TMI Blog2012 (6) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... ellate stage. If this established course is to be followed then the only enquiry at the stage of admission would be to ascertain from the memorandum of appeal as to whether the grounds on questions of law have been formulated or not, with a very broad correlation with the finding of the Company Law Board in the judgment under appeal. The scope of enquiry thus has to be minimal at this stage. Applying such minimal scrutiny test, in my opinion the appellants have made out a case for admission of the appeal. Pre-admission objection on the question of maintainability of the appeal is rejected. - A.P.O.T. NO. 399 OF 2009 AND A.P.O. NO. 274 OF 2009 - - - Dated:- 20-4-2011 - ANIRUDDHA BOSE, J. S.B. Mookherji, Sudipto Sarkar, Rajiv Nayyar, S.N. Mookherjee, Parthasarathi Sengupta, Jishnu Saha, Maushumi Bhattacharya, Ciccu Mukhopadhaya, Niloy Pyne, Neelina Chatterjee, Sooruya Ganguli, Pooja Chakrabarti, Ayush Agarwal and Kartik Nayar for the Appellant. Anindya Kumar Mitra, Pratap Chatterjee, Malay Kumar Ghosh, Paritosh Sinha, Debangsu Basak, Manju Bhuteria, Sachchida Nand Pandey, P.C. Sen, Sanjiv Kumar Trivedi, Debanjan Mandal, Sourya Sadhan Bose, Soumya Ray Chowdhury, Dee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties in a composite manner instead of dealing with their submissions individually as there are many overlapping points in their submissions. At the threshold a preliminary objection has been taken by learned counsel appearing for the respondents as regards maintainability of the appeal itself. It has been argued on behalf of the respondents that the appeal ought not to be admitted since in the judgment under appeal, the Company Law Board has come to a finding that the petition is not maintainable and such finding is based on factual issues. Argument of the respondents on this count has been that the Company Law Board has come to its finding that the petition was filed mala fide , and such finding was finding on fact. Referring to the provisions of section 10F of the Act, it has been contended that the appeal should not be admitted as no appeal lies against a finding on fact under the aforesaid provision of the Act. In the judgment, (at pages 70-72) it has been, inter alia held : "18. Shri Sarkar argued that as long as the petition has been filed/ supported by 100 members, the question of qualitative aspect does not arise. He relied on All India Shaw Wallace Employees Fede ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re entitled to appoint an agent to look after their affairs. It is the agent who will apply his mind to the affairs of his principal and use his own judgment. Members who are given a right to file a petition under sections 397 and 398 can, therefore, delegate their right to an agent who can exercise that right on their behalf'. In this judgment, the statutory provision has been examined on the facts of that case. While I do agree that section 399 does not talk of the quality of a member, I have explained below as to why the quality of the member is necessary in a proceeding under section 397/398. 19. In many of the proceedings before this Board, motive had been questioned, I do not remember that in any case, the qualitative aspect, as a point of law had been raised or considered by this Board. Shri Sarkar argued that there is no statutory provision regarding the qualitative aspect of a petition. I agree that section 399 does not deal with the qualitative aspect. Yet, since in a proceeding under section 397/398, this Board exercises equitable jurisdiction with enormous powers, I am of the firm view that while examining the eligibility under section 399, the qualitative aspect of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 can be filed only by those, even if qualified under section 399, having some real stake in the company. As I have observed earlier in this paragraph, from the manner, mode and method of acquisition of shares, it is clear that the consenters have no real stake or interests in the company and therefore their fulfilling the requirements of section 399 is of no consequence. In other words, in real sense, considering the equitable nature of the proceedings under section 397/398, it can be held that the petitioners cannot maintain the petition." 4. Since objection has been raised on the point of maintainability, I shall A refer to the submissions made on behalf of the respondents first. Reliance has been placed on the decision of the hon'ble Supreme Court in the case of T.K. Lathika v. Seth Karsandas Jamnadas [1999] 6 SCC 632, on behalf of the respondents in support of their contention that such preliminary issue should be decided first, before entering into the merits of the appeal. The other judgment relied on by the respondents on this count is also a decision of the hon'ble Supreme Court in the case of N.V. Srinivasa Murthy v. Mariyamma [2005] 5 SCC 548. It has been arg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of the hon'ble Supreme Court in the cases of General Manager (P.), Punjab and Sind Bank v. Daya Singh [2010] 11 SCC 233 and Sumitomo Heavy Industries Ltd. v. Oil Natural Gas Co. AIR 2010 SC 3400. 8. Main submission of the appellants in response to the preliminary objection is that the impugned judgment involves decision on various points of law. In particular, it has been argued that once the qualification test laid down in section 399 of the Companies Act for maintaining an application under the provisions of sections 397 and 398 of the Act is satisfied, there is no further necessity to enquire into the quality of the applicant members before entertaining a petition of this nature. It has been further argued that no personal interest is required to be established once the applicants establish their locus in the manner specified under the aforesaid provision of the Act. It is the case of the appellants that once the petitioners qualify in the threshold test, then the scope of enquiry as to whether there is mismanagement or not becomes wider and under section 398(2) of the Act, the Board can enquire into the question of apprehended mismanagement also. 9. In su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to the realm of facts and not of law. In the case of Bhagwati Developers (P.) Ltd. ( supra ) an hon'ble single judge of this court held (page 450) "... a finding of fact recorded by the Company Law Board is final and cannot be reversed by the High Court." 13. But it is not an absolute proposition of law that every factual finding of the Company Law Board is immune from the scrutiny of the High Court under section 10F of the Act. In the case of Dale Carrington Investment (P.) Ltd. ( supra ) the hon'ble Supreme Court held (page 184) : "Section 10F refers to an appeal being filed on the question of law. Learned counsel for the appellant argued that the High Court could not disturb the findings of fact arrived at by the Company Law Board. It was further argued that the High Court has recorded its own finding on certain issues which the High Court could not go into and therefore the judgment of the High Court is liable to be set aside. We do not agree with the submission made by learned counsel for the appellants. It is settled law that if a finding of fact is perverse and is based on no evidence, it can be set aside in appeal even though the appeal is permissible only o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntainability should be decided as a preliminary issue. The reason for doing so is that if the respondents had only raised the issue relating to the numerical eligibility, then the same has necessarily to be decided as a preliminary issue. But in the present case, the petitioners do satisfy the numerical requirement and the objections of the respondents on the maintainability are on various grounds which cannot be decided without going into the merits of the case." 16. Now would the finding based on qualitative test of a member raise a point of law ? In my opinion, for that purpose the judgment under appeal would have to be scrutinised in greater detail. It has to be ascertained first as to whether such a factor could at all be considered by the Company Law Board for determining the locus of the applicants in a proceeding under sections 397 and 398 of the Act or not. If finding on this point is affirmative, then it has to be examined whether there was sufficient material before the Company Law Board to come to such a conclusion. Of course upon consideration of these issues the Appellate Court could affirm the finding of the Company Law Board on the point of maintainability of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icated by the Company Law Board raise any question of law on which an appeal can be preferred. 18. The practise followed by this court in an appeal under section 10F of the Act has been to admit the appeal and then examine as to whether the judgment under appeal involves any point of law or not, if objection on this ground is raised. Such test can be applied on the day of first hearing itself, at the time of admission of appeal, as has been done in the two unreported judgments cited on behalf of the respondents. But unlike in an appeal under section 100 of the Code of Civil Procedure, 1908, it has not been the practice of this court to ascertain first if the appeal involves any question of law, and then admit the appeal upon being satisfied that it does. An appellant assailing an order of the Company Law Board is not usually required to obtain any entry-permit from the court before being allowed into the arena of adjudication at the appellate stage. If this established course is to be followed then the only enquiry at the stage of admission would be to ascertain from the memorandum of appeal as to whether the grounds on questions of law have been formulated or not, with a very ..... X X X X Extracts X X X X X X X X Extracts X X X X
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