9911796707
TMI Blog2013 (10) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... which is closely held by the members of the same family. (b) The respondents 1, 3 and 6 are the sons of one late Palanisamy Naidu. The second respondent is the wife of the first respondent. The fourth respondent is the wife of the third respondent. The 7th and 8th respondents are the wife and son of the sixth respondent. (c) In other words, 3 brothers viz., P.Narayanasamy (R-1), P.Govindarajan (R-3) and P.Swathanthirarajan (R-6), jointly have a controlling interest in the affairs of the said Company. (d) But it appears that family disputes between 2 brothers on the one hand (R-1 & R-3) and the third brother (R-6) on the other hand, led to the respondents 1 to 4 herein, filing a petition in C.P.No.8 of 2003 on the file of the Company Law Board, alleging oppression and mismanagement. (e) The said petition C.P.No.8 of 2003 was filed somewhere in the beginning of the year 2003. But before it was filed, the Board of Directors of M/s.Neela Spinning Mills Pvt. Ltd., which is the fifth respondent herein, passed a resolution on 6.10.2002 to sell a land measuring an extent of acres 9.45 comprised in S.F.No.311/2 of Veerapandi Village, Tirupur Taluk. Pursuant to the said resolution, a Sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al No.30 of 2009. But the same came to be dismissed by the Company Court by the order dated 8.1.2010, on the ground that there was no question of law, requiring adjudication by this Court. (k) Thereafter, the appellant herein filed an appeal in Company Appeal SR No.108540 of 2009. But by the time the appeal was filed, the limitation for filing the same was already over. Therefore, the appellant took out an application in M.P.No.2 of 2010 for condoning the delay of 56 days. But by an order dated 1.12.2010 this court dismissed the condone delay petition. (l) Challenging the order refusing to condone the delay in filing the appeal, the appellant filed a Special Leave Petition in SLP (Civil)No.8636 of 2011. The Supreme Court granted leave and allowed the appeal in Civil Appeal No.6361 of 2011, by an order dated 5.8.2011. The result is that the delay in filing the appeal was condoned. Thus, the appeal filed by the State Bank of India, which was not a party to the main petition before the Company Law Board, was taken on file. 4. Before proceeding further, it should be pointed out that the respondents 1 to 4 herein allowed the civil suit, seeking to set aside the Sale Deed, dismissed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions. The scope of an appeal under Section 10-F of the Companies Act, 1956, is circumscribed only to questions of law. Therefore, I am obliged only to see if there are any questions of law to be decided in this appeal. 9. From the grounds of appeal raised by the appellant in the Memorandum of Appeal, I think the following substantial questions of law arise for the consideration of this Court:- (i) Whether the Company Law Board, after having granted leave to the parties to the proceedings to institute a civil suit, could have usurped the powers of the Civil Court to find out whether the transfer of right in an immovable property was right or wrong? (ii) Whether the Company Law Board could have decided the question whether the purchaser was a bona fide purchaser for valuable consideration without notice, in a proceeding that was summary in nature? 10. There are no disputes on facts that I have narrated in paragraph-3 above. Therefore, I can straightaway take up for consideration the two questions of law which I have framed. But before doing so, it is necessary to consider one important issue relating to the maintainability of the appeal, raised by the respondents 1 to 4 herein. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to interfere with the order of the Company Law Board." 15. From the operative portion of the order of this Court, dismissing the previous appeal, it is seen that this Court did not reject the appeal as devoid of any questions of law worth consideration by this Court. As a matter of fact, this Court did not answer both the questions of law raised in the above appeal, one way or the other. The dismissal of the appeal was substantially on the facts of the case and not on any finding with regard to the questions of law raised. 16. The appellant herein was not a party to the appeal C.A.No.30 of 2009. The questions of law raised by the respondents 10 and 11 in their appeal, were not answered one way or the other by this Court. Therefore, at the most, the order passed by this Court in the said appeal, would be taken to have put the lid of finality to litigation as against the respondents 10 and 11. It would not either operate as res judicata or operate as a decision that could be elevated to the level of stare decisis on the points of law raised in that appeal. Hence, the objection to the maintainability of the appeal is rejected. The rejection of the appeal on facts, is also not bindi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the post of the Managing Director of the Company." 18. Therefore, it was contended by the learned Senior Counsel for the appellant that the Company Law Board ought not to have set aside the sale, when there was not even a prayer to the said effect. 19. But I do not think that the said contention can be upheld. The power of the Company Law Board in a proceeding under Section 398 read with Section 402, are wide enough to mould the relief. As held by a Division Bench of this Court in Syed Mahomed Ali vs. R.Sundaramoorthy {AIR 1958 Mad. 587}, the proceedings under Sections 397 and 398 are not like suits between private parties. The interests of the Company are paramount in those proceedings and the Court has jurisdiction to pass an order to protect the interests of the Company. 20. In Bennet Coleman and Co. vs. Union of India {1977 (47) CC 92}, the Supreme Court also pointed out that the powers of this Court under Sections 398 and 402 are wide enough to enable the Court to appoint an Administrator or a Special Officer or a Committee of Advisers and thereby supplant the corporate management. 21. Again in Cosmosteels P. Ltd vs. Jairam Das Gupta {1978 (48) CC 312}, the Supreme Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 405, which enables "any other person" who has not been impleaded as a respondent to any application under Section 397/398, to be impleaded to such a proceeding. 26. Therefore, it is clear that the Company Law Board is entitled to set aside a transfer or agreement, but only after hearing a party concerned. Hence, the fact that there was no prayer for setting aside the transaction, is no ground to conclude that the Company Law Board could not have set aside the transaction. As I have pointed out earlier, applications under Sections 397 and 398 are only in the nature of complaints about oppression and mismanagement. Consequently, the power conferred under Sections 397 and 398 are for "making such order as the Court thinks fit". Therefore, it is not necessary for the Company Law Board to confine itself to the reliefs prayed for and to reject a complaint of oppression and mismanagement on the sole ground that there was no prayer of a specific nature. 27. Having disposed of the question of maintainability and the preliminary contention raised by the appellant, let me now take up the two questions of law raised. The first question of law is as to whether the Company Law Board co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uceable as evidence and mounting the same; (iv) examining witnesses on oath; (v) granting adjournments; and (vi) reception of evidence on affidavits. It will be of interest to note that in every enactment under which a Tribunal is constituted, such a Tribunal would normally be vested with only 4 types of powers. But Section 10-E (4-C) of the Act, confers more powers upon the Company Law Board than what is normally conferred upon similar Tribunals in relation to the Code of Civil Procedure. 30. Moreover, sub-section (4-D) of Section 10-E states that the Company Law Board shall be deemed to be a Civil Court for the purpose of Section 195 and Chapter XXVI of the Code of Criminal Procedure and also declares that every proceeding before the Bench shall be deemed to be a judicial proceeding, within the meaning of Sections 193 and 228 of IPC. 31. In exercise of the powers conferred by Section 10-E (6), the Company Law Board framed the Company Law Board Regulations, 1991 for regulating the procedure to be followed by the Board, while discharging its quasi judicial functions. Under these Regulations, a Bench of the Company Law Board is conferred with various powers, including the power to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Company Law Board, the fact that the property had already been offered as security to the appellant herein. If the same had been brought to the notice of the Company Law Board, the Company Law Board could have impleaded the appellant as a party and allowed them to contend that the mortgage was bona fide secured. Since the principles of natural justice form an integral part of the scheme of Sections 397, 398, 402 and 405, the failure of the Company Law Board to hear the appellant herein, before passing the order in question, is fatal. 36. Therefore, the answer to the first question of law is that though the Company Law Board was entitled to decide the validity of the transfer, despite granting leave to the parties to go to the Civil Court, it should not have decided the same, without impleading the appellant as a party. It is true that none of the parties brought to the notice of the Company Law Board, the creation of the mortgage. But today, respondents 1 to 4 on the one hand and respondents 6 to 8 on the other hand, appear to have cemented tiles. It must be remembered that respondents 1 to 4 went to the Company Law Board, complaining of oppression and mismanagement by responden ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
