company would become the responsibility of the transferee company. (iv)In the case of Hifco Consumer Credit Ltd. v. Midland Industries Ltd. [1998] 93 Comp Cas 502 (AP), the applicant claimed to be holding equity shares in the company which came to be merged with the first respondent-company under a scheme of amalgamation approved by the court. However, after amalgamation, the first respondent-company allegedly did not allot any shares to the applicant to which it was entitled. In the instant application under section 392 of the Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter expression having a wider denotation than a member or creditor or liquidator of a company specified in section 391 and includes even a non-member or a non-creditor. Undoubtedly, the court may decline to act at the instance of a busy body but if the action proposed to be taken is justified, valid, legal or called for, the capacity or credentials of the person who brought the situation calling for court's intervention is hardly relevant, nor would it invalidate the resultant action only on that ground. Therefore, when sub-section (2) confers power on the court to act on its own motion, the question of locus standi hardly arises. On the same analogy, the court can exercise under sub-section (1) of section 392 also on an application of any person interested in the affairs of the company including one who is not a member or a creditor of the company. Sub-sections (1) and (2) have to be read harmoniously. 41. Mr. Nanavati further raised an issue that contract of personal service cannot be specifically enforced. He submitted that the prayers as made if granted, i.e., the office memorandum dated March 8, 2007, if quashed and set aside as prayed for, then, it would indirectly have the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t with consequential reliefs-is whether employment is governed purely by contract or by a statute or statutory rules. Even where employer is a statutory body, but relationship is purely governed by contract with no element of statutory governance, contract of personal service will not be specifically enforceable. Conversely, where employer is a non-statutory body, but employment is governed by a statute or statutory rules, a declaration that termination is null and void and that employee should be reinstated can be granted by the courts. (ii)In the case of Nandganj Sihori Sugar Co. Ltd. v. Badri Nath Dixit [1991] 3 SCC 54, the apex court held that even if there was a contract in terms of which the plaintiff was entitled to seek relief, the only relief which was available in law was damages and not specific performance. Breach of contract must ordinarily sound in damages, and particularly so in the case of personal contracts. Assuming that a contractual relationship arose consequent upon the letters addressed by defendant No. 3 to defendant No. 1, however, the plaintiff was a total stranger to any such relationship, for, on the facts of this case, no relationship of a fiduciary cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Rules governing the said provisions under the Companies (Court) Rules, 1959. Further, it is admitted by the applicants in their rejoinder affidavit that the fact about the said office memorandum dated March 8, 2007, was within their knowledge right from the same day. Therefore, and even otherwise, since there is no requirement for disclosing the details with regard to conditions of service of the employees of the transferor company as were prevailing before or during the said proceedings before the company court or prior to the said proceedings before the company court, the transferor company was not obliged to specifically plead about the office memorandum dated March 8, 2007, in the proceedings for or proceedings leading up to the sanctioning of the scheme of amalgamation of IPCL with RIL in this court. In that view of the matter, non-disclosure of the service conditions with regard to age of superannuation or to be precise of non-disclosure of office memorandum dated March 8, 2007, in the pleadings of or in the proceedings leading up to the sanctioning of the scheme of amalgamation cannot be said to be an act of fraud as is sought to be contended by the applicants. 44. Mr. N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the Bombay High Court and the scheme was sanctioned by the Bombay High Court. The applicants are originally the employees of IPCL and they have raised their grievance against reduction of their superannuation age from 60 years to 58 years. It is equally true that on scheme becoming effective, IPCL stood dissolved and hence the applications are rightly filed by the applicants against RIL and not IPCL. The only question which is to be decided by the court is as to whether such applications can be entertained by this court especially when IPCL stood dissolved and relief is claimed against RIL over which the Bombay High Court has jurisdiction. 47. To address this question, certain statutory provisions contained in the Companies Act, 1956, are required to be looked into. Section 2(11) of the Act defines the word "the court" which means, (a) with respect to any matter relating to a company, other than any offence against this Act, the court having jurisdiction under this Act with respect to that matter relating to that company, as provided in section 10 ; (b) with respect to any offence against this Act, the Court of a Magistrate of the First Class or, as the case may be, a Pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he carrying out of the compromise or an arrangement ; and this court can certainly make an order or give direction or make such modification in the compromise or arrangement as it considers necessary for the proper working of the compromise or arrangement. However, sub-section (2) puts restriction on exercise of such powers in view of the fact that if the scheme cannot be worked satisfactorily with or without modifications, the court shall make an order of winding up of the company, and in that case it would be treated as an order passed under section 433 of the Act. The IPCL is already dissolved and hence there is no question of winding up of the said company. If RIL is to be wound up it can be done only by the Bombay High Court as this court has no jurisdiction over RIL. 50. In the above view of the matter and considering the statutory provisions of sections 2(11), 10 and 392(2) of the Act, this court is of the view that this court has no territorial jurisdiction to entertain these applications. 51. Another issue was raised with regard to delay caused in filing these applications before this court. What is challenged in these two applications is the office memorandum dated Marc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions contained in section 391(2) of the Act. The real issue is as to whether such a prayer can be made while invoking the jurisdiction of the company court under section 392(1) of the Act. There is no dispute or doubt about the fact that the power of this court under section 392(1) is of very wide amplitude. However, there are certain inherent restrictions on exercise of such powers. Such powers can be exercised only for the purpose of proper working of compromise or arrangement and it can never be invoked for the purpose of determination or adjudication of any right or interest claimed by any party, flowing from the scheme sanctioned by the court. By filing the present applications the applicants require this court to adjudicate the dispute or claims arising from the scheme under the guise of supervising the scheme. The basic prayer in both these applications is the prayer for quashing and setting aside the office memorandum dated March 8, 2007. The same would not fall within the ambit of carrying out of compromise or arrangement as contemplated by clause (a) of section 392(1) nor even within the ambit of taking any step for the purpose of working out the compromise or arra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 and after that date on attainment of the 58 years of age, such person shall retire from service. Thus, the contention raised by the applicants that they are governed by the service regulations which are prevalent on the appointed date, i.e., April 1, 2006, according to which they will be retired at the age of 60 years, should prevail and it is not open for RIL to make any change in the said service regulations, has no legal force and cannot be accepted. To substantiate the plea of the applicants, Mr.Shah at the belated stage has strenuously pressed into service the ground regarding violation of the provisions of disinvestment policy and shareholders' agreement. There is nothing in the scheme which requires that the service conditions as were prevalent at the time of framing disinvestment policy or entering into shareholders' agreement are to be preserved. It cannot be accepted that RIL has committed any breach of the disinvestment policy or the shareholders' agreement. Even otherwise, it is a disputed question of fact which cannot be decided in a proceedings under section 392 of the Companies Act, 1956. As stated earlier and as found from the judicial pronouncements referred to h ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
