9911796707
TMI Blog2012 (6) TMI 642X X X X Extracts X X X X X X X X Extracts X X X X ..... ential direction upon the Registrar of Companies and the official liquidators has been rejected. While rejecting the said application the learned trial judge recorded certain findings which had gone against the respondents-companies and as such cross-objection has been filed against the said portion of the judgment. Accordingly, both the appeal and cross-objection are heard together and being disposed of by the following common judgment and order. 2. The short fact leading to filing the application before the learned trial judge and consequently preferring appeal to this court are follows : The aforesaid appellants were the applicants numbering 11 (eleven) before the learned trial judge. Out of these five appellants Nos. 1 to 6 are person individuals, and the rests are private limited companies. It appears that the said individual applicants by virtue of majority shareholding are really controlling the appellant-companies. It also appears that these appellants are also really majority shareholders of respondent-companies Nos. 2 to 7. The detail of the shareholding patterns of all the appellants in respondents Nos. 2 to 7 are stated in the application. The learned trial judge has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been practised on the shareholders and upon the court reporting that directions have been complied with on the strength of which sanction has been obtained for the amalgamation of the companies. 3. So far as the other grounds taken in the said application are concerned we are of the view the same are not required to be considered at the moment, as if it is held that in spite of having received notice or knowledge no action was taken within the time as permitted by the law, challenge to the subsequent action is not entertainable at all. 4. The said application has been opposed by filing affidavit affirmed by one Suresh Kumar Rungta who has claimed to be constituted attorney of the first respondent. Bereft of all details which purport to deal with the allegations contained in the petition, relevant objections are summarised hereunder : (a) The instant application has been filed against six non-existent companies. The application is barred by limitation and also hit by the principle of res judicata or at least constructive res judicata. (b) The applicants who purport to be parties interested in the scheme of amalgamation sanctioned by this hon'ble court by order dated January 16 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the petitioners or by anyone else was made. In fact, with the sanctioning of the scheme of amalgamation by the hon'ble High Court at Jodhpur on October 17, 2003, Suresh Kumar Rungta accepted the same by entering into the understanding and/or arrangement on October 18, 2003, on the basis thereof from the beginning of 2011, and agreeing that he would leave the company in the event of being paid a sum of Rs. 1.5 crores. (g) In the annual returns of these companies signed by the said Suresh Kumar Rungta himself and/or his associates for the year ended March 31, 2002, reflected the actual shareholding of Rajendra Prasad Rungta, his family members, friends and nominees in the said companies. The annual return filed by the same set of persons as on March 31, 2004, showed that their shareholding in the companies had been completely either done away with and/or drastically reduced. This could not have been done in view of the expressed object of the understanding and/or arrangement of January 4, 2001, sanctioning of the scheme of amalgamation to give effect to the same and understanding and arrangement of October 18, 2003, inter alia, recording the intention of Suresh Kumar Rungta to pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is submitted that service of notice is not recorded in the report of the chairperson. The learned trial judge ignored the fact that the meeting has been attended by the alleged proxies who had no authority to attend such meeting. In the report of the chairperson it is said that meeting is said to have been attended by one Dinesh Rungta and Purusottam Lal Rungta both died long ago. The aforesaid infirmity and illegality go to the very root of the matter, as such the said order of learned trial judge is liable to be set aside. 8. Learned counsel for the respondents submits that the learned trial judge is justified in dismissing the application for setting aside the scheme in 2005. This very scheme was supported by these self-same applicants or their privies by filing affidavits. The self-same issue was before the court earlier and was adjudicated on filing of the affidavits not only before the learned first court but also before the appellate court in company jurisdiction. Against the Division Bench judgment special leave petition was preferred before the Supreme Court and the same was dismissed as withdrawn. Thus it is not a question of res judicata alone but question of extrao ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tting aside the order of sanction, but have merely chosen to support the applicant." 12. The aforesaid judgment with finding have been affirmed by the Division Bench with identical details. 13. In our considered view obtaining of order of withdrawal of the special leave petition does not change the position of law nor does it create any greater or better right. In view of the dismissal of the special leave petition, the order sanctioning the scheme and follow up action pursuant thereto, has become final in the proceedings wherein some of the present applicants were not only present but participated by filing affidavits. We fail to understand how the same could be agitated once again after having found unsuccessful both in Jaipur by their direct action, and in Calcutta by their indirect action through Ambika Prasad Modi. Therefore we think the learned trial judge has rightly concluded that this action is not only hit by the principle of res judicata and/or constructive res judicata but also barred by the principle of acquiescence. We do not find any infirmity in the judgment of the learned trial judge as his Lordship has correctly recorded based on high authorities recorded in his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no notice of the meeting to consider the scheme was received by him. The meeting was said to have been illegally convened, conducted and further vitiated by alleged attendance by dead persons. The applicant Nos. 1 to 6 ('the supporters') had filed affidavits in that application supporting the applicant, Ambika Prasad Modi. 5. That application was dismissed by my brother Sanjib Banerjee, J, on 3rd December, 2007. 6. From the said judgment and order of brother Banerjee, J, Ambika Prasad Modi preferred an appeal before the Division Bench of this court. For more or less the same reasons as given by my brother Sanjib Banerjee, J, and some additional reasons which are very significant and which I will discuss later on, in this judgment, the Division Bench dismissed the appeal, on 19th March, 2009. A special leave petition was preferred from that judgment and order by the applicants herein, which was also dismissed as withdrawn by the hon'ble Supreme Court on 31st July, 2009. 7. Now, all the controlling shareholders of respondent Nos. 2 to 7 are together as applicants for the purpose of undoing the order sanctioning the scheme. Arguments of parties 8. Fundamentally, three points hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ling affidavits. (b)The self-same issues were before the court. (c)The court of first instance upheld the scheme and overruled the objection. (d)An appeal was preferred against that order but the court of appeal affirmed the order of the trial court for the same reasons. (e)A special leave petition was preferred before the Supreme Court by the applicants which was dismissed as withdrawn. (f) There has been great delay in approaching the court. There was acquiescence by the applicants. (g)All issues which have been raised in this application have been already decided by the court in the earlier proceedings and have become res judicata. (h) The court has no power to reopen such issues. (i) The scheme has long been implemented and it is now not open to the court to reopen the scheme or to set aside the order sanctioned by the court. 14. These submissions together with the authorities cited by both the parties are examined in detail under the heading "Discussion and findings". Judgment dated 3rd December, 2007 15. I have carefully examined the judgment of my brother, Banerjee, J, and the judgment in appeal affirming it. In the judgment and order of the learned company Judge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e meeting and kept in the dark in respect of the then proposed scheme of amalgamation, the applicant could not have stopped or stalled the resolutions passed by the concerned company or the other transferor-companies or by the transferee-company and the applicant lacked the shareholding strength to do so. The vicarious grievance of the supporters cannot ride on the applicant in the absence of such supporters coming to the fore." 16. There were other points also addressed by his lordship as follows : "The applicant has also relied on the affidavits filed by various Rungta shareholders beginning page 418 of the application and ending at p. 447 thereof. The summary of the contents of the affidavits appearing between pp. 418 and 447 is recorded at p. 448 of the application. The applicant suggests that on the strength of the affidavits filed by his supporters, it would appear that a substantial percentage of the shareholders in the six transferor-companies had no knowledge of the meetings and had not been issued any notice therefor. The applicant also indicates that a number of the shareholders of the transferor-companies shown to have attended the statutory meetings pursuant to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the court. Therefore, the question is whether the interests of those companies were also represented before the court. 19. To deal with the question of res judicata, let me first try to interpret the meaning of the phrase "between the same parties or between parties under whom they or any of them claim, litigating under the same title" in section 11 of the Code of Civil Procedure, 1908 ('the Code'). Now, "between parties under whom they or any of them claim" means, in my opinion, servants, agents, assigns or privies of the parties, their legal representatives or predecessors-in-interest as the case may be, under the same title, representing the interests of those parties, by their authority or by authority of law. Former suit has been defined as one decided prior to the suit in question by Explanation I to that section. 20. Explanation - IV of section 11 of the Code is quite important. It says that any matter which might or ought to have been made a ground of defence or attack in such former suit shall be deemed to have been a matter directly and substantially in issue in such suit. Explanation V provides that any relief claimed in the plaint which is not expressly granted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 94] 2 SCC 14 the Supreme Court said that a decided issue will bind the parties and their privies. It said that the object of section 11 of the Code was to bring conclusiveness with regard to judgments, binding the parties and their privies. The justification for such provision is to be found on "public policy as well as private justice". This is akin to the principle of issue estoppel or cause of action estoppel as held by the Supreme Court in Ishwar Putt v. Land Acquisition Collector [2005] 7 SCC 190. This principle applies to different stages of a proceeding. Who can be called privy has been very nicely described in said passage of Jowitt quoted above relying on the said old English decision. The principle of res judicata also applies to representative proceedings under order 1, rule 8 of the Code as held in K. Manathunainatha Desikar v. Sundaralingam & Singhai Lal Chand Jain AIR 1996 SC (sic) 1211 and K Manathunainatha Desikar v. Sundaralingam a Full Bench decision of the Madras High Court, AIR 1,971 Mad 1. The Supreme Court went further in Narayana Prabhu Venkateswara Prabhu v. Narayana Prabhu Krishna Prabhu AIR 1977 SC 1268. Referring to the question of estoppel or res judicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the fraud or upon it being ought to be discovered by reasonable diligence - see Md. Noorul Hoda v. Bibi Raifunnisa [1996] 7 SCC 767 and Panna Lal v. Murari Lal AIR 1967 1384. When fraud has been practised on the court, the court has the power to set aside such order or decree on the ground of fraud. If there is fraud the principles of res judicata will not apply. An act perpetuated by fraud may be void ab initio. A fraudulent party may be thrown out at any stage of the litigation - see Commissioner of Customs v. Aafloat Textiles India (P.) Ltd. [2009] 11 SCC 18; Ram Chandra Singh v. Savitri Devi [2003] 8 SCC 319 ; S P Chengalvaraya Naidu v. Jagannath AIR 1994 SC 853 ; Hamza Haji v. State of Kerala [2006] 7 SCC 416, Vijay Shekhar v. Union of India [2004] 4 SCC 666 ; Vijay Shekhar (supra) and MCD v. State of Delhi [2005] 4 SCC 605. 29. If the facts constituting alleged fraud or any substantial part of those facts were before the court which tried the issue in the earlier proceeding and decided expressly or by implication, the issue of fraud also becomes res judicata. 30. The entire issues which are sought to be raised today including the issues of fraud were before the court in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Explanation IV. But there can be no res judicata of an issue when it is before the court but not decided - see Sheodan Singh v. Darya Kunwar AIR 1966 SC 1332. Further, the court in the earlier proceedings did not recognise "the supporters" as parties, when it said "The application (earlier application) has to be considered not on the strength of what the apparent supporters allege from the wings of the supporting affidavits". For this additional reason there can be no res judicata of the above issues. 35. As far as the allegations in the application before me regarding advertisement, conduct of the meeting and adopting of resolution are concerned, there is no denial of them at all in the affidavit-in-opposition. Only reference is craved to the 'records'. There is no denial of the allegations that proper notices were not served before the meeting or that advertisements were made in obscure newspapers. Indeed, I have not heard about one of the two newspapers where the notice was published. Further, there is no denial that the meetings were attended by many unauthorised persons. Dead persons were shown as having attended the meeting. I have examined the records, including the anne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... January, 2003 was, however, filed by the appellant only on 30th September, 2005 after the expiry of more than 2 years and 8 months since the passing of the same. This in itself demonstrates that the said application was without merits and was filed by the appellant as an afterthought.... We are also not satisfied with the explanation given by the appellant that the notices which were published in the financial Express and Kalantar in terms of the direction given by the court, had limited circulation and that he had no knowledge of the said meeting or it cannot be accepted that he came to learn of the amalgamation only in course of his visit to his native village place in September 2005. Therefore, we do not find that the appellant has been able to find any ground to explain the delay as has been stated in the petition." 38. According to my findings above, the applicants in this proceeding are bound by the above findings in the earlier proceedings. They are squarely bound by the finding that they had constructive notice if not actual of this fraud. The court was for the first time approached nearly three years after the order dated 16th January, 2003. Further, there was no imped ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
