TMI Blog2017 (7) TMI 504X X X X Extracts X X X X X X X X Extracts X X X X ..... seek joinder under Order 1 Rule 10. But it is still not a case for leave under Order 1 Rule 8. Apart from impleadment of parties under Order 1 Rule 10, the law also envisages several other ways of dealing with such situations. There could be clubbing of several suits for trial (if several individual suits are filed) or there could even be a test case (if other suits could later follow). The rationale behind this statement of law is not far to seek. If the suit is truly a representative suit, any decree passed therein would bind every other person who is represented in the suit. A number of such other persons whom the Plaintiffs claim to represent, but who actually oppose the suit, will be forced to join the suit with a view to contest it, for if they do not, the decree, which they perceive to be to their detriment, will bind them. That would be clearly unjust, if, in the first place, there was no warrant in allowing the Plaintiff to represent them. In the present case, the non-promoter shareholders, who do not want reinstatement of Mistry, would be bound to accept his reinstatement if the Plaintiffs were to succeed and on top of it, suffer such reinstatement as something which w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... je Tata Trust, which trusts together hold about 66 percent of the paid- up capital of Tata Sons Ltd. 2.2 The grievance of the Plaintiffs is about the purported illegal ouster of one Cyrus Mistry from his position as the Executive Chairman of Tata Sons Ltd. and appointment of Ratan Tata (Defendant No. 1) in his place as the interim Chairman, both of which actions are said to be contrary to the Articles of Association of Tata Sons Ltd. and in total disregard of corporate governance and disclosure norms and against the best interest of public shareholders such as the Plaintiffs. The Plaintiffs submit that after the ouster of Mistry and appointment of Tata in his place, Tata Sons Ltd. abused its position as a dominant shareholder and holding company in the Tata group to cause the listed companies, namely, Defendant Nos. 21 to 27, to toe its line in removing or ousting Mistry as their Chairman and taking steps for his removal from their respective Boards. It is the case of the Plaintiffs that all these actions led to a crash in the share prices of various Tata Companies including Defendant Nos.21 to 27. The Plaintiffs set out by way of illustration the closing prices on the stock exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efendant Nos. 21 to 27); they are shareholders of one or more of these companies, each of whom has distinct Articles of Association, and a separate and independent board of directors. It is submitted that the grievance in respect of ouster of Mistry as chairman or director in each of these companies and the resultant alleged fall in share value of each company is a distinct individual cause of action; there is no commonality of cause of action as far these individual causes are concerned. It is submitted that there are no common questions of fact or law arising in respect of these grievances. (b) Secondly, it is submitted that the present Plaintiffs not only do not have a common interest in the suit between them, but do not have such interest in common with other individual non-promoter shareholders of these seven companies. Learned Counsel submits that the non-promoter shareholders collectively of these seven companies, or even separately in case of each company, do not from a distinct class for the purposes of a representative suit such as the present. It is submitted that for forming such a class there must be a common interest and grievance in the suit, and a common benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... articular company out of seven Tata companies arraigned as Defendants, has community of interest with other non- promoter shareholders of that particular company to claim relief in respect of fall in share prices of that company as a result of ouster of Mistry from Tata Sons Ltd. Learned Counsel argues that Order 1 Rule 8 formulates a methodology to avoid similar suits on the same cause of action, both from the standpoint of the actual/prospective plaintiffs, and the defendants. Sub- Rule (1) of Rule 8 enables one or more persons to sue, with the leave of the court, on behalf of others, whilst Sub-Rule (6) protects the defendant/s from similar suits by others by making a decree passed in such suit binding on those others. 6. I find no difficulty in accepting Mr. Dwarkadas's submission on the test to be applied in the present case. Each of the Plaintiffs may be aggrieved as a shareholder of the particular Tata company, whose shares he holds, by the fall in share prices of the particular company as a result of the acts complained of in the suit. Whether he can join others, who may have a similar grievance in respect of other Tata companies, of which such others are shareholder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it. The object of this exception is clearly to facilitate the redressal of grievances in which a large body of persons are interested, but where several practical difficulties would arise if every individual so interested were to either join in one suit or file a separate suit under the general rule. The special rule facilitates prosecution of a cause in which numerous persons are interested, whilst, at the same time, protects the opponent from having to face a multitude of causes. If that is so, the essential condition for application of this special rule, by its very nature, must be that the interest of persons interested must be really represented by those that file or defend the suit. For if that interest be clashing or different from the persons suing or defending on their behalf, or for their benefit, various anomalies would ensue if these latter were permitted to sue or defend on the former's behalf or for their benefit, and any decree in the suit were to bind the former. 8. That seems to be pretty clear as a matter of principle, but what is precisely meant by the expression - same interest in one suit ? Going by the Explanation, at least one thing is clear and that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aside the writ and all other proceedings, was of the view that the plaintiffs were not entitled to sue on behalf of themselves and all other growers of fruit, etc. within the meaning of the Act and stayed the action in respect of all matters and causes alleged in a representative capacity. The learned Judge ordered dismissal of the action unless the plaintiffs elected to proceed in respect of their individual and personal causes of action. The Court of Appeal discharged the order of Romer J. The Duke came in appeal before the House of Lords. Lord Macnaghten, in his celebrated judgment, considered the principal ground of challenge, namely, that the plaintiffs were not entitled to sue in representative character in defence of their alleged statutory rights. The learned Law Lord held that in considering whether the representative action was maintainable, one had to consider what is common to the class, not what differentiates the cases of individual members of that class. The learned Judge also held that Order 16 of Rule 9 (which is in pari materia with our Order 1 Rule 8), which provided for persons suing or being sued as representing a class, was not restricted to apply only in a ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fendants from putting the scheme into operation. The plaintiffs claimed to be suing on behalf of themselves and all other tenants of houses provided by the defendants under Part V of the Housing Act, 1936 . The defendants applied to have the writ struck out and the proceedings stayed on the ground that the plaintiffs, in the circumstances of the case, were not entitled to bring a representative action. The trial court struck out the writ and stayed all further proceedings. In the plaintiffs' appeal, Evershed M.R., who wrote the leading judgment of the Appeal Court, was of the view that at first blush, one might be disposed to say that if there are 13,000 tenants with tenancies in identical form, then the case is one which the rule (Rule 9 of Order 16) would be designed to meet, on the grounds at least of convenience. The learned Judge, however, was of the considered view that these 13,000 individual tenants could not be said to have the same interest in one cause or matter . The case of Duke of Bedford (supra) was cited before the Court. Evershed M.R. noted that there was a distinction between that case and the case before the Appeal Court. In Duke of Bedford there was a clas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l rents according to the means and circumstances of the tenants, because the result of that would be that some tenants, those in more affluent circumstances, would, in effect, be subsidizing by the increases in rent imposed in their cases the tenants in less affluent circumstances in whose cases no increase was to be made at all. The learned Judge held that that being the true nature of the grievance, it was impossible to maintain that in this particular dispute these 13,000 tenants constitute a class having a common interest in any relevant sense : it seems to me impossible to maintain that they have in this dispute a common grievance or that the relief sought is beneficial to all. 11. The expression same interest in one suit being thus de-codified, let us consider if the facts of our case make out such interest and justify the leave granted under Order1 Rule 8. The present suit is filed on behalf of non-promoter members of Defendant Nos. 21 to 27. These members, in the first place, do not form a class for the purpose of the interest in the suit . No doubt each of these non-promoter members has the same right, breach of which is complained of in the suit, namely, the prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sistance offered by Mistry and his promoter group as the root cause of all problems. After all, in a corporate democracy, more often than not, there is a sharp division amongst shareholders as to the outcome of a board meeting or a board resolution. Some may support a board decision, whilst the others may not. In short, each of the non-promoter shareholders in the present case may have the same type of proprietary right in the share and thereby, the same interest in protecting its value, but so far as the complaint of prejudice to that interest is concerned, other non-promoter shareholders may not have a common cause with the Plaintiffs. It is this prejudice or accrual of liability arising therefrom, which forms the subject matter of 'interest in the suit' and not the proprietary right per se or the interest in protecting its value. The grievance that the particular alleged acts of the Board of Directors of Tata Sons have led to the prejudice suffered or accrual of liability on the part of the Board as a result, is also not common amongst the alleged class of non-promoter shareholders. The grievance of the Plaintiffs is that ouster of Mistry and the acts of other directors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reinstatement. The relief claimed would, in that case, be in fact to the detriment of such others. As far as monetary losses are concerned, each individual shareholder clearly has a separate cause of action; the individual circumstances and loss or gain, as the case may be, may be quite different. Each individual case may entail a separate inquiry into quantum of damages. No one can, in a case like this, purport to claim damages on behalf of others. 13. Mr. Madon tried to counter this by suggesting, firstly, that there are in fact others who concur with, and share, the Plaintiffs' cause, and, secondly, if some individuals, who are claimed to be represented here, have a different perception and do not agree with the Plaintiffs, they may well choose to join the suit as defendants and oppose the suit. There is no merit in either of these suggestions. The fact that there are actually some others who support the Plaintiffs is not determinative of the issue. That is a mere coincidence. The question is whether there is a class of persons having the same interest in the suit and that question has to be decided at the date when leave under Order 1 Rule 8 is sought, when it is only t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etriment, will bind them. That would be clearly unjust, if, in the first place, there was no warrant in allowing the Plaintiff to represent them. In the present case, the non-promoter shareholders, who do not want reinstatement of Mistry, would be bound to accept his reinstatement if the Plaintiffs were to succeed and on top of it, suffer such reinstatement as something which was prayed for on their behalf or for their benefit. To avoid such predicament, they would be forced to join the suit and defend it, when they really had no intention or obligation to do so. Nothing could be more unjust. 15. The judgments of Supreme Court in the case of Chairman, Tamil Nadu Housing Board, Madras v. T. N. Ganapathy and of Madras and our High Court, respectively, in Kodia Gounder v. Velabdi Gounder and Karia District Co-operative Milk Producers Union Ltd. are clearly distinguishable on facts. In T. N. Ganapathy's case, there were numerous allotments under the same housing scheme and all relevant facts were common; the housing board had made a demand on all, after purportedly making a final determination of price, the basis of which demand was equally applicable to all the allottees and th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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