TMI Blog2016 (11) TMI 1678X X X X Extracts X X X X X X X X Extracts X X X X ..... liberty to seek interlocutory order on additional facts, he is entitled raise on the same facts by invoking another legal point. The applicant ought to have raised all these legal scores in the former application itself - thus, the relief sought by the applicant in this CA is held as hit by constructive resjudicata. Whether the disqualification set forth in Section 164(2)(a) r/w 167(1) (a) of the Act 2013 has retrospective effect or not? - HELD THAT:- In the present case non-filing of financial statements before this enactment would not tantamount to disqualification to become Director or to continue as Director, new enactment made non-filing of financial statements for three consecutive years as disqualification and amounts to an offence only to the act after 1.4.2014 - If this disqualification is construed as applicable to the past acts, it is obviously unfair to the people conducted the affairs of the company under the impression that non-filing of financial statements for three years is not a default and not an offence - Therefore, this provision has to be read as applicable to the situations where non-filing has started, at the most in the past and continuing while this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts that Section 164 (2)(a) of the Act mandates that no director of a company which has not filed financial statements or annual returns for three consecutive financial years shall be eligible to be reappointed as director of that Company or appointed in any other Company for a period of five years from the date on which the said Company fails to do so. The applicant further submits that Section 167 (1) (a) of the Act says that office of a director shall become vacant in case he incurs disqualification of non-filing of financial statements or annual returns for a continuous period of three financial years as stated in Section 164 of the Act. 5. That RI Company, wherein R4 R5 functioning as directors, having not filed financial statements for five years consecutively i.e., from 31-32010 to 31-3-2014, R4 R5 shall be declared disqualified to continue as directors of RI Company, despite a respite of two months from 15.08.2014 to 15.10.2014 the Central Government bestowed upon companies to hold AGMs and file financial statements, this RI Company headed by R4 R5 ignored it and remained defaulters u/s 164 (2) (a) r/w Section 167 (1) (a) of the Act, of course they held the AGMs for all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce R4 has not been reappointed and no Resolution has been passed in any of the AGMs since 1-10-2009, he ceased to be director of the Company even under the Article above mentioned. To fortify the above proposition, the counsel relied upon (Krishnaprasad J. Pilani v. Colaba Land and Mills Co. Ltd [(1959)29 Comp Cas 273 (Bom)J. 11. The applicant counsel further submits that the power conferred upon this Tribunal is of widest amplitude and the power u/s 403 (equivalent to Section 242 (4) of the new Act) of the Companies Act 1956 for passing interim order as the same is incidental to the power to order substantial reliefs as set out in Section 402 of the Companies Act 1956. To show that this Tribunal can pass any order which it thinks fit, the petitioner counsel relied upon Cosmo steels Private Ltd. And Ors. v. Jairam Das Gupta and Ors [AIR 1978 SC 3751; Shoe Specialities P. Ltd. and Others v.Standard Distilleries and Breweries P.Ltdand Ors. [MANU/TN/0114/19661; Sanjay Gambhir and Ors v. D. D Industries Limited and Ors [(2013)177 Comp Cas 99]; Pramod Kumar Mittal v.Andhra Steel Corporation and Ors. [(1985) 58 Comp Cas 772 (Cal)] and Bennet Coleman Co. V. Union ofIndia and Ors [(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lied upon Satyadhyan Ghosal Ors. v. Smt. Deorajain Debi Anr [(AIR 1960 SC 941) (Paragraphs 7 and and Arjun Singh vs. Moinder Kumar Ors. [(AIR 1964 SC 993) (Paragraphs 10, 11 and 13)]. 14. The respondents counsel submits that interim relief sought in this CA is not in aid of the reliefs in the main CP, therefore, the same is liable to be dismissed, for which the respondents counsel relied upon Shanti Prasad Jain v. Kalinga Tubes Limited (AIR 1965 SC 1535 para 35); Shree Ram Urban Infrastructure Limited v. R. K. Dhall Ors. [(2010) 153 Comp Cas 150 (Bom) pages 152,154-157, 160-162)J and United Commercial Bank v. Bank oflndia and Ors. [(1981) 2 SCC 766, paras 50-541. 15. The Respondent counsel further submits that this applicant filed several CAS in the past against the assets of the Company and the functioning of Directors of the Company but none of the times, he was granted the reliefs he sought, the same is evident from the orders passed by Courts. The petitioner had filed CA 170/2010 seeking suppression of the Board and injunction against current assets of the Company, but no relief was granted in the orders dt. 1-11-2010 and 11-2-2014. Again, when the petitioner filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed any objection in the AGMs stating that R4 R5 should not continue as Directors of the Company, more so, the Company approved R4 and R5 continuing as Directors on year to year basis in the AGMs held. In fact, the applicant himself filed CA for holding AGMs for the years 2009-10 to 2013-14; therefore this applicant now cannot say that the respondents on their violation failed to file financial statements for the year 2009-10 to 2013-14. Besides this, this petition has never challenged the audited financial statements or the AGMs held for the year 2009-10to 2013-14 as prejudicial to him or to RI Company. Hence, he could not raise as a plea in the CP filed u/s 397-398 ignoring the fact that non-compliance of any section of law of the Companies Act will not have any bearing on the CP filed u/s 397-398 for the allegations in the Company petition u/s 397-398 are solely to be decided on the point as to whether the acts complained of are oppressive against the petitioner or reflecting mismanagement of the Company, hence the respondent counsel, for the reasons stated above, sought for dismissal of this CA. 18. On hearing the submission of either side, now the points for discussion is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he directorship of TCFC Securities Pvt.Ltd.(another associate company) and Citi Leasing Pvt.Ltd. (100% subsidiary company) and vacated the office of its directorship w.e.f 30 th September 2013 21. The applicant asked various other reliefs without prejudice to the reliefs sought above. Though the applicant asked various other reliefs, the counsel has not pressed the remaining reliefs; except the reliefs above mentioned, this Bench has therefore not discussed those reliefs. In the remaining reliefs, most of them are nothing but repetition of the reliefs already determined or sought in the CAS filed by this applicant 22. The applicant herein has asked to declare that R4 and R5 ceased to continue as Directors of RI Company precisely on the ground that they are no more eligible to continue as Directors for they failed to file the financial statements for five consecutive years from 2009-10 to 20013-14 immediately before notification of Section 164 and 167 of Companies Act 2013. Likewise, in CA 201/2015 also sought an injunction restraining R4 and R5 from acting as Directors of RI Company which is substantially the same as the relief sought in the present CA 47/2016 subsequently f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be nothing but making the order of High Court redundant. The only solace given to the applicant in the appeal order is that he can take out fresh application for interlocutory reliefs pleading such additional fact as he may choose to. Yes, he is free to take out a fresh application if additional facts emanate giving cause of action to him. In CA 201/2015 and in the present CA 47/2016, the relief asked is for removal of R4 R5 as directors. The Sections 164 167 of the Act were in force when CA 201/2015 was filed, as they are in force today. Then, one should not lose sight of the fact that these new Sections 164 and 167 have come into force from 1-4-2014, i.e., before filing CA 201/2015, therefore he ought to have brought these disabling provisions to the notice of ROC, at least to High Court, that has not been done. He kept quiet until CA 201/2015 was disposed of without any order, since the appeal order is a consent order; he could not take it to appeal, rightly not taken to appeal. It does not mean that he is open to raise second round of litigation on removal of R4 R5 as directors by filing another CA under the cover of the above Sections. 27. It goes without saying that a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ification on the past conduct does not become retrospective for part of the requisition for its action is drawn from a time antecedent to passing new Act. For which he relied upon In Re. Solicitor's clerk, and Ishwarnagar Co-Operative Housing Building Society case, Supra to fortify his arguments that the Provisions aforesaid are applicable to the defaults happened antecedent to new enactment. 31. On perusal of Solicitor's clerk case, it appears that a solicitor's clerk was convicted of larceny before 1956 amendment to the Solicitors Act 1941, was made ineligible to continue as solicitor's clerk after amendment in the year 1956. The said clerk was convicted on April 14 1953 that was before the aforesaid amendment that a person convicted of larceny should not continue as clerk to a Solicitor. When the aggrieved Solicitor's clerk after his removal filed an appeal to the Queen's Bench, England challenging the said provision as not applicable to him retrospectively, on which, the Bench held that the order has no retrospective effect because disqualifying a person from acting as a Solicitor's clerk in future cannot be considered as retrospective for what ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive. Indeed, Solicitor's case ratio comes to the rescue of the respondents rather to the applicant. 35. The need for accessibility, precision and general application flow from the concept of rule of law, a person should be able to know of the law and be able to confirm his or her conduct according to the law. Basis of presumption is based on eliminatory consideration of fairness which dictates that individuals should have an opportunity to know what the law is and confirm their conduct accordingly. 36. In the present case non-filing of financial statements before this enactment would not tantamount to disqualification to become Director or to continue as Director, new enactment made non-filing of financial statements for three consecutive years as disqualification and amounts to an offence only to the act after 1.4.2014. 37. If this disqualification is construed as applicable to the past acts, it is obviously unfair to the people conducted the affairs of the company under the impression that non-filing of financial statements for three years is not a default and not an offence. 38. Therefore, this provision has to be read as applicable to the situations where non-fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avention of the Act may not suffice to warrant the remedy of winding up, especially where alternative remedies are available. Where the 'just and equitable' jurisdiction has been applied in cases of this type, the circumstances have always, I think, been such as to warrant the inference that there has been, at least, an unfair abuse of powers and an impairment of confidence in the probity with which the company's affairs are being conducted, as distinguished from mere resentment on the part of a minority at being outvoted on some issue of domestic policy Neither the judgment of Bhagwati J, nor the observations in Elder are capable of the construction that every illegality is per se oppressive or that the illegality of an action does not bear upon its oppressiveness. In Elder a complaint was made that Elder had not received the notice of the Board meeting. It was held that since it was not shown that any prejudice was occasioned thereby or that Elder could have bought the shares had he been present; no complaint of oppression could be entertained merely on the ground that the failure to give notice of the Board meeting was an act of illegality. The true position is t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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