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TMI Blog2014 (1) TMI 1960X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of pleadings. 3. It would be necessary to state the background facts against which the appellant had filed Company Application No.25/2012 under Regulation 17 and 44 of the Company Law Board Regulations, 1991 read with Order 6 Rule 17 of the Code of Civil Procedure, 1908 seeking amendment of the pleadings. 4. The appellants had filed Company Appeal No.5/2005, in this Court, against the order dated 24-10-1994 passed by the CLB, in Company Petition No.4/111/SRB of 91 (for short "company petition"). 5. Company petition was filed by the appellants seeking declaration that the purported allotment of 6000 shares in favour of respondent Nos.5 and 6, i.e., respondent Nos.6 and 7 in the company petition, (for short "the respondent") at the meeting of the Board allegedly held on 24-9-1990 is void, illegal and inoperative. The appellants further prayed for direction to rectify the Register of Members of the Company by deleting names of the respondents therefrom in respect of 3000 shares each allotted to them. 5.1. The company petition was however rejected by the CLB, upholding the impugned allotment of 6000 shares. It appears that the appellants raised the question whether allottees o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of 6 months from the date of receipt of a copy of this order, without being influenced by any observation made in the course of this order. In the event the chairman finds that the Additional Special Bench, Chennai is not able to dispose of the matter within the time stipulated, the Chairman of the Company Law Board is requested to either hear it or it is open to the Chairman to allocate the case to any other appropriate Bench for disposal. If the Respondents apply for return of original documents and records once produced, the Company Law board shall consider the request after hearing both parties. Sri Bhupinder Rai shall be entitled to be present as an observer at every Board meeting of the Company till the Company Law Board decides the matter afresh. The Company is directed to give due notice along with agenda papers to Sri Bhupinder Rai and shall also send a certified copy of the minutes of every Board Meeting of the Company from this day till the Company Law Board passes a final order. Sri Bhupinder Rai shall not be entitled to be present when the Board discusses any issue in relation to submission of tenders by the Company or receive agenda papers relating thereto." (e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he proposed amendment would not change the nature or character of original company petition whereby, improper allotment of shares was challenged. He further submitted that a composite petition under Section 111 and Sections 397 and 398 is maintainable. In support of this contention, he placed reliance upon the judgment of the Delhi High Court in Charanjit Khanna & Others vs. Khanna Paper Mills Ltd. & others (2011) 164 Comp Case 315 and so also, the order of the Supreme Court dated 8-8-2011 whereby the said judgment of the Delhi High Court was confirmed. He then submitted that the amendment sought by the appellants is necessary for determining the real question in controversy between the parties, viz., illegal/improper allotment of 6000 shares and hence, the CLB ought to have allowed the amendment as sought. He submitted, in any case, the amendment sought would not cause any prejudice to the respondents apart from the fact that the amendment would be necessary to determine the real question in controversy. He then submitted that the CLB committed grave error of law in entering into the correctness or falsity of the contents of the amendment. He submitted that it was not open to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Londhe Prakash Bhagawan vs. Dattatraya Eknath Mane and others, (2013) 10 SCC 627, K. Raheja Constructions Ltd. and another Vs. Alliance Ministries and Others, 1995 Supp (3) SCC 17, Van Vibhag Karamchari Griha Nirman Sahakari Sanstha Maryadit (Regd.) Vs. Ramesh Chander and others, (2010) 14 SCC 596, the judgment of Calcutta High Court in Hungerford Investment Trust Ltd. Vs. Turner Morrison and Co. Ltd., (1972) ILR 1 Cal. 286. It was also submitted that if the amendment is allowed, it shall enhance the scope of enquiry contemplated under Section 111 of the Act, which is summary in nature. The enquiry, he submitted, under Section 397 of the Act is wider, and hence the amendment cannot be allowed. Lastly, he submitted that after having relinquished a part of the claim i.e., the reliefs under Sections 397 and 398 of the Act, it was not open to the appellants to seek such relief by way of amendment after more than 21 years. In support of this contention, he placed reliance upon the provisions contained in Order 2 Rule 2 of Code of Civil Procedure and the judgment of the Supreme court in Van Vibhag (surpa). 11. Mr. Naganand, learned Senior Counsel appearing for the appellants in re-jo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplication for amendment should or should not be allowed, the Court should not go into the correctness or falsify of the case in the amendment. Likewise, it should not record a finding on the merits of the amendment and the merits of the amendment sought to be incorporated are not to be adjudicated at the stage of allowing the prayer for amendment. This cardinal principle was not followed by the CLB in instant matter. Moreover, the CLB proceeded on the assumption that order in terms of the minutes of order was a consent order and observe that the amendment sought was beyond the scope the order of remand. 14. We have perused the company petition, in particular, the grounds of challenge in paragraphs (1) to (18). We find that challenge to the allotment of 6000 shares to the respondents was on the ground of malafides and for collateral purpose, namely, to benefit the respondents at the cost of other share holders. The appellants specifically contended that exercise of power by respondent Nos.2 to 5 in the company petition for allotment of 6000 shares is vitiated by fraud. In other words, they played fraud on the appellants allotting the shares behind their back, prejudicially affecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat respondent is a small domestic Company, a quasi-Partnership having been formed from a Partnership firm, it would be just and equitable to wind up the respondent No.1 Company as there is complete breakdown of mutual good faith and trust on account of Respondent No.7's conduct. This has also been so found by the Division Bench of Hon'ble High Court in O.S.A.No.46 of 2006 and connected cases disposed of on 22.3.2012. Winding up would prejudice the petitioners and therefore alternate relief under Sections 397 and 398 is warranted to protect the company and the interest of its members, the petitioners herein. II. Add the following additional prayers. 18. Declare that the purported allotment of 6000 shares in favour of the Respondent Nos.6 and 7 at the meeting of the Board stated to have been held on 24.09.1990, as prejudicial to the interests of the Company and oppressive to the Petitioners, and consequently set aside the said allotment. 19. Remove Respondents No.2, 5, 7 as Directors of the Company and disqualify them to hold Office as Directors of Respondent No.1 Company." 16. From bare perusal of the grounds sought to be introduced by the appellants, it is clear that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egation of oppression and mismanagement is inextricably intertwined with the issue of maintainability of the petition under Section 399 of the Act, a composite petition has to be held as maintainable. To ask a petitioner to file two separate petitions in such circumstances would not only be unfair but would also result in unnecessary delay." The Judgment of the Delhi High Court, as observed earlier was confirmed by the Supreme Court. 17. We are satisfied that the amendment would not change the basic nature and character of the company petition and/or that it does not travel beyond the scope of the order of the remand. In our opinion, it does not change the nature of case except the fact that by way of amendment the appellants seek additional relief under Sections 397 and 398 of the Act. In fact, this Court had allowed/permitted to amend the pleadings. That apart, the CLB wrongly proceeded on the assumption that the order in terms of the minutes of the order was a consent order. The Supreme Court in Speed Ways Picture Pvt. Ltd. and Another vs. Union of India & Another (1996) 6 SCC 705 has made it clear that the Order in terms of minutes of order is not the consent order or is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the minutes is an order in invitum which is binding on both parties which agreed before this Court for allowing/permitting the parties to file further pleadings and documents as they may choose. In the circumstances, the order dated 17.10.2012 passed by the CLB in C.A.No.25/2012 in C.P.No.4/1991 is set aside. The C.A.No.25/2012 is allowed. The appellants are directed to carry out amendment within two weeks from the date of receipt of this order. It is open to the respondents to file Written Statement/reply if they so desire within six weeks from today. Once the amendment is carried out, it is open to the appellants to move the CLB for hearing of the company petition. 20. At this stage, Mr. Naganand, learned Senior Counsel for the appellants submits that the Member of the CLB sitting at Chennai has already recused himself from hearing of the company petition and in view thereof the company petition has already been sent to the Chairman for placing it before the appropriate Bench of the CLB. This Court is informed that so far the Chairman has not assigned the case to any other Bench. The Chairman of the CLB is therefore requested to assign Company Petition No.4/1991 to appropriate ..... X X X X Extracts X X X X X X X X Extracts X X X X
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