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TMI Blog1964 (8) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... ny, an order directing Madhavji K. Varma and Sons Private Ltd. to render account of all raising of coal from the colliery and also directing it to vacate the colliery and make over immediate possession to the Special Officer and for costs. The company was incorporated as a Private company for exploiting certain collieries in the district of Dhanbad. The shares in the capital of the company are held by the members of the family of one Bipinbehari Basu and also by a distant relative Harakali Basu. Particulars of shares held by the different members have been set out under paragraph 6 of the affidavit of the applicant affirmed on May 2, 1964. The applicant holds two shares in his individual and personal capacity and also holds 149 shares jointly with other members of his branch of the family. For sometime past disputes and differences arose between the members of the company with the result that the affairs of the company were not properly conducted, the liabilities of the company kept on mounting from year to year. To solve the difficulties the applicant along with other members of the company approached one Chotalal Madhavji Varma, a director of Madhavji K. Varma and Sons Private Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ries by, advertisements in several newspapers and the Special Officer was directed not to accept the offer of Varma for a period of six weeks from the date of the order, to see if a better offer was received as a result of the advertisement, pursuant to this order, advertisements were made, but no better offers were received by the Special Officer. The said order of November 22, 1963, is of some importance and I shall revert to it later. 5. On January 14, 1964, the matter came up before me for further orders and by consent of all the parties an order was made directing the Special Officer to accept the offer of Varma in terms of his report dated January 14, 1964, and subject to variations contained in two letters dated January 6, 1964, and January 7, 1964. The Special Officer was directed to enter into an agreement for lease pending permission of the Central Government and the State Government and he was also directed to take steps for obtaining such permission. Pursuant to this order the Special Officer accepted the offer of Varma by a letter dated January 15, 1964. Thereafter a draft agreement was prepared and it was approved by the solicitors of the parties. On February 7, 1964 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pay the balance of ₹ 10,00,000/- to the Special Officer for the companies at the end of five years. (h) If the liabilities exceeded ₹ 15,00,000/- the lease shall pay such excess to the extent of ₹ 1,00,000/- and shall adjust this excess payment of ₹ 1,00,000/- against payment to be made to the said companies. (i) The lessee shall pay commission at the rate of 62 nP. per rupee for every metric ton of coal for five years of the lease and thereafter at the rate of 75 nP. for the rest of the term of the lease. (j) The lessee shall pay commission at 94 nP. per metric ton of soft and hard coke for five years and thereafter at the rate of Re. 1.12 nP. for the rest of the term. (k) Commission at the rate of 7 1/2 per cent on the total gross sale proceeds of materials in respect of the Engineering Works subject to a minimum payment of ₹ 5,000/- per year. (l) ₹ 300/- per month to be paid as minimum commission even if there is no raising and for the interim period from the date of this agreement. (m) All buildings, Dhowrahs, structures, director's bungalows and other quarters and the Engineering Works shall be in the possession of the lesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er into an agreement the draft of which was produced by the Special Officer with the modifications made therein. Prior to this, an order was made on November 22, 1963, whereby liberty was given to the Special Officer to accept the offer made by C.M. Varma as set out in the report of the Special Officer subject to appropriate sanction and approval from the Central Government, the State Government and other authorities. The offer of Varma was not to be accepted for six weeks and directions were also given for advertisements. A copy of the order dated November 22, 1963, was produced at the hearing of this application by the Learned Counsel for the Special Officer. 9. The order made on February 7, 1964, is challenged on the ground that it contravenes the provisions of Rule 37 of the Mineral Concession Rules, 1960, which prohibits without previous consent in writing of the State Government (which in the case of a mining lease in respect of certain specified minerals) shall not be given except under previous approval of the Central Government. The prohibition under the Rule relates to: (a) Assignment, subletting, mortgaging or in any other manner transferring the mining lease or any r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion may be at once dismissed that it is too late now to raise the section as an answer to the claim. No court can enforce as valid that which competent enactments have declared, shall not be valid, nor is obedience to such an enactment, a thing from which a Court can be dispensed by the consent of the parties or by a failure to plead or argue the point at the outset; Nixon v. Albion Marine Insurance Co., (3) the enactment is prohibitory. It is not confined to affording a party a protection, by which he may avail himself or not as he pleases. 13. Thereafter the Supreme Court referred to another decision of the Judicial Committee in Shivaprosad Singh v. Srish Chandra Nandy, (4) 76 I.A. 244, in which the Judicial Committee held that the provisions of a public statute cannot be ignored. In the case before the Supreme Court the claim was by some members of an illegal association against another member on the footing that the association should be treated as legal in order to give rise to liability to account in respect of transactions of the association. It was held that such a claim was untenable as the plaintiff came to Court on allegations which on the face of them showed that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsent of the parties. The parties did contemplate sanction being obtained from the authorities for the purpose of the lease and the order of November 22, 1963, makes it quite clear that sanction or permission had to be obtained by the Special Officer granting a lease. The parties had given their consent after fully understanding the requirement of the statute and indeed in the agreement as executed, it was made clear that permission or sanction of the Central and State Governments had to be obtained. This decision therefore does not help the applicant. 16. Mr. Deb next referred to a decision of the Judicial Committee in Macfoy v. United Africa Co. Ltd., (19) (1961) 3 A.E.R. 1169. In this case a statement of claim in an action for recovery of moneys was delivered during the long vacation. Such delivery was made in breach of Order 64, Rules 4 and 5 of the Rules of the Supreme Court which were applicable. The defendant having failed to file his defence within time, judgment was signed against him in default of defence. An application to have the judgment set aside failed and in appeal the defendant for the first time took the point that the delivery of the statement of claim was a nu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the whole question was one of jurisdiction of the Court on the basis of valuation of the suit and it was held that it was a fundamental principle that a decree by a Court without jurisdiction was a nullity and its invalidity could be set up whenever it was sought to be enforced or relied upon. A defect of jurisdiction, whether pecuniary or territorial, it was held struck at the very authority of the Court to pass any decree and such defect could not be cured even by consent of parties. This decision does not help the applicant as in the instant case before me, the question is not of want of jurisdiction of this Court to pass the order. Indeed this Court exercising its jurisdiction under the Companies Act, 1956, is the only Court which could pass the order now sought to be set aside. In my opinion, this decision also does not help the applicant. 19. The next case relied upon by Mr. Deb is Lazard Bros. v. Banque Industrielle De Moscou, (9) (1932) 1 K.B. 617. In this case an English firm commenced an action against a Moscow bank, claiming a large sum of money. No appearance was entered and thereupon judgment by default was signed against the bank. It was found later on that the Mosc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nded that s. 4(2) of the Act and Rule 37 constituted a complete bar to the agreement. Mr. B. Das next referred to s. 19 of the said Act and argued that inasmuch as the lease was granted in contravention of Rule 37, the agreement was void and of no effect. Referring to the terms of the agreement, Mr. B Das argued that there can be no doubt that the instrument created a present demise, and as such demise is in clear violation of the said Rule 37, the transfer of interests sought to be created by the instrument was void and no effect could be given to the same. 22. In support of his argument Mr. B. Das referred to a decision of this Court in Ramjoo Mohamed v. Haridas Mallick & Ors. (11) A.I.R. (1925) Cal. 1087. This was an action for specific performance of an agreement to grant a lease of certain premises in Calcutta. It was held that whether an agreement was a present demise or not depended upon the intention of the parties which was to be gathered from the language in which the agreement was couched. Mr. Das argued that if in this case the agreement was looked into as a whole, there could be no doubt that it was a present demise and not a mere agreement to grant a lease. 23. Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was satisfied in this case as the lessee was given exclusive possession and control of the colliery and also the engineering works. 25. Mr. Mukherjee appearing for Lodna Collieries Ltd., the superior landlord, opposed the application and submitted that the question raised could not be gone into in this application. The order of February 7, 1964, had been made by consent of all the parties and has been acted upon. 26. Mr. T.P. Das, Learned Counsel for the respondent No. 6, first of all contended that the application was mala-fide, inasmuch as the order of February 7, 1964, was a consent order Not only the parties gave their consent to the order, the Central Government also gave its consent. He argued that some sanctity should be attached to the orders of this Court and an order once made and acted upon, could not be challenged in this fashion. He next argued that the agreement was entered into by the Special Officer under orders of this Court. It was therefore an act of the Court. Rule 37 contemplates act of parties and cannot affect an act of the Court. He next referred to s. 402(g) and s. 403 of the Companies Act, 1956, and submitted that the Court could make any order in an ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 contended that this Court had no jurisdiction to make any order on this application. The order has been made and acted upon. No grounds have been made out for revision of that order. No fresh materials have been produced to justify any order the effect of which will be to reopen the order already made. Secondly, Mr. Chaudhuri contended that the order was a consent order. The parties after mature deliberation and upon competent legal advice, had chosen to accept the terms and had obtained an order from this Court by consent of all. Mr. Chaudhuri next argued that it was well-known to the parties that his client, the respondent No. 6, had advanced large sums of money to put the colliery in a working condition. While the applicant wants to have the order recalled, no suggestions have been made for indemnifying his client for moneys spent by it under the order of this Court. The parties had taken full advantage of the services of his client and have also enjoyed the benefit of the large sums of money spent by it to maintain the collieries in a running condition. One should expect, Mr. Chaudhuri argued, that if they want to have the order recalled or set aside and the agreement cancell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs to be done by the Special Officer, namely, the permission to be obtained by him from the appropriate authorities and therefore, Mr. Chaudhuri submitted, that the agreement was not a present demise, but a mere executory agreement. There is good deal of force in this contention of Mr. Chaudhuri. But in whatever manner the agreement is described, it cannot be overlooked that under its terms there is a transfer of some right, title or interest to the respondent No. 6. To that extent it contravenes the provisions of Rule 37(a) of the said Rules. 32. The next case relied upon by Mr. Chaudhuri is Ainsworth v. Wilding, (14) (1896) 1 Ch. 673 (663). This case was relied upon by Mr. Chaudhuri in support of his proposition that where a judgment had been passed even by consent and under a mistake, it could be set aside only in a fresh action brought for that purpose and by no other means. Romer, J., held that the judgment could not be set aside on a motion at any rate without the consent of the parties. It is not necessary for me to deal any further with this question, because I am of opinion, for the reasons hereinafter stated, that the order made on February 7, 1964, cannot be and should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... my opinion an order once made, perfected, filed and acted upon cannot be challenged on a motion and the appropriate remedy is to proceed by way of an action. 36. The next case relied upon by Mr. Chaudhuri was Kinch v. Walcott & Ors. (18) (1929) A.C. 482. Dealing with the question of consent order it was held in this case that an order made by consent and not discharged by mutual agreement is as effective as an order of the Court made otherwise than by consent and that a party must obey such a consent order unless and until it has been set aside in proceedings duly constituted for that purpose. To my mind this decision is not of any assistance because it is not an issue in this application if the order made on February 7, 1964, is binding on the parties. That order so long as not set aside, remains in force and binds the parties as effectively as any other order. 37. Mr. Chaudhuri next argued that the agreement was not affected by Rule 37(a) or Rule 37(b) as it was not a case of a lease by a private party. It was a case of a lease by the Special Officer under orders of the Court. It was therefore an act of the Court and not an act of either the lessor or the lessee. A distinction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his nature. 40. Upon a consideration of the terms of the agreement, it seems to me that there are certain features in it, which do confer upon the respondent No. 6 a right to exclusive possession of the company's assets and also a right to exploit the colliery, despatch and sale of coal and coke and also the right to exploit the engineering works. It is true that the possession of the respondent No. 6 is a possession under the Special Officer and not in its own right. There is also provision for restoration of such possession to the Special Officer in the event of permission by the Central and State Governments being refused. But under the agreement the Special Officer is required to make over possession of the collieries and the engineering works to the respondent No. 6, who would thereupon be entitled to carry on all mining operations including despatch and sale of coal and coke and also to run the engineering works and to realise the price and moneys. While there is provision for making over possession by the Special Officer there are also provisions that the respondent No. 6 will work the collieries and deal with coal under the Special Officer. To this extent it seems to m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer was appointed. Even after such appointment, the Special Officer had tried to induce the parties to advance funds in order to work the collieries and pay off the dues of the creditors. But no means could be devised of raising funds, in order to meet the company's liabilities. It was in these circumstances that the members of the company negotiated with the representative of the respondent No. 6 for the purpose of preservation and protection of the collieries. It is to be noticed however, that the arrangement that has been entered into with the respondent No. 6 was arrived at, after prolonged deliberation on the terms, clause by clause, and modification thereof wherever necessary. Further, advertisements were issued under orders of this Court inviting offers for taking over the colliery and the engineering works. But there was no response to such advertisements. It was only then that the Special Officer with the approval of all the members conducted negotiations with the representative of the respondent No. 6 and the agreement had been concluded. By reason of the agreement, and under the terms thereof, the respondent No. 6 has invested large sums of money to work the col ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat order and if that agreement is to be interfered with, the respondent No. 6 should be given all the protection which this Court can give. The ends of justice demand that the rights of the respondent No. 6, whatever they are under the said agreement, must get the fullest protection which this Court can give. 45. The order dated February 7, 1964, cannot be recalled or set aside for another and more important reason. As I have already stated an order was made concerning this company on November 22, 1963. This order was made in Company Petition No. 217 of 1963 and the material paragraph of that order is as follows: "It is ordered that the said Special Officer shall be at liberty to accept the offer for a lease made by Mr. C.M. Varma on the terms set out in his said report, but subject to provision being made for payment of royalty to Lodna Colliery (1920) Ltd. and subject also to the appropriate sanctions and approval being obtained from the Central Government, the State Government and any other authorities that may be required." But even if the order of February 7, 1964, is recalled, the order of November 22, 1963, would still remain in force and be binding upon the Spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes. 48. It now remains to consider the order to be made on this application. Mr. Deb had rightly and very frankly conceded that the parties had misled themselves in giving their consent to the terms of the agreement. Tnere was misapprehension with regard to the terms and scope of the agreement. It seems to me that there was misapprehension regarding the rights that were being conferred on the respondent No. 6 under the terms of the agreement. 49. But before making the order, I should consider another question, namely whether this Court has the power to make appropriate orders in this application having regard to the events that have happened. The application on which the order dated February 7, 1964 was made, was an application for interim relief under sections 397 and 398 of the Companies Act, 1956. The main application under sections 397 and 398 is still pending and has not been disposed of. Under section 403 of the Companies Act, 1956, this Court has power to make any interim order which it thinks fit, for regulating the conduct of the company's affairs upon such terms as appear to this Court to be just and equitable. The powers of this Court to make interim orders in app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Regulation and Development) Act, 1957, and the Mineral Concession Rules, 1960, and cannot therefore be treated as a nullity. But while the said order cannot be recalled or set aside or revoked, operation or any further operation of the agreement dated February 11, 1964, should be suspended as hereinbefore directed. 52. The respondent No. 6 should forthwith make over possession of all the assets of the company which were made over to it under the said agreement dated February 11, 1964, to the Special Officer and should cease to be in occupation of the lands, buildings, structures, factories and workshop and all other assets of the company. The Special Officer is directed to take over possession of all the assets of the company which were made over to the respondent No. 6 under the said agreement. But simultaneously with taking over possession of the said assets from the respondent No. 6 in terms of this order, the Special Officer is directed to appoint Madhavji K. Varma, Nanalal M. Varma, Karsanji K. Varma and Chhotalal M. Varma (Directors of the respondent No. 6) as managers, without security and without remuneration, under the Special Officer to operate and exploit the collierie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order directing the Special Officer not to take any further action under the agreement dated February 11, 1964. This prayer has been disposed of by the order made herein. Prayer (c) is for an order directing the Special Officer to make an inventory of the collieries and the engineering works. It appears that no inventory of the assets of the company was made by the Special Officer. It was submitted by the Learned Counsel appearing for the Special Officer that no order was made directing the Special Officer to make any inventory. Learned Counsel for the applicant submitted that an inventory ought to be made of the assets of the company. I therefore direct the Special Officer to make an inventory of all the assets of the company as early as possible. Copies of such inventories should be furnished to all the members of the company. 56. There is a prayer for an injunction retraining the respondent No. 6 from taking out any plant, machinery, goods and other assets from the colliery. The charge relating to removal of the said plant and machinery has not been pressed and therefore no. order is made on the prayer for injunction. 57. The respondent No. 6 should furnih an account of all ra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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