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2016 (4) TMI 615 - CALCUTTA HIGH COURT

2016 (4) TMI 615 - CALCUTTA HIGH COURT - TMI - Issue of grant or revocation of grant of licence - Held that:- The licence to import was vitally connected with the shareholding of Kamal Kr. Datta and the percentage shareholding of his brother Sajal Datta. If the number of shares issued to Kamal increased on the basis of importation of those items, the percentage shareholding of Sajal was likely to fall. Therefore, both the company and its principal shareholders Kamal and Sajal had an interest in .....

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writ applications orders were passed by this court directing the Reserve Bank of India to consider the issue of grant or revocation of grant of licence upon hearing Kamal and Sajal. Therefore, both the brothers had the right to approach the court complaining of failure on the part of the Reserve Bank of India to discharge this duty, by refusing to pass an order or by passing a wrong order.

Applicability of res judicata - Held that:- The shares had been allotted to Kamal subject to th .....

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ng additional shares of ₹ 40 lakhs and so on. But not even for a moment did the court even make any comment with regard to the 30,55,329 equity shares issued to Kamal provisionally pending the writ. The passing observation of the Court is not even obiter dicta. Therefore, the point of res judicata raised by Mr. Kapur also fails

Neither adjudication of penalty nor criminal prosecution can be undertaken as the period of two years from the date of commencement of the 1999 Act has l .....

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e, even if it is assumed that the importation was wrongful, no action can be taken, by operation of law. If a new statute after repeal of an Act does not contemplate any action in relation a past illegal act under the repealed statute, then the new statute has the effect of legitimising that illegality.

Lastly, the importation was made more than 20 years ago. These capital goods have spent their life. Their value, now after depreciation is nil. At the time of their importation their d .....

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Advocate Mr. Tarun Aich. Advocate For the Respondent : Mr. S.K. Kapurr. Advocate Mr. Jishnu Saha. Sr. Advocate Mr. Subhojit Roy Advocate Mr. P. Gorai Advocate Mr. H.K. Mitra Sr. Advocate Mr. D.D. Sen, Advocate JUDGMENT I. P. Mukerji, J. Ruby General Hospital is situated right at the crossing of Eastern Metropolitan Bypass and the Gariahat connector to it. It was set up on the initiative of two brothers, Sajal, the writ petitioner and Kamal the respondent no. 6 and a friend of Kamal, Binod Prasa .....

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of Industry made on 31st May, 1993 for approval of Foreign Non-resident Indian Investment in the public company which owned the hospital (Ruby General Hospital Limited), it was stated that the Non-resident Indian (NRI) shareholding in the company would be subject to a ceiling of ₹ 8,00,00,000/-, not exceeding 88.88% of the total shareholding and was to be on repatriable basis. Now, repatriable basis and non-repatriable basis are different. According to Sajal who is now prosecuting this wr .....

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llotted to him. This, in foreign exchange terminology was investment on a non-repatriable basis because equipments were imported into India with allotment of shares. There was no outflow of foreign exchange from this country. According to Sajal, investment could only be on a repatriable basis. Foreign exchange had to come into the country, thereafter, the money would be remitted for the purchase of new equipments, against allotment of shares. On 6th August, 1993 the Secretary to the Department o .....

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second hand medical equipments were caused to be exported by Kamal and were duly imported by the company. Sajal s grievance was that no foreign exchange was remitted. Kamal claimed to have paid the vendors of the equipments in the USA. On 22nd March, 1997, Reserve Bank of India granted approval to the company under Section 19(1) (d) of the Foreign Exchange Regulation Act, 1973 (FERA) now repealed, to issue 30,55,329 equity shares of ₹ 10/- each to Kamal against the importation of the said .....

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ricated at a later date. Subsequent resolutions were passed. On 7th February, 1996 Kamal was removed as Managing Director of the Company, succeeded by Sajal. Therefore, when Reserve Bank of India gave permission on 22nd March, 1997 to allot shares to Kamal for importation of second hand medical equipments, he had ceased to be the Managing Director of the Company and in control of it. Sajal assumed the control of the company and filed a writ application in this Court challenging the permission gr .....

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y of second hand medical equipments. The present writ is the third writ. This Court directed, as an interim order, that any allotment of shares to Kamal would abide by the result of the writ. It was filed in the year 2004. For thirteen years it is pending. Meanwhile, Kamal on or about 12th November, 1997 moved the Company Law Board complaining against Sajal that his action was oppressive to him. It inter alia held that allotment of shares to Kamal on account of importation of second hand medical .....

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On 11th August, 2006, the Supreme Court to which an appeal had been preferred against the judgment of the Division Bench of this Court allowed the appeal by Kamal inter alia ordering status quo ante 19th April, 1995. - Fortified by the Supreme Court order the Company withdrew from the instant writ on 30th November, 2006. It also took steps for allotment of 30,55,329 shares to Kamal on account of importation of second hand medical equipments. It was subject to the result of the instant writ. Kama .....

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n 10(F) of the Companies Act, 1956 has been filed in this Court and is pending. The position, as of now is like this. Dr. Kamal Kumar Dutta has been issued 30,55,329 equity shares of ₹ 10/- each in the company against his investment of ₹ 3,05,53,290/- in the form of second hand medical equiptments. This allotment by the Company is subject to the result of the instant writ application. If this allotment is taken into account then Sajal has a little over 10% share in the company. If Sa .....

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al proceeded with the writ as the sole petitioner. At this point of time, he was only a shareholder in the company. In 2007, the respondent no. 6 made an application in the writ being no. (G.A 360 of 2007) wanting dismissal of the writ in the changed circumstances. One of the grounds taken in the application was that Sajal as the shareholder did not have the locus standi to maintain the writ. In the case of Calcutta Gas Company (Proprietary) Limited, Versus State of West Bengal and others report .....

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tus of a company as a legal person and that of a shareholder as merely having an interest in the company under its articles and a director being an agent for managing it. Hence, a shareholder did not have the right to move a writ application on behalf of the company (See Paragraph 12). That the existence of a legal right in the writ petitioner was a precondition was emphasised in Union of India and another Versus Arulmozhi Iniarasu and others reported in (2011) 7 SCC 397. In Ayaaubkhan Noorkhan .....

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ur and others reported in (2013) 5 SCC 427 (See Paragraph 14). These cases were cited by Mr. Kapur, learned Counsel for the respondent no. 5. Mr. S.N. Mookerjee, learned Counsel for the writ petitioner submitted that sometimes the shareholders are granted fundamental rights. If those rights are impaired by state action a writ would lie to remedy the wrong as held by the Supreme Court in Bennett Coleman and Co. Ltd. & Others. V. Union of India reported in AIR 1973 SC 106. A fine analysis was .....

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l as of the company. Jurisdiction of the court to grant relief cannot be denied, when by State action the rights of the individual shareholders are impaired if that action impairs the rights of the company as well. The test in determining whether the shareholder s right is impaired is not formal; it is essentially qualitative; if the State action impairs the rights of the shareholders as well as of the company, the court will not, concentrating merely upon that technical operation of the action, .....

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ental actions which would affect the company as well as its shareholders. It appears to us that though it may be that no specific mention has been made in the petitions of any of the Articles which are alleged to have been infringed by the impugned order, the facts stated and the contentions urged in the petition entitle the petitioners to invoke also Article 19. A shareholder can challenge the order if the restriction on his right under Article 19 (1) (f) is unreasonable. If the impugned order .....

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sel. Learned counsel also cited Hindustan Lever and another v. State of Maharashtra and another reported in (2004) 9 SCC 438 to emphasise the dictum laid down in that case to the following effect. No individual living being owns the company. Each shareholder is the owner of the company to the extent of his shareholding. Hence on examination of these authorities it is plain that a person individually affected by an action of the State or one of its instrumentalities can file an application under .....

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mplained of is such that both the company and the shareholder can assail it, as it affects both of them. In those circumstances, a writ application by a shareholder is maintainable. Look at the situation in this case. At the time of incorporation Kamal had 52% shares and Sajal had 48% shares. There was a decision by the company to import medical equipments. The equipments actually imported were second hand. Kamal wanted an allotment of shares in his favour for providing the equipments to the com .....

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rmission it granted. Again on 17th May, 2004 it granted it. No matter what may be said, if one shareholder is claiming shares on the basis of importation of second hand machinery, it is likely to alter the shareholding percentage of other shareholders. In this company there are principally only two shareholders. Allotment of shares to Kamal would have tipped the balance of control of the Company in his favour. Therefore, Sajal was likely to be directly affected by the allotment of shares to Kama .....

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equally true as held by the Supreme Court in LIC v. Escorts Limited reported in (1986) 1 SCC 264 that the Reserve Bank of India is the sole judge of whether the licence is to be granted or not and no other authority can take this burden upon itself. But, on examination of the above facts the licence to import was vitally connected with the shareholding of Kamal Kr. Datta and the percentage shareholding of his brother Sajal Datta. If the number of shares issued to Kamal increased on the basis of .....

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her creatures of the Constitution and the Statutes is amenable to a writ of mandamus commanding it to do its duty. In the two previous writ applications orders were passed by this court directing the Reserve Bank of India to consider the issue of grant or revocation of grant of licence upon hearing Kamal and Sajal. Therefore, both the brothers had the right to approach the court complaining of failure on the part of the Reserve Bank of India to discharge this duty, by refusing to pass an order o .....

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of the Code of Civil Procedure. I am unable to agree. I have carefully examined the judgement of the Supreme Court. The resolution taken in the meeting held on 19th April, 1995 to issue 40 lakhs equity shares of ₹ 10/- each, which resolution was alleged to be fabricated was set aside. So were the resolutions at subsequent meetings. On 7th February, 1996 Kamal was removed as Managing Director of the company and replaced by Sajal. The Supreme Court came to the following findings: ********** .....

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Respondent 2 to somehow see that the holding of Appellant 1 from the office of the Managing Director by purchasing majority of shareholding pursuant to the resolution passed on 19.4.1995; he wanted to con troll the entire company. The filing of repeated writ petitions in the Calcutta High Court at the expense of the company adversely affected the interest of the company. If this is not the oppression of the member under Section 397 and bringing material change in the management under Section 398 .....

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e Supreme court did not even go into the question of the allotment of 30,55,329 equity shares of ₹ 10/- each. The shares had been allotted to Kamal subject to the outcome of the writ. No, doubt, the Hon ble Judge had expressed his utter disgust at Kamal in preferring the writ applications to nullify the allotment of shares in favour of Kamal but nowhere it confirmed the said allotments. It certainly held oppression of Kamal by Sajal and set aside the order of this High Court in the Company .....

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ls. FEMA v. FERA Now, I come to the last point, but the most vital and decisive. The Foreign Exchange Management Act, 1999 came into force on 1st June, 2000. The repeal and savings clause of this Act is very important. It is Section 49 which is set out below: 49. Repeal and saving- (1) the Foreign Exchange Regulation Act, 1973 (46 of 1973) is hereby repealed and the Appellate Board constituted under sub-section (1) of Section 52 of the said Act (hereinafter referred to as the repealed Act) shall .....

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isions of the repealed Act as if that Act had not been repealed. (5) Notwithstanding such repeal, - (a) anything done or any action taken or purported to have been done or taken including any rule, notification inspection, order or notice made or issued or any appointment, confirmation or declaration made or any licence, permission, authorisation or exemption granted or any document or instrument executed or any direction given under the Act hereby repealed shall, in so far as it is not inconsis .....

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in the absence of any action it became legally imported after the sunset period. Mr. Mookerjee, learned Senior Advocate appearing for the writ petitioner submitted that the rights of his client under Section 6 of the General Clauses Act, 1897 were preserved despite the sunset provision. There is no dispute that no permission is required from the Reserve Bank of India to allot shares on importation of capital goods to Non-Resident Indians, under the Foreign Exchange Management Act, 1999. Now, eve .....

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e principles of natural justice by the Reserve Bank of India and that the impugned order was erroneous and remit the matter back to the Reserve Bank of India to consider afresh. Under this subsection, only this course of action is open to me, in view of the dictum of the Supreme Court in Life Insurance Corporation of India v. Escorts Ltd. and others reported in (1986) 1 SCC 264 that the power vested in the Reserve Bank of India can only be exercised by it and nobody else. Let us also assume that .....

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ection 51 read with Section 50 of the Foreign Exchange Regulation Act, 1973 for violation of Section 19 (1) (b) of the 1973 Act. No greater punishment is contemplated. Now, the General Causes Act, 1897 comes into play. I quote Section 6 (a) (c) (d) and (e). a. revive anything not in force or existing at the time at which the repeal takes effect; or c. affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed; or d. affect any penalty, forf .....

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s and obligations under FERA, 1973 were preserved and for how long need to be investigated. Neither adjudication of penalty nor criminal prosecution can be undertaken as the period of two years from the date of commencement of the 1999 Act has long elapsed. Either a civil proceeding for penalty had to be started by issuance of a show cause notice or cognizance of the offence should have been taken by a criminal court within two years of commencement of the Act, 1999, under Section 49 of FEMA, 19 .....

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