TMI Blog1985 (4) TMI 332X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the company petition No17 of 1983. It may be worthwhile to notice that but for CA Nos 314 and 315 of 1985, this application would not have been urged to be taken for disposal and pursued so vehemently by the applicant. It is relevant to notice that this application was presented as early as 16.8.1984 At no stage was the applicant-second respondent in the main company petition ever exhibited his anxiety to get on with this application, which if accepted, in his opinion would entail dismissal of CP No 17 of 1983. 3. It is not in dispute that the agreement alleged to have been entered into between the applicant on one hand, and respondents 1, 5 and 6 on the other, acting on behalf of other respondents, is not signed, though it is in writing. Two preliminary objections raised by Mr Vasantha Pai, learned counsel for the respondents are: proceedings under section 397 and/or 398 of the Act is a representative action and therefore, it is Order 23, Rule 3-B CPC, that is attracted. It is his further contention that if Order 23, Rule 3-B were to be applicable, no agreement or a compromise in a representative action shall be entered into without the leave of the Court expressly recorde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce to such of the provisions. What is contemplated under section 399(3) of the Act is that a person with the consent of others is entitled to institute a petition under section 397 or 398 of the Act not only on behalf of himself, but also on behalf of others for the benefit of other members. It might be that other members may join as a party or one person alone obtaining the consent of others may continue the proceeding under section 397 and/or 398 of the Act. When Order 1, Rule 8 Civil Procedure Code refers to numerous persons, section 399 of the Act refers to some of the members who have either given consent or joined with the one who wanted to pursue the proceedings under section 397 and/or 398 of the Act. The law is well settled that Order 1, Rule 8 will not be applicable to numerous persons, if they are not ascertainable. What is provided under section 39;(3) of the Act is that a member himself and on behalf of the other members can present a petition under section 397 and 398 of the Act, and pursue the petition not only on behalf of himself, but on behalf of others who have given consent or joined in prosecuting the petition under section 397 and/or 398 of the Act. Thus the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s pointed out by Mr S Chellasami, learned counsel for the applicant, that the order passed on the application under section 397 and/or 398 would not be binding on other members who have neither joined nor given consent. But that by itself would not in any way indicate that the action is a personal one, but not in a representative capacity. Secondly, under section 399(5), notice of the application laid under section 397 and/or 398 of the Act shall be given to the Central Government; and the Company Court is bound to take note of the representations made by the Central Government. I must here point out that if it was a personal action, as contended by the learned counsel for the applicant, there is no need for any notice to, be given to the Central Government or to hear its representations. There is also rule 88 of the rules. According to the said rules, where a petition is presented under section 397 or 398 on behalf of any members of a company entitled to apply under section 399(1), by any one or more of them, the letters of consent signed by the rest of the members so entitled authorising the petitioner or petitioners to present the petition on their behalf, shall be annexed to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be binding on the persons who gave consent to the petitioner or petitioners who come for- ward with the proceedings under the abovesaid provision. It is thus Order 1 Rule 8 Civil Procedure Code has to be applied to a proceeding under the Act. 7. In the view I had taken, I find that it is wholly unnecessary for me to refer to sections 41 and 42 of the Evidence Act to which my attention drawn by the learned counsel for the applicant, nor is here any necessity to delve into the decision reported in Tripurna Setthapathi Rao Dora v. Rokkain Venkanna Dora and Others AIR 1922 Madras 71 at page 76)It is my duty to refer to one other aspect that is pressed into service by the learned counsel for the applicant, namely, I shall not judge whether the proceeding under section 397 and/or 398 of the Act is a representative action, by taking guidance from the rule 88. In other words, do not start from the tail, but do start from the beginning . I have earlier pointed out that there is inbuilt indication in section 399(3) which proclaims that it is a representative action, and also that the reliefs concentrate affairs of the company, but not to the individual member or members who have come ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a director is ever visualised or provided. On the other hand, all the reliefs by way of repetition, concerns the affairs of the company or promotes the interest of the company. 10. Yet another test that may be adopted in resolving this dispute is whether the person who came forward with this application is enabled to withdraw straightaway. If it is a personal action, I shall reiterate, the relief also should be personal-oriented. Here I had already pointed out that the relief is not personal to him, but concerns the company. It is, therefore, that rule 88 provides that without leave of the Court, no proceeding instituted under section 397 and/or 398 could be withdrawn. If it is a personal action, the rules can place no embargo on such a person to withdraw the proceedings, except that the adversary can pray only for his costs. In this context, the learned counsel for the applicant drew my notice to the decision in S.P. Gupta v. President of India (AIR 1982 SC 149) and paragraphs 198, 253, 272 and 314 in the judgment of the Supreme Court. I must straightway state that the ratio laid down by the Supreme Court cannot be questioned. At any rate, it is binding on me. But the question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive process' and we might add, through the political process, may try to use the Courts to further their aims . These are some of the dangers in public interest litigation which the Court has to be careful to avoid. It is also necessary for the Court to bear in mind that there is a vital distinction between locus standi and justiciability; and it is not every default on the part of the State or a public authority that is justiciable. The Court must take care to see that it does not overstep the limits of its judicial function and trespass into areas which are reserved to the executive and the legislature by the Constitution. It is a fascinating exercise for the Court to deal with public interest litigation; it is a new jurisprudence which the Court is evolving a jurisprudence which demands judicial statesmanship and high creatability (sic). The frontiers of public law are expanding far and wide; and new concepts and doctrines which will change the complexion of the law, and which were so far as embedded in the womb of the future, are beginning to be born . There is no occasion for me to make such a painful exercise in view of my construction of section 399. 12. The lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the Court so recorded shall be void. I must at once refer to the argument advanced by the learned counsel for the applicant that the above provision is rather unintelligible, and therefore, this Court shall look into the avowed objects and reasons which prompted the Parliament to introduce this provision by Amendment Act 104 of 1976. The further contention of the learned counsel for the applicant is that the dominant object cannot be spelt out from the language in which the provision is couched or worded. In my view, the section is too intelligible to seek an assistance from the avowed objects and reasons. In this context, the learned counsel laid emphasis on the word recorded . According to the learned counsel, the expression without the leave of the Court so recorded would mean that the Courts shall record the compromise. His interpretation is that leave cannot be obtained before the agreement or compromise is recorded. Thus according to the learned counsel, it leads to absurdity. I find no merit in this arguments. For I must point out that the provision unmistakably points out that no agreement or compromise in a representative suit shall be entered into without the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se. The learned counsel for the applicant laid emphasis on the fact that respondents 1,5 and 6 have undertaken to have the shares of a member who is not a party to the proceeding, transferred to the applicant, and also to the fact that ₹ 17,00,000 and odd paid has nothing to do with the subject-matter of this proceeding, but related to loans owing by the respondents to third parties. I must, at once state that this argument, in my anxious consideration, is rather suicidal. Satisfaction should be confirmed to the subject matter of any action. If it embraces other subjects, it should be either adjustment or compromise. I shall make it clear that the agreement or compromise is genuine, while satisfaction is a speak (sic). In other words, the adjustment or compromise would also include mere satisfaction. That is obvious from the reading of Order 23, Rule 3-B. Order 23, Rule 2-B consists of two parts. First part related to any lawful agreement in writing, while the latter part is confined to satisfaction in part or whole of the subject-matter of the suit or any action. This in my view, gives an ample indication that satisfaction, if it should be brought within Order 23, Rule 3 sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement are respondents 1,5 and 6 alone. If they are not parties, there can be no recording of satisfaction. 19. It is also contended by the learned counsel for the applicant that the Courts shall not be carried away by the form of the alleged agreement; but it should peep into the substance, and then decide whether it is a compromise or alleged adjustment or a pure and simple satisfaction. According to the learned counsel, the document, if scanned in the above fashion, will indicate that it is a simple satisfaction; but not an adjustment. I have on an earlier occasion referred to the reliefs claimed in the company petition which included the reliefs concerning the company itself and held that such reliefs are not personal to the petitioners 1,5 and 6; but is common to all the petitioners 1 to 7. I have also further pointed out that there cannot be satisfaction of the claims made in the petition by this alleged satisfaction. 20. It is also contended by the learned counsel for the applicant that, it is only after the Court goes into merits, a stage will come for the Court to scan, the compromises. Till then, the stage for examining the compromise is not reached. According to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il Procedure Code. I find that the same power, is however, conferred on the Court. Therefore, I am unable to agree with the learned counsel for applicant that without entering into merits, the Court is precluded from examining the preliminary objection. 22. In the view I had taken, there is no need to refer to the decision in Vinod Kumar v. State (AIR 1982 (P H) 372 at page 393). I have taken the view that Order 23, Rule 3 Civil Procedure Code consists of two parts, first part governs the alleged adjustment or compromise, while the second, a satisfaction pure and simple. 23. Let me now turn to satisfaction. The learned counsel for the applicant relied on a decision in Audh Behari Lal v. Fagur Rai (AIR 1951 All 236). The ratio relied on by the learned caunsel for the applicant is that the compromise depending upon on third person's action not within control of parties, cannot be an adjustment within the meaning of Order 23, Rule 3. The learned counsel for the applicant relied upon two clauses by which 4,000 shares belonging to a party, who is not a party to this action, have to be amicably settled. I am unable to agree, because Order 23, Rule 3 only refers to a lawful agre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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