TMI Blog2008 (4) TMI 783X X X X Extracts X X X X X X X X Extracts X X X X ..... t company application (C.A. No. 131 of 2007) inkier Order 6 Rule 17 of Code of Civil Procedure read with Rule 6 of the Companies Court Rules, seeking to amend the company petition mainly on the ground that there are certain subsequent facts, which were not known on the date of filing of the company petition, but subsequently came to their knowledge, due to antedating and manipulations of records of the Company by the respondents. The CLB on weighing the rival contentions raised in C.A. No. 131 of 2007, passed on 27.07.2007, the following order: Heard the Parties on CA No. 131 132/07. Considering the contents of the amendment application and the legal submissions as well plethora of case laws relied upon parties as well as Regulation 46 of the CLB, to consider real controversies between the parties and to avoid multiplicity of litigation 1 allow the petit totter to amend C.P. No. 46/2006. Petitioner to file amendment petition within a week's time. Respondent to file reply to the amended petition within four week thereafter, adjourned to 8.10.2007 at 2:30 pm and 9.10.2007 and 10.10.2007 at 2:30 pm. 3. The respondents, aggrieved by the CLB order, preferred an appeal in A.P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in authorised capital was filed with the ROC only on 14.07.2006. The seventh respondent, without any notice to the petitioners, had allotted on 03.04.2006, 17,57,000 equity shares of ₹ 10/- each to M/s. Indoworth (India) Ltd., upon the alleged conversion of Zero Coupon Convertible Debentures (ZCDs). However, Form No. 2 in respect of this allotment was filed only on 21.07,2006, with the Registrar of Companies. The impugned increase in authorised share capital as well as allotment is nothing but an illegitimate hijacking of the Company, with the illegitimate dishonest device to defraud the petitioners and their group members. The seventh respondent allegedly entered into an agreement on 12.04.2006 in respect of the landed property belonging to the Company, in order to defraud the petitioners and circumvent the interim order dated 21.04.2006 of the High Court of Kolkata made in G.A. No. 1236 of 2006 in C.S. No. 98 of 2006, prohibiting the transfer of the shareholding in favour of any third part). The seventh respondent, further in collusion with Shri Piyush Patel illegally entered into an antedated transfer deed, circumventing the order of the High Court. The constitution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding the impugned allotments, which adversely affected their shareholding position in the Company. No inconsistent pleas have been taken by way of the proposed amendments. The plea of fraud has already been set out in different terms by the petitioners and such plea now raised is not a fresh one. The prayer of the applicants will not in any way prejudice the respondents, or deprive their rights, who are entitled to file their additional counter on the averments set out in the amended petition. The provisions of Order 6 Rule 17 of CPC dealing with amendment of pleadings provides that the Court (now CLB) may at any stage of the proceedings allow either party to alter or amend his pleadings in such manner and on such terms as may be just and all such amendments shall be made as may be necessary for the purpose of determining the real questions in controversy between the parties. In view of the above subsequent events and developments, the petitioners have now claimed the following reliefs: (i) to annul and set aside the allotment of 8,200 shares made on 26.03.2002 in favour of the respondents 5 6; (ii) to set aside the allotment of 40,000 shares made on 28.10.2002 in fav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eing discretionary, the same will have to be exercised on a judicious evaluation of the facts and circumstances in which the amendment is sought. There is no absolute rule that in every case where a relief is barred because of limitation an amendment should not be allowed. If the granting of an amendment really subserves the ultimate cause of justice and avoids further litigation the same should be allowed. There can be no straitjacket formula for allowing or disallowing an amendment or pleadings. Each case depends on the factual background of that case. Om Ptakash Gupta v. Ranbir B. Goyal to show that the Court may permit under Order 6 Rule 17 CPC any subsequent event being introduced into the pleadings by way of amendment, as it would be necessary to do so for the purpose of determining the real question in controversy between the parties. Estralla Rubber v. Dass Estate (T) Ltd. to show that the amendment of pleadings, as fairly settled in law under Order 6 Rule 17 is to be allowed if such an amendment is required for proper and effective adjudication of controversy between the parties and to avoid multiplicity of judicial proceedings, subject to certain conditions such as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 04.09.2006 from the office of director of the Company. These oppressive actions came to light only after filing of the company petition on account of the delayed filing of the statutory returns by the Company with the Registrar of Companies, thereby the respondents have played a fraud on the petitioners. The Supreme Court in Rajesh Kumar Aggarwal v. K.K. Modi , while dealing with Order 6 Rule 17 of Code of Civil Procedure categorically held that the rule of amendment is essentially a rule of justice, equity and good conscience and the power of amendment should be exercised in the larger interest of doing full and complete justice to the parties before the Court. The court always gives leave to amend the pleadings of a party unless it is satisfied that the party applying was acting in a manner malafide. Furthermore, it has been held in Union of India v. Kopran Limited (2006) Vol. 134 CC 665 that the CLB is a quasi judicial authority to be guided by the principles of natural justice in the exercise of its powers and discharge of its functions under the Act and it shall act in its discretion. The CLB may in exercise of its powers grant leave to amend the pleadings in terms of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ideas to the prejudice of any right acquired by any party on account of lapse of time; (v) The Madras High Court held in Kumaraswami Gounder v. D.R. Nanjappa Gounder that any application for amendment cannot be allowed when the amendment sets up a totally different cause of action which ex-facie cannot stand on a line with the original pleading. A pleading would only be amended if it is to substantiate, elucidate and expand the pre-existing facts already contained in the original pleadings; but under the guise of an amendment a new cause and a case cannot be substituted and the courts cannot be asked to adjudicate the alternative case instead of the original case; and (v) The Privy Council held in Kanda and Ors. v. Waghu AIR 1950 Privy Council 68 that the powers of amendment must be exercised in accordance with the legal principles and cannot be allowed when an amendment involves the setting up of a new case, or when the real matter in controversy between the parties stands altered. This Board disallowed the amendment to the company petition in (a) C.G. Holdings Private Limited and K.C. Palanisamy v. Cheran Enterprises Private Limited and Ors. (2007) 75 SCL 534 on the ground that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioners were quite aware of the issuance of the ZCDs to the creditors of the Company, which is reflected in the audited balance sheet for the year 31.03.2003 and yet the petitioners failed to challenge such issuance of ZCDs. The petitioners omitted to impugne the issuance of ZCDs and thereby relinquished their claim, which is hit by Order 2 Rule 2 of CPC and cannot be sued at this stage by way of an amendment. The petitioners despite being aware, deliberately omitted to question the issuance of ZCDs which were to be converted, being inherent, into equity and cannot challenge the conversion and allotment of 17,57,000 shares made in April 2006 in favour of M/s. Indoworth (India) Limited, upon which interest has accrued on it and were subsequently sold in favour of Shri Piyush Patel and the petitioners, therefore, cannot be permitted, without leave of this Bench, to challenge the issuance of shares upon conversion of ZCDs and the subsequent transfer to Shri Piyush Patel. Moreover, fresh allegations against third parties cannot be introduced by means of amendments. These third parties are neither parties nor is there any prayer against them in the main petition. The petitioners are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich were within their knowledge sought to be raised in the amendment application before commencement of the final hearing of the company petition, but having failed to do so, the petitioners cannot be allowed to bring the amendments on record by way of an amendment at this belated stage. The application suffers from delay and laches. The petitioners could have known the facts sought to be introduced by way of amendment by exercising due diligence by them. Thus, the application is not bonafide but filed with an ulterior motive of misleading the Bench. The application for amendment is a clear abuse of process of law. The reference to the present company petition in the proposed amendment, under the head Matter not Previously Filed or Pending in any other Court , is self contradictory and pre-supposes the dismissal of the original petition filed by the petitioners and replaces the same with a new petition. 6. Shri Narinder Sharma, learned Counsel for the seventh respondent, while adopting the arguments of Shri C.A. Sundaram, learned Senior Counsel, submitted: The seventh respondent is not a member or director, having any interest in the affairs of the Company. The petitioners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Order 6 Rule 17) (ii) The CLB may at any time, and on such terms as it may think fit, amend any defect or error in any proceeding before it and shall make necessary amendments for the purpose of determining the real question or issue raised by or depending on such proceeding. (Regulation 46). (iii) The prayer for amendment of pleadings must be construed without causing serious injustice or irreparable loss to the other side and without substituting a new cause of action in the place of original lis or without altering the subject matter in controversy between the parties or setting up a new or alternative case to the prejudice of any right acquired by any party. (iv) The power of amendment being essentially a rule of justice, equity and good conscience has to be exercised liberally, when the party applying was not acting malafide (a) for determining the real question in controversy between the parties, without causing prejudice to the other side; (b) for doing of full and complete justice to the parties; (c) for proper and effective adjudication of the controversy between the parties and to avoid multiplicity of judicial proceedings; (d) for taking notice of the subsequen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of association of the Company and without satisfying the requirements of Section 81 of the Act, thereby reducing the shareholding of the petitioners group as on 31.03.2003 from 50% to 1.8%.; (iii) the illegal and unauthorized appointment of the fourth respondent as a director with effect from 06.05.2005; (iv) the entrustment of the day-to-day affairs of the Company with the seventh respondent by the board of directors despite the fact that the seventh respondent is neither a director nor a shareholder of the Company; (v) the collusive course of action of the seventh respondent with the respondents 2 3 in the unauthorized increase and issue of shares after March 2003 in favour of the respondents 5 6 and deprivation of the petitioners of their right to participate in the affairs of the Company; (vi) the unauthorized execution of an agreement dated 08.03.2006 by the seventh respondent in favour of the eighth respondent for sale of the landed properties belonging to the Company; (vii) the unauthorized execution of yet another agreement by the seventh j respondent in respect of the landed property and the entire j shareholding of the Company resulting in civil suit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny. If the petitioners had exercised resonable diligence, they could have known the issue of further shares in March 2002 and in October 2002, which came to be issued only after the increase of the paid up capital upto ₹ 5 lakhs, as borne out by the balance sheets for the period between 31.03.2003 and 31.03.2005 and, therefore, the petitioners cannot take any advantage on account of the belated filing of Form No. 2 so as to avoid both the increase of the paid up capital upto ₹ 5 lakhs and further issue of shares in favour of the respondents 5 6. The claim of the Company that the annual returns filed with the Registrar of Companies on 11.10.2002 and 26.12.2003 do reflect the increase in the shareholding pattern of the Company and the impugned allotments in favour of the respondents 5 6 has not been repudiated by the petitioners. The petitioners originally sought to set aside the further issue of allotment of shares in favour of the respondents 5 6 and restore the shareholding pattern as on 31.03.2003, whereas the proposed amendments are being introduced under the guise of typographical error as of 31.03.2003. It is relevant to observe that the amendment application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The mere issuance of ZCDs would not establish the increase of the authorized capital of ₹ 10 lakhs to ₹ 200 lakhs and the subsequent allotment of impugned shares by conversion of such ZCDs which took place only after filing of the company petition. The defence that the petitioners have relinquished their claim by not questioning the issuance of ZCDs, thereby suffering disability under Cider 2 Rule 2 of CPC, will arise only when the enhancement of the authorized capital and the allotment of equity shares by conversion of ZCDs, being subsequent events, are brought on record by way of amendment of the pleadings and not at this stage as put forth on behalf of the respondents. It is further relevant to point out that the application for impleadment (C.A. No. 122 of 2007) is pending and hence the fortification of the respondents that fresh allegations cannot be made against third parties does not merit any consideration. 11. The constitution of board of directors of the Company by appointment of Shri Piyush Patel, Shri Mahesh Sharma and Shri Rajesh Patel as directors and by the removal of the petitioners and the third respondent from the office of director came to be noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng company petition except those relating to the allotment of shares (48,200) in favour of the respondents 5 6 are attempting to convert the existing company petition into a new petition. The petitioners have not claimed any relief against the seventh respondent, whereas, serious charges are sought to be raised by means of amendments which are being new cannot be permitted, as held in Ajendapmsadji N. Pande v. Swami Keshavprakeshdasji N. (Supra). The relief of ordering an investigation into the affairs of the Company under Section 237(b) of the Act on account of the alleged fraudulent conduct of the seventh respondent falling beyond the scope of the original pleadings cannot be entertained. Nevertheless, the events which have taken place subsequent to filing of the company petition under Section 397/398, could be introduced by way of amendment, for the purpose of determining the real question in controversies, as held in Om Prakash Gupta v. Ranbir B. Goyal (Supra). Therefore, the increase of the authorised capital from ₹ 10 lakhs to ₹ 200 lakhs, the allotment of 17,57,000 equity shares of ₹ 10/- each in favour of M/s ladoworth (India) Ltd. by conversion of ZCDs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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