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TMI Blog2013 (7) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... n Peerless to close its business. The business was being run by two friends namely Sri Kali Kumar Chatterjee and Sri Sunil Kanti Roy. Kali Kumar Chatterjee died in September 1979 when he was holding 520 shares in his own name and 4500 shares jointly with his wife Amiya Bala Chatterjee. Amiya Bala also held 200 shares in her own name. After the death of Kali Kumar Chatterjee, Amiya Bala became the owner of 5220 shares that was accordingly recorded in the shareholder's register. In a settlement within the members of the Chatterjee family, Ajit Kumar Chatterjee son of Amiya Bala got 1350 shares. In July 1986, Ashish Kumar the younger brother of Ajit became a director of Peerless. In 1987 Peerless succeeded in the litigation at the Apex Court level holding that they did not fall within the mischief of the Money Circulation Act however, the Supreme Court was critical about the forfeiture of the lapsed deposit amount. Ajit permanently settled at UK. His number of shares increased to 2700 when Peerless issued bonus shares. In October13,1987, Paid up capital of Peerless was Rs.73,61,200 divided into 73612 equity shares of Rs.100/- each. The dispute arose in 1988 when Peerless issued 30,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey were gained over. Arghya was made a director of the company. Bhagwati appeared in the scene. They applied for recall of the order of dismissal coupled with a prayer for transposition in the place of Chatterjee-appellants so that they could proceed with the appeals and ultimately the proceedings for mismanagement and oppression that was dismissed by the learned Judge on the ground of maintainability. The Division Bench dismissed the application. Bhagwati approached the Apex Court. The Apex Court observed, Bhagwati should file independent appeal. Bhagwati preferred fresh appeals. The Division Bench condoned the delay and admitted the appeals, however, declined to pass any interim order. Bhagwati filed Special Leave Petition. The Apex Court asked the Division Bench to dispose of the pending application. The Division Bench ultimately disposed of the pending application and the appeals. The Division Bench dismissed both the appeals. Bhagwati again approached the Apex Court. By an order dated April 4, 2013, the Apex Court set aside the order of the Division Bench and remanded the appeals back to this Court for being heard afresh. We heard the appeal on the above mentioned dates. Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore us. We would find, Mr. Gaggar executed a Power of Attorney in favour of Lodhas on February 26, 1991. On that date Mr. Gaggar also confirmed having executed the Power of Attorney, through a letter. The Power of Attorney would also have a schedule mentioning about 5600 shares being the subject matter of the document. Bhagwati Developers took a Board Resolution on May 27, 1991 deciding to support Ajit and Arghya in making the petition for mismanagement and oppression. Lodha accordingly informed Chatterjees through a letter dated May 29, 1991, they would extend support on the strength of the shares belonged to them as also purchased from Sri Gaggar. Mr. Kapoor would rely upon the relevant provisions of corporate law particularly Section 153C and D of the Indian Companies Act 1913 that stood repealed and replaced by the Companies Act 1956, particularly Section 399 thereof. Mr. Kapoor would contend, expression of interest to support the petition in the prescribed format would be sufficient. The supporter need not go through the petition or take responsibility of the averments made therein "Expression of Interest" was enough for the purpose. He was critical about the subsequent affid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Mr. Kapoor would contend, subsequent gaining over of Chatterjees would not make the situation different. The Chatterjees had requisite qualification taking into account the shares of Bhagwati. Hence, on the date of the presentation of the petition, the petition was maintainable and the learned Judge was not right in dismissing the same. Similar view was observed by the other decisions cited by Mr. Kapoor on the issue. Counter acting the argument advanced by Peeless, Ajit being an NRI was not entitled to acquire share without appropriate permission from the Reserve Bank, Mr. Kapoor would rely upon the decision in Dale & Carrington (supra) particularly paragraph 10 and 32 where the question of locus standi was discussed. In paragraph 33, the Apex Court discarded the contention on FERA violation by observing, "Since they were registered as shareholders of the company on the date of filing of the petition and they held the requisite number of shares in the company, they could maintain the petition." Appearing for Peerless Mr. Bhaskar Prosad Gupta, learned senior counsel being assisted by Mr. Abhijeet Chatterjee, learned senior counsel and Sri Aninda Basu, learned Advocate advanced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f R.L. Gaggar was competent to extend support, question would still be germane as to whether Lodha was competent to extend such support on behalf of Gaggar on the strength of the Power of Attorney. Mr. Gupta would refer to the clauses of the Power of Attorney and the affidavit subsequently filed by Mr. Gaggar and Mr. Lodha to contend, Gaggar categorically stated, he did not instruct Lodha to give consent. He did not go through the petition at all. Even if we take it, Lodha was competent in terms of the Power of Attorney, the Power of Attorney would itself show, the main purpose was to have the formalities of registration of shares and not for any other purpose. Mr. Gupta would rely on a particular clause of the Power of Attorney that is quoted below : "To sign execute and deliver the transfer deeds concerning or relating to the "said shares" as may from time to time be necessary or required for effecting the sale and/or transfer in respect of the said shares in favour of the said M/s. Bhagwati Developers Pvt. Ltd. and/or its transferees assignees and/or nominees and for the said purpose to do all acts deeds matters and things as the said attorneys or either of them shall think pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith interest that would have an irrevocable status. Distinguishing the Escorts Ltd. (supra) case, Mr. Kapoor would contend, question of delay in applying for mutation was not at all in issue. He had no quarrel with the definition of 'member' as interpreted in the case of Howrah Trading Co. (supra) and Balkrishna Gupta (supra). He would also rely upon Bengal Luxmi Cotton Mills Ltd. reported in 1965 Volume-XXXV Company Cases page-187 while this Court held, contrary to the other High Court's view as discussed above,rather it would have the support of the Apex Court in the case of P. Punnariah (supra). He would again refer to Killick Nixon (supra) itself to contend, consent given in writing was enough. It was not necessary to be a part of the proceeding. CASES CITED AT THE BAR : Before we deal with the issue on merits, let us first understand the law on the subject with reference to the decisions cited at the Bar. Mr. Kapoor cited eight decisions as above whereas Mr. Gupta would rely upon altogether thirteen decisions appearing in the compilation in addition to the decision in the case of Timblo Irmaos Limited (supra). We need not deal with all the cases in the compilation submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effect in the statute, cease to be maintainable by reason of events subsequent to its presentation. In our opinion, the withdrawal of consent by thirteen of the members, even if true, could not affect either the right of the applicant to proceed with the application or the jurisdiction of the court to dispose of it on its own merits". Such clear view of the Apex Court is still holding the field. We need not deliberate on the issue any further. Chatterjees had a particular percentage of shareholding that they admittedly held on the day of presentation of the petition. Learned Judge did not find fault on that score, at least not specifically mentioned. Lodhas extended support in respect of the shares held by them as also the share purchased from Sri R. L. Gaggar. Gaggar did not deny the transaction. He did not deny the execution of Power of Attorney or the letter confirming the same. His subsequent assertion, he did not read the petition or was not aware of the consent being given, was irrelevant and would not make the petition not maintainable. We hold, on the date of filing of the petition, Chatterjees had the requisite support that would make the petition maintainable. Once the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the purchaser would be free to use it. It would be unjust to deny exercise of such right by the purchaser. The Legislature thought it fit and thus amended the law. Such amendment, in our view, was to make the provisions more clear, the equitable right of the purchaser under the common law was already existing. The company was not a party to the sale. Company thus could not take any notice of it unless the shares were properly lodged for recording such change. So long it is not done, the company would recognize only the recorded shareholder and nobody else, hence, under Section 399(3) the recorded shareholder meaning thereby, Gaggar was only authorized to deal with the company and his consent would be sufficient. Gaggar executed the Power of Attorney so that such power could be used by the purchaser through the constituted attorney being two Directors of BDPL. Hence, the consent was valid. We do not wish to give rigid restricted meaning of Power of Attorney in this regard. Matter may be viewed from another angle, Gaggar never authorized his attorneys to use his power other than his right over the shares. Once the shares were transferred, Gaggar would have no moral or legal autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e interest of Rajeswari". In paragraph-7 His Lordship discussed the argument advanced by Mr. Sibal to the effect, the right or power to grant consent was a personal right that could not be delegated to an agent and it must be a personal decision of the member. In paragraph- 8 His Lordship categorically held, "we are unable to agree with the said reasoning". In paragraph-15 His Lordship allowed the appeal holding, the consent given by the Power of Attorney holder was a valid consent. Hansaria, J. while concurring observed as follows : "I am in respectful agreement with my learned Brother in the conclusion arrived at by him. Though it may be that on the legal question under consideration the contention of Shri Sibal is correct for the reasons advanced by him, but as Smt Rajeshwari made her position clear in the affidavit filed in the High Court, to which Brother Jeevan Reddy has advanced to, I do think she had authorized her father to act on her behalf in the matter at hand, and the application under Sections 397/398 of the Companies Act, 1956, as filed in the Court, ought to be taken as one to which she had consented". In our view, once His Lordship concurred the judgment of Jeeva ..... X X X X Extracts X X X X X X X X Extracts X X X X
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