TMI Blog2013 (2) TMI 367X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of litigations. The CLB stated that the proposed amendment will not in any way fundamentally change the nature and character of the applicants case in the company petition and no prejudice would be caused to the appellants if the amendments were allowed for proper, effective and just adjudication of the matter. The CLB has permitted the appellants to file counter affidavits within three weeks on receipt of the amended company petition. The CLB has also rendered a finding that the company petition filed by the respondent Nos. 1 to 3 has not become infructuous. Company petition fairly depicts that the challenge in the said petition was not restricted to the extraordinary general meeting dated 10-11-2010 but was also against any such meeting in future that might be held for same or similar purposes. By application for amendment filed by the respondent Nos. 1 to 3 the applicants had prayed for amendment of the petition under sections 397 and 398 and to bring on record the subsequent events and development during the pendency of the company petition. It is not in dispute that the company petition is pending before CLB. The CLB has exercised its discretionary power to allow the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent to a company petition under section 397/398 can be allowed to introduce such events ? 4. Where a company petition is instituted under section 397/398 of the Companies Act, 1956 on the premise that the board of directors of the company have convened an EOGM, whether an EOGM requisitioned by shareholders under section 169 of the Companies Act, 1956 would constitute a subsequent event in continuation of the earlier alleged cause of action which can be introduced as an amendment to the company petition ? 5. Whether an extraordinary general meeting convened pursuant to a valid requisition by shareholders under section 169 of the Companies Act, 1956 constitutes a cause of action for an action under section 397/398 of the Companies Act, 1956 against the shareholders who have not requisitioned the meeting ? 6. Whether an extraordinary general meeting convened pursuant to a valid requisition by shareholders under section 169 of the Companies Act, 1956 to consider an amendment to the articles of association of the company constitutes a cause of action for an action under section 397/398 of the Companies Act, 1956 against the shareholders who have not requisitioned the meeting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order remains unchallenged and has become final and binding and conclusively holds that Appellant no. 1 is a public company and its shares are freely transferable. The said order and judgment not only binds Respondent no. 4 and 5, but also binds the Appellant and Respondent No. 1 and 2 herein. 12. On 9th December, 2009, respondent no.1 and 2 on the basis of certain newspaper reports which stated that Appellant no. 2 was selling his shares in Appellant no. 1 filed another company petition bearing No. 132 of 2009 before the CLB setting out the same allegations as set out in Company Petition No. 77 of 1990 along with allegations arising out of such news paper reports. 13. On 14th May, 2010, the Company Petition NO.132 of 2009 was dismissed by the CLB by an order dated 14th May, 2010 holding that no case of oppression of mismanagement was made out, appellant no.1 is a public company and that Article 57 of the Articles of Association thereof is void and unenforceable. 14. On 26th May, 2010, respondent Nos. 1 and 2 preferred an appeal against the said order dated 14th May, 2010 before this Court bearing Company Appeal No.24 of 2010. 15. On 16th October, 2010 during the pendency o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cles of Association is unenforceable. The said order however continued an injunction granted at an ad-interim stage of the appeal with certain modification whereby appellant Nos. 2 and 3 are restrained from selling, transferring, alienating, pleading, encumbering or in any manner creating any third party rights in shares of appellant no.1 directly or indirectly held by them. Though the Company Appeal No.24 of 2010 was dismissed on 14th June, 2011, no order was passed in Company Appeal No. 2 of 2011 whilst dismissing Company Appeal No. 24 of 2010. 25. Thereafter respondent Nos. 1 and 2 preferred SLP bearing No. 16994 of 2011 before the Supreme Court of India against the said order dated 14th June, 2011. 26. On 22nd and 27th July, 2011, the said SLP has not yet been admitted. The Supreme Court of India by its orders dated 22nd July, 2011 and 27th July, 2011 in SLP (Civil) No. 16994 of 2011, has continued the order of injunction which was continued by this Court in its order dated 14th June, 2011. The SLP is pending. The Supreme Court has not granted a stay of the order dated 14th June, 2011. 27. On 8th August, 2011, the Company Appeal No.2 of 2011 was sought to be withdrawn by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Petition No. 87 of 2010 with a view to introduce inter alia a challenge to the conduct of the EOGM dated 22nd May, 2012 and to seek an injunction against the appellants restraining them from implementing the resolution dated 22nd May, 2012, deleting article 57 from the Articles of Association of appellant no.1. 34. On 10th July, 2012, Company Application Nos. 73 of 2012, 85 of 2012 and 91 of 2012 were being heard together and Company Application Nos. 73 of 2012 and 85 of 2012 were part heard on 10th July, 2012 and adjourned to 24th July, 2012. 35. On 24th July, 2012, Company Application Nos. 73 of 2012, 85 of 2012 and 91 of 2012 were listed but at the request of respondent Nos. 1 and 2, they were adjourned to 10th August, 2012. 36. On 9th August, 2012, the advocates for respondent Nos. 1 and 2 issued a letter to the advocates for the appellants and stated that they would be seeking another short adjournment on 10th August, 2012 due to the unavailability of counsel since he was held up in another matter before this Court. Under the instructions from the appellants, the advocates for the appellants intimated the advocates for respondent Nos. 1 and 2 by two letters dated 9th A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be given if the EOGM was to be held later. The appellants did not hold any EOGM called by the company by notice issued on 16th October, 2010. This court passed an order dated 8th August, 2011 allowing the prayers of respondent nos. 1 and 2 to withdraw the Company Appeal (2 of 2011) in view of appellants' adjourning the meeting. This court observed that respondent nos. 1 and 2 may adopt proceedings in an appropriate forum on a fresh cause of action keeping all the questions including maintainability of the appeal open. (b) Company Petition (87 of 2010) filed by the 2nd respondent thus become infructuous as the cause of action had ceased to exist and this Court granted liberty to adopt fresh proceedings in a appropriate forum on a fresh cause of action. (c) Notice for EOGM dated 22nd May, 2012 constituted a new and different cause of action. Notice dated 25th April, 2012 for holding EOGM on 22nd May, 2012 was issued upon a requisition by three shareholders made on 31st March, 2012 and received by the appellants on 20th April, 2012 under section 169. The requisition of meeting thus constituted an entirely new and different cause of action and could have been questioned only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own away. In a case where an entirely different cause of action is raised, I think that the proper course is to leave the party to bring a fresh suit ab initio, if so advised." 45. Dr. Saraf, the learned counsel appearing for respondent nos. 7 and 8 supported the appellants in impugning the order passed by the CLB allowing the amendment thereby impleading respondent nos. 7 and 8 as party to the Company Petition. It is submitted that collusion between the appellants and respondent nos. 7 and 8 has not been proved. The learned counsel placed reliance upon the findings of fact recorded by CLB in paragraphs 13 and 39 of the impugned order and submits that once such finding of no collusion is recorded by the CLB, respondent nos. 7 and 8 could not have been impleaded as party respondents. It is submitted that the order allowing impleadment of respondent nos. 7 and 8 after recording such finding shows inconsistency in the impugned order. 46. Mr. Samdhani, the learned senior counsel appearing on behalf of respondent nos. 1 and 2 on the other hand submits as under :- (a) Company Petition No. 87 of 2010 filed by the second respondent before the CLB is not infructuous. The challenge in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest or in a manner prejudicial to the interest of the company. These are all applications by members. In the case of Lundie Brothers Ltd., In re, a petitioner, who was one of three directors and shareholders in a private company, presented a petition for relief under section 210 of the English Companies Act, 1948, which is equivalent to section 397 of the Companies Act. The petitioner was ousted from the control of the company and was removed as a working director of the company. It was held that no element of lack or probity or fair dealing to the petitioner in his capacity as shareholder in the company had been established, for, his having been ousted as a working director related to his status as director and not as shareholder. It was held that the petitioner was not entitled to relief under section 210 of the Companies Act. In the present case, however, the amendments do not deal merely with removal of directors of the fifth respondent-company. The acts complained of relate to requisition various shareholders of the fifth respondent company, as a result of which an extraordinary general meeting is purported to have been held and certain new directors appointed. At this meeti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Companies Act. After the petition was presented some of the shareholders withdrew their consent. The Court held that this subsequent withdrawal of consent is not relevant if the petition had the support of the requisite number of members at the time when the petition was presented. This case does not support the contention of Mr. Chinoy. The judgment merely states that if a petition is validly filed and complies with all the requirements of sections 397 and 398 of the Companies Act at the date when it is filed, any subsequent withdrawal of consent by some of the shareholders would not invalidate the petition. The decision does not set out that subsequent events cannot be looked into in deciding a petition under sections 397 and 398 on merits. 7. The second case relied upon by Mr. Chinoy was that of Shanti Prasad Jain v. Kalinga Tubes Ltd., reported in. The Court there held that it is necessary in a petition under sections 397 and 398 of the Companies Act to show that the conduct of the majority shareholders was oppressive to the minority as members. Also, the events had to be considered not in isolation but as a part of a consecutive story. It said "There must be continuous a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a pleading in a petition under section 397 or 398 of the Companies Act, 1956 for relief against mismanagement or oppression in the affairs of a Company. In the case of Bastar Transport and Trading Co. v. Court of Wards, reported in the Court has held that the provisions of the Code of Civil Procedure, so far as applicable, would govern proceedings under the Companies Act also. There is thus no provision under the Companies Act which prohibits a Court from looking at subsequent events in a petition under sections 397 and 398 of the Companies Act." Thus, it becomes evident that it is permissible to bring on record by amendment not only the facts pertaining to the events upto the filing of the petition but also subsequent events. Mr. Manohar had, however, submitted that this judgment does not take note of the law laid down by the Supreme Court in the case of Shanti Prasad Jain v. Kalinga Tubes Ltd. A.I.R. 1965 S.C. 1535. In paragraph 35 of the judgment, the Supreme Court observed as follows: "35. Nor is there any ground for holding that because of the change which took place in the management after July, 1958 it was likely that the affairs of the Company would be conducted in a ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n plain and obvious cases.........." Similar views expressed by other Judges are also noticed in that judgment which are as follows. "In Nagle v. Feilden, 1966 (1) All. E.R. at page 695 Danckwerts, L.J., observes: "The summary remedy which has been applied to this action is one which is only to be applied in plain and obvious cases, when the action is one which cannot succeed or is in some way an abuse of the process of the Court." Salmon, L.J., at page 697 observes: "It is well settled that a statement of claim should not be struck out and the plaintiff driven from the judgment seat unless the case is unarguable." Thus the Rule appears to be that the plaint can be rejected in plain and obvious cases when the action is one which cannot succeed or is in some way an abuse of the process of the Court. The plaint should not be struck out unless the case is unarguable. In the same judgment Sir Gordon Willmer at page 1105 observed as follows: "The question whether a point is plain and obvious does not depend on the length of lime it takes to argue. Rather the question is whether when the point has been argued, it has become plain and obvious that there can be but one result ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the learned Attorney-General to the effect that the petition does not make out a case under sections 397 and 398 of the Act and the petitioner could not be permitted to supplement the allegation by subsequent affidavits filed. It is noted by the Division Bench that the petition was filed on 14th September, 1960. The Company filed its counter affidavit on 19th September, 1960. Respondent No. 2 filed his rejoinder on 2nd December, 1960. The Court had earlier ordered that by 15th February, 1961 all rejoinders should be filed. The petitioner filed all rejoinders on 8th February, 1961. On 17th March, 1961 respondent No. 2 filed another affidavit without the leave of the Court and on 13th April, 1961 the petitioner filed a counter affidavit in reply to this affidavit without leave of the Court. The learned Attorney-General contended that the subsequent affidavits filed by the petitioner should not be taken into consideration to supplement the averments made in the petition and that the petition is demurrable. The ratio of the judgment is in paragraph 10 which is as follows: "10. On a summary of the legal position, it is sufficiently clear that in a petition under sections 397 and 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nion that once the Court comes to the conclusion that the petition is maintainable then subsequent events can also be considered in order to do complete justice between the parties and to make appropriate orders for removing the oppression. 18. The aforesaid judgment of the Division Bench was taken to the Supreme Court by way of appeal. The judgment of the Supreme Court in Shanti Prasad Jain v. Kalinga Tubes Ltd., is. A perusal of this judgment shows that the Supreme Court was not dealing with a case of amendment. Mr. Manohar had submitted that the issue was squarely raised in paragraphs 8 and 9 of the judgment and it was answered in paragraph 35 in the negative. I am unable to accept this proposition. The Supreme Court was not considering a case of amendment. It was only considering as to whether subsequent facts can be looked into on the basis of affidavits filed by the parties. The Single Judge of the Orissa High Court had allowed the petition. The appeals were allowed by the Division Bench. The Supreme Court dismissed the appeals against the judgment of the Division Bench. In paragraphs 8 and 9 of the judgment of the Supreme Court, there is no mention of the additional affida ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rely upon them. While repelling the said submissions, the Court observed as follows:- "Section 397 provides that any member of a company who complains that the affairs of the company are being conducted in a manner prejudicial to public interest or in a manner oppressive to any member or members may apply to the Court for an order under that provision, if the Court is of opinion that the Company's affairs are being conducted prejudicially to public interest or in a manner oppressive to any member or members and that to wind up the company would unfairly prejudice such member or members; but that otherwise the facts would justify the making of winding up order on the ground that it was just and equitable that the company should be wound up, the Court may, with a view to bringing to an end the matters complained of, make such order as it thinks fit. It is useful to notice that there is no limitations on the reliefs to be granted by the Company Court under this provision. For, the provision enables the Court to make such order as it thinks fit with a view to bringing to an end the matters complained thereof. The emphasized portion of the above said provision will clearly indicate th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame subject matter and the amendment was also with a view to avoid multiplicity of proceedings. It was further contended that the new events indicating a fresh cause of action for filing a new petition would not come in the way of the petitioner in getting the petition amended as the same was meant for supplementing the main contention. It was contended before the Division Bench that amendments ought not to have been granted as it would attract the provisions of Order 23, Rule 1. It was further submitted that as there is a fresh cause of action, proceedings would not be maintainable in view of the amendment under the Companies Act and the forum for the grievance would be the Company Law Board. It was further submitted that the subsequent events are not relevant for deciding the issue in question. It was contended that the additional evidence should be the evidence in addition to the evidence already on record in the form of original pleadings. New material should partake the same character and content as the original petition. As the allegations are altogether different and have no nexus or relevance to the original allegations, the applications ought to have been rejected. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on that the Court would be able to decide this issues as to whether the dividend squeeze could amount to an oppression. The Court would also have to decide as to whether or not transfer of shares made in contravention of the Articles of Association would amount to an act of oppression. The Court would also have to decide as to whether or not the remuneration received by respondent No. 2 is an act of oppression. These are all matters which require detailed consideration and have to be decided on merits at the final hearing of the petition. 48.1 And also in the case of Sampath Kumar v. Ayyakannu [2002] 7 SCC 559. 9. Order 6 Rule 17 of the CPC confers jurisdiction on the Court to allow either party to alter or amend his pleadings at any stage of the proceedings and on such terms as may be just. Such amendments as are directed towards putting-forth and seeking determination of the real questions in controversy between the parties shall be permitted to be made. The question of delay in moving an application for amendment should be decided not by calculating the period from the date of institution of the suit alone but by reference to the stage to which the hearing in the suit has pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dant of the advantage accrued to him by lapse of time, by excluding a period of about 11 years in calculating the period of prescriptive title claimed to have been earned by the defendant. The interest of the defendant can be protected by directing that so far as the reliefs of declaration of title and recovery of possession, now sought for, are concerned the prayer in that regard shall be deemed to have been made on the date on which the application for amendment has been filed. 12. On the averments made in the application, the same ought to have been allowed. If the facts alleged by plaintiff are not correct it is open for the defendant to take such plea in the written statement and if the plaintiff fails in substantiating the factual averments and/or the defendant succeeds in substantiating the plea which he would obviously be permitted to raise in his pleading by way of consequential amendment then the suit shall be liable to be dismissed. The defendant is not prejudiced, more so when the amendment was sought for before the commencement of the trial. 13. For the foregoing reasons, the appeal is allowed. The impugned orders of the High Court and the Trial Court are set aside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n three weeks of receipt of the amended CP. Rejoinder within three weeks thereafter. 50. I have heard the learned counsel and have given my anxious consideration to the rival submissions made by the learned counsel. 51. On perusal of the impugned order passed by the CLB allowing company application (73 of 2012) filed by respondent nos. 1 to 3 seeking amendment to company petition (87 of 2010), it is clear that the CLB has rendered a finding that the application for amendment was allowed for determination of the issues between the parties and for the purpose of framing issues for avoiding multiplicity of litigations. The CLB has rendered finding that the proposed amendment would not constitute and fundamentally change the nature and character of the applicants case in the company petition and no prejudice would be caused to the appellants herein if the amendments were allowed for proper, effective and just adjudication of the matter. The CLB has permitted the appellants herein to file counter affidavits within three weeks on receipt of the amended company Petition. The CLB has also rendered a finding that the company Petition (87 of 2010) filed by the respondent nos. 1 to 3 here ..... 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