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Manipal Sowbhagya Nidhi Ltd. R/by Its Law Officer and Authorised Signatory - Mr. L.N. Rao Vs. G.N. Rama Rao and ors. - Court Judgment

SooperKanoon Citation

Subject

Company

Court

Karnataka High Court

Decided On

Case Number

Company Appeal No. 11 of 2005

Judge

Reported in

(2007)1CompLJ187(Karn); [2007]73SCL258(Kar)

Acts

Companies Act - Sections 45 and 391; Reserve Bank of India Act - Sections 45QA and 45QA(2)

Appellant

Manipal Sowbhagya Nidhi Ltd. R/by Its Law Officer and Authorised Signatory - Mr. L.N. Rao

Respondent

G.N. Rama Rao and ors.

Appellant Advocate

Nandish Patil, Adv., ;Holla and Holla and ;Patil and Netter, Advs.

Respondent Advocate

Jagadish Mundargi, Adv. for R1, R3, R5-11, 13-16, 18-23, 28-31, 33-35 and 41

Disposition

Appeal allowed

Excerpt:


.....which a candidate other than the returned candidate may be declared to have been elected held, firstly, the high court should be of opinion that in fact the petitioner or such other candidate received a majority of the valid votes; secondly, the high court should be of opinion that but for the votes obtained by the returned candidate by corrupt practices the petitioner or such other candidate would have obtained a majority of the valid votes. in the present case it is not a case where the returned candidate obtained votes by corrupt practices and therefore, the question of discarding those votes for deciding the returned candidate does not arise. -- karnataka co-operative societies act, 1959. [k.a. no. 11/1959]. section 70: powers of the arbitrator election dispute held, although there are no statutory provisions corresponding to sections 100 and 101 of the representation of people act, 1951 setting out the grounds on which the election to a co-operative society can be set aside, it is open to the arbitrator to rely as far as possible upon the large volume of judicial precedents under the election law. in appropriate cases, the arbitrator is competent to declare the petitioner..........company law board, southern region bench at chennai passed in c.a.no. msn. 1-36/45qa/srb/2002 and c.a.no. msn. 1-5/45qa/srb/2003 dated 16.6.2003.2. facts in brief are as under:the appellant is a company incorporated under the provisions of the companies act. it is carrying on the business of a non-banking financial company. service is granted by r.b.i. after january 1998, the reserve bank of india has introduced several stringent measures and those measures adversely effected the financial position of the company. in april 2002, m/s. maharashtra apex corporation limited committed serious defaults in repayment of its depositors. the said defaults caused severe panic amongst the investors/depositors of m/s. maharashtra apex corporation ltd. which resulted in cascading effect, whereby there was a mass withdrawal of deposits and debentures as well as a demand for premature repayment. all these circumstances affected the financial position of the company. the company was compelled to propose a scheme of arrangement for settlement of dues.3. the appellant-company proposed a scheme of arrangement before this court pursuant to company application no. 712/2002. proceedings were held and.....

Judgment:


1. Manipal Sowbhagya Nidhi Ltd. is before us challenging the order of the Company Law Board, Southern Region Bench at Chennai passed in C.A.No. MSN. 1-36/45QA/SRB/2002 and C.A.No. MSN. 1-5/45QA/SRB/2003 dated 16.6.2003.

2. Facts in brief are as under:

The appellant is a company incorporated under the provisions of the Companies Act. It is carrying on the business of a non-banking financial company. Service is granted by R.B.I. After January 1998, the Reserve Bank of India has introduced several stringent measures and those measures adversely effected the financial position of the Company. In April 2002, M/s. Maharashtra Apex Corporation Limited committed serious defaults in repayment of its depositors. The said defaults caused severe panic amongst the investors/depositors of M/s. Maharashtra Apex Corporation Ltd. which resulted in cascading effect, whereby there was a mass withdrawal of deposits and debentures as well as a demand for premature repayment. All these circumstances affected the financial position of the Company. The Company was compelled to propose a scheme of arrangement for settlement of dues.

3. The appellant-Company proposed a scheme of arrangement before this Court pursuant to Company Application No. 712/2002. Proceedings were held and thereafter the appellant filed a Company Petition No. 193/2002 seeking sanction of the scheme of arrangement so as to be binding on all the shareholders, debenture holders and depositors of the appellant. Petition was admitted and notice was issued. Paper publication was taken. Petition is pending now in this Court.

4. The respondents in the meanwhile, claiming to be deposits sought for repayment of the deposit before the Company Law Board. The Company Law Board after hearing has chosen to pass an order on 16.6.2003. This order is challenged in these petitions.

5. Most of the respondents are served and some of them are not represented. Learned Counsel Sri. Nandish Patel says that the order of the Company Law Board requires our interference in the light of pending proceedings in this Court. He refers to us Section 45 of the Companies Act to say that the order of the Company Law Board requires our interference. After hearing, we have carefully perused the material placed on record.

6. From the order of the Tribunal, it is se0en that applications have been filed Under Section 45QA(2) of the Reserve Bank of India Act seeking for refund of the amount. Matter was heard. After hearing, the Company Law Board has chosen to pass an order ordering repayment of the deposit with a time schedule in terms of the impugned order. The Company Law Board however has noticed that in the meanwhile and in the event of the scheme being approved by the High Court the applicant before him would be bound by the scheme so approved and the company is at liberty to make applications accordingly. A similar question arose in Kerala High Court and the Kerala High Court has considered the effect of Section 45QA of the Reserve Bank of India Act. The facts in that case as narrated in the Judgment would show that a depositor made an application seeking for refund Under Section 45QA(2) of the Reserve Bank of India Act. The Company Law Board in the said case ruled that it would not be proper for the Board to pass any order on the application till the disposal of pending application Under Section 391 of the Companies Act. That order of the Company Law Board was challenged in the High Court. The High Court has accepted the order of the Company Law Board. The facts in this case are same/similar. When the appellant has chosen to point out the pending 391 application in this Court, the Company Law Board ought not to have granted any relief and on the other hand, it should have disposed of the same by ordering to await the order Under Section 391 in terms of the Judgment of the Kerala High Court. The finding by way of repayment during the pendency of a procedure Under Section 391, in our view, is neither warranted nor is it in the interest of the members in the light of a better status to an order Under Section 391 of the Act. In these circumstances, in our view, the discretion exercised by the Company Law Board in terms of the impugned order requires our interference.

7. In these circumstances, we accept this appeal. The impugned order is set aside. Liberty is however reserved to the respondents to move the Board, if ultimately the scheme is not approved by the High Court.

8. Ordered accordingly. No costs.




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