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IN THE HIGH COURT AT CALCUTTA
Ordinary Original Civil Jurisdiction
ORIGINAL SIDE
CA NO. 755 OF 2011
C.P. 611 OF 1988
Prasanta Kumar Mitra and; Ors.
VERSUS
India Steam Laundry (P) Ltd. and; Ors.
BEFORE
The Hon'ble Justice
HARISH TANDON
Mr. P.C. Sen, Sr. Adv.,
Mr. Raj Ratna Sen, Adv.,
Mr. Goutam Roy, Adv.,
..... for the petitioner no. 3
Mr. Joydeep Kar, Adv.,
Mr. Sirsanya Bandopadhyay, Adv.,
..... for Indrajit Roy and; Jayati Roy
Mr. Joy Saha, Adv.
Mr. Debdut Mukherjee, Adv.
Mr. Ranjit Kumar Mitra, Adv.
..... for Srila Mitra and; Binota Basu
Mr. S. B. Mookherjee, Sr. Adv.
Mr. D. N. Sharma, Adv.
..... for the respondent no. 3
Mr. S. N. Mukherjee, Sr. Adv.
Mr. D. Basu, Adv.
..... for the respondent no. 4
Heard On : 24.8.2011, 29.8.2011, 30.8.2011 and; 1.9.2011 Judgment On : 15.9.2011
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HARISH TANDON, J : This application is pressed for an interim order of formation of Interim Committee of management under the Chairmanship of the special officer to manage, supervise and conduct the affairs of the company till the board of directors is constituted at an extraordinary general meeting of the respondent no. 1 company.
Admittedly the company petition being C.P No. 611 of 1988 was filed on 24th September 1988 complaining the oppression and mismanagement as envisaged under section 397 and 398 of the Companies Act 1956. On an interim application being C.A 516 of 1988 an order was passed on 29th September 1988 appointing Joint Special Officers to make an inventory of a statutory books and assets of the company and to ascertain the possession and the payment of rents by the shopholders to the said company. The company court further passed an interim order of injunction in terms of prayer (g) and (i) to the judge's summons which is reproduced below :
(g) injunction restraining Srila Mitra, Indrajit Roy, Jayati Roy and Binota Basu from entering the factory premises of the respondent no. 1 company situated at premises no. 80, Jawpur Road, Kolkata - 700 074 or from holding themselves out as Directors of the Company, or intermeddling in the affairs of the company.
(i) an interim committee of management be formed under the chairmanship of the Special Officer appointed by this Hon'ble Court to manage, supervise and 3
conduct the affairs of the company till such time a freshly constitute Board of Directors is appointed at an Extraordinary General Meeting of the respondent no. 1 company to be held under the directions of this Hon'ble Court. After the aforesaid interim order, there was no further progress in the said company petition until 11th November 2005 when another interim application being C.A 707 of 2005 was taken out by the petitioner no. 3 alleging the oppressive conduct of the respondent no. 2 in relation to the company affairs with multiple prayer including a prayer for an order of injunction restraining the defendant no. 2 and 3 and the board of directors of the respondent no. 1 company from letting out and/or creating any encumbrances relating to the moveable and immovable property of the company and also to furnish the list of the persons in occupation of the factory shed and the rate of rent received from them.
At the time of moving the said application, on 6.12.2005 the company court directed that the monthly rents received from the tenants of the company shall be kept in a separate account which can be operated under the supervision of the special officer and further appointed a special officer for such purposes. On 21.12.2005 the special officer was directed to collect the rent from the tenants and to deposit in the account opened in Allahabad Bank, Shyambazar Branch which would not be operated unless allowed by the special officer in 4
writing. The company was further directed to furnish the list of the tenants along with their respective rents as well as the list of the workers and the amount payable to them on account of their remuneration.
Thereafter on diverse dates the company court passed consequential orders relating to the opening and operating the bank account by the special officer, disbursement of the salary and allowances to the permanent workers and payment of bonus to the said workers. The matter was thereafter kept idle and was not proceeded until the death of the respondent no. 2 who expired on 27th April 2011.
On 10th May 2011 another interim application being C.A 485 of 2011 is taken out by the petitioner no. 3 for various reliefs as would appear from the judge's summons taken out on 3rd May 2011. It appears that the said interim application was affirmed on 21.3.2011 i.e. before the death of the respondent no. 2 who died on 27.4.2011.
The said application basically rests upon the allegation that the respondent no. 2, the managing director of the company is making efforts to let out the factory sheds and/or creating an encumbrances in respect of the immovable property held by the company. It is further alleged that the respondent no. 2 was called upon to furnish the name of the directors of the respondent No. 1 Company but the same was not responded to. Subsequently the searches were made with the Registrar of the company, West Bengal wherefrom it appears that 5
one Smt. Srila Mitra has been appointed as additional director of the company w.e.f 5th September 2006 which is evident from Form 32 submitted by the respondent no. 2 on 27.8.2010. It further appears that the former directors of the company namely Subimal Bhattacherjee, Dhiman Chandra Biswas and Debranjan Basu Mullick have all resigned from the board of directors w.e.f. 30th September 2006. It is specifically alleged that the respondent no. 2 have increased the equity shares held by him and there is a gross irregularity in the paid-up and subscribed equity shares of the company. Lastly it is alleged that there is a publication in the newspaper regarding the sale of the property owned by one Taraknath Dey, since deceased claiming themselves to be the absolute owner of the land.
On the basis of the aforesaid allegation and/or submission the following prayers were made :
(a) leave be given to the petitioner to serve a copy of this petition on Smt. Srila Mitra, who is alleged to have been appointed as a Director of the company with effect from September 5, 2006 and Form No. 32, in respect of her purported appointment, was field by the respondent no. 2 on August 27, 2010
(b) order be passed restraining Smt. Srila Mitra from acting or holding herself out as a Director of the respondent no. 1 company and (Form 32) filed with the Registrar of Companies on 27 August 2010, in respect of 6
her alleged appointment as Director of the Respondent no. 1 company, be directed to be cancelled
(c) cancellation of Form no. 20B filed in respect of the financial year ended March 31, 2009, showing that the respondent no. 2 holds 9800 equity shares, constituting 16.44% of the paid up equity share capital of the company
(d) injunction restraining the respondent no. 2 from exercising any rights or deriving any benefits either by way of receipt of dividends, or voting rights in respect of the purported issue and allotment of 9000 shares of Rs. 10/- in his favour, as shown in Form NO. 20B filed in respect of the respondent n o. 1 company for the financial year ended on March 31, 2009, or from transferring or creating any third party rights in respect of the same
(e) a fit and proper person be appointed as Special Officer with a direction to take immediate possession of the assets and properties of the respondent no. 1 including the factory of the respondent no. 1 situated at 80, Jawpur Road, Kolkataa - 700 074 and to file a report in respect thereof
(f) an interim committee of management be formed, under the chairmanship of a special officer, to be appointed by this court, to manage, supervise and conduct the business and affairs of the company, till such time a freshly constituted Board of Directors is appointed at an Extraordinary General Meeting of the respondent no. 1 7
company to be held under the auspices and supervision of the special officer to be appointed by this Hon'ble Court
(g) order of injunction restraining the respondent no. 2 and Mrs. Srila Mitra from letting out, encumbering, dealing with and/or disposing of by sale, lease or by any other means whatsoever the movable and immovable properties of the respondent no. 1 company situated at 80, Jawpur Road, Kolkata- 700074 or from entering into negotiations with any person or persons for the sale of the company's movable and immovable properties situate at 80 Jawpur Road, Kolkata - 700 074 or from negotiating with any person in respect of the transfer of shares held by the persons as set out from paragraph 4 of CA no. 707 of 2005 (h) direction upon IIBI being the respondent no. 9 not to hand over the share certificates in respect of the 50,162 equity shares of the respondent n. 1 company currently lying in their possession and which were pledged to them, in terms of the loan agreement, entered into between the respondent no. 1 and IIBI in the year 1972 (i) order be passed directing the respondent no. 2 to hand over the original share scripts, lying in the locker at the factory premises of the company at 80, Jawpur Road, Kolkata - 700 074 to the shareholders, whose names re appearing in paragraph 4(c) of C.A NO. 707 of 2005 (j) ad interim order in terms of prayers above
(k) such further order or orders be made and direction or directions be given, as in the circumstances this Hon'ble Court deems fit and proper 8
Before the said interim application being C.A 485 of 2011 could be moved the managing director, the respondent no. 2 died on 27.4.2011. After his death the petitioner no. 3 filed another interim application being C.A 493 of 2011 alleging that the said Srila Mitra along with Sudipta Mitra, Indrajit Roy, Jayati Roy and Binota Basu claimed themselves to be the newly appointed directors of the company and invited the workers of the company and made a lucrative offer to them to act in their support. It is further alleged that such appointments are all illegal.
The aforesaid two interim applications namely C.A 485 of 2011 and C.A 493 of 2011 were moved on 19th May 2011 where the company court directed the impleadment of Srila Mitra, Indrajit Roy, and Jayati Roy as party respondent to the company petition. Although prayer (d) and (f) of the interim application being C.A 493 of 2011 was pressed by the petitioner no. 3 but the company court passed an order in the form of status quo as on that date to be maintained in respect of the directorship as well as the shareholding of the respondent no. 1 until further orders. The prayer (d) and (f) to the interim application being C.A 493 of 2011 reads thus :
(d) Injunction restraining Indrajit Roy, his wife Jayati Roy, both residing at 50 Gorakshabasi Road, P.S Dum dum, Kolkata - 700028 Sudipto Mitra of p-247 CIT Road, Kolkata - 700054, and Binota Basu residing at Patipukur Housing Estate, Block c, Flat no. 7, 69/1, S.K. Deb Road, Kolkata - 9
700045 from dealing with, encumbering or disposing of by sale, lease or by any other means whatsoever the movable and immovable properties of the respondent no. 1 company including the land situated at 80 Jawpore Road, Kolkata - 700074 or from entering into any negotiations with any person or persons in respect of the company's movable and immovable assets situated at the registered office of the company at 80 Jawpore Road, Kolkata - 700074 or from negotiating with any other person in respect of the shares held by the shareholders of the company whose names are set out in the Schedule annexed hereto being marked "C" (f) Injunction restraining Srila Mitra and her son Sudipto Mitra both of p- 247, CIT Road, Kolkata - 700054, and Ms. Binota Basu from exercising any rights or deriving any benefits as shareholders of the company or from transferring or allotting any shares of the respondent no. 1 company either to Indrajit Roy or his wife Jayati Roy of 50, Gorakshabasi Road, P.S Dum Dum, Kolkata 700028 or to any other person whosoever. By subsequent order dated 22nd July 2011 the company court directed the impleadment of Mr. Sudipta Mitra and Smt. Binota Basu, the alleged additional directors as party respondent to the company petition. In the present application, the petitioner no. 3 alleged that after the order dated 19th May 2011 the security guard who was posted at the factory and the registered office of the company has been removed forcefully by the said Indrajit 10
Roy and another security guard appointed by the said Indrajit Roy has been deployed at the factory premises. It is further contended that the valuable papers and documents of the company has been removed by the said Indrajit Roy and Jayati Roy which is duly informed to the officer-in-charge of the Dum Dum Police Station. It is further contended that in an affidavit affirmed by Srila Mitra on 27th July 2011 it is stated that the said Indrajit Roy and Jayati Roy have acquired 29680 equity shares of the respondent no. 1 company which constitutes 49.79% of the paid-up share capital of the company.
The sum and substance of the allegation which runs into several pages in the instant petition is the acquisition of the seizable quantity of equity shares by the said Indrajit Roy and Jayati Roy from a undisclosed source and taking over the management of the respondent no. 1 company and also deployment of their own security guards after forcefully removal of the security guard already placed therein.
Mr. P.C. Sen, learned Advocate appearing for the petitioner no. 3, the applicant herein submits that the alleged appointments of Srila Mitra and others as additional directors are illegal and contrary to the clauses of the Article of Association. He vehemently argues that the company court in appropriate cases can pass an order to supercede the board of directors if it is found by the court to be just and expedient and placed reliance upon a judgement of this court in case of Pradip Kumar Sarkar and; Ors. Vs. Luxmi Tea Com. Ltd. and; Ors. reported in 67 11
Company Cases 491, Amal Kumar Mukherjee and; Anr. Vs. Clarian Advertising Service Ltd. and; Ors. reported in 52 Company Cases 315 and in case of Richardson Cruddas Ltd. LICI Vs. Haridas Mundhra and; Ors. reported in AIR 1959 Cal 695. He further submits that the alleged acquisition of the share cannot be done unless the same is accompanied by a valid transfer deed and the share script as envisaged under section 108 of the Companies Act which is mandatory and placed reliance upon a judgment of the supreme Court in case of Mannalal Khetan Vs. Kedarnath Khetan and; Ors. reported in AIR 1977 SC 536. Mr. S. B. Mookherjee, learned Senior Counsel appearing for the respondent no. 3 submits that the court in exercise of power under section 402 of the Companies Act while considering an application under section 397 and 398 of the said Act, has unlimited power for the purpose of corporate existence of the company including the power to supplant the entire corporate management and relies upon a Division Bench judgment of this court in case of Debi Jhora Tea Co. Ltd. Vs. Barendra Krishna Bhowmick and; Ors. reported in 50 Company Cases 771. By placing the Article of Association he submits that clause 10 puts a fetter regarding the transfer of shares without the previous sanction of the directors and as such in absence of any previous sanction the holding of alleged shares by the purported directors are illegal.
Mr. S. N. Mukherjee, learned Senior Counsel appearing for the respondent no. 4 submits that the alleged appointment of Srila Mitra as additional director is illegal inasmuch as clause 17 of the Article of Association provides the 12
qualification for being appointed as director to be that the said person must hold at least 200 ordinary or preference shares within two months after the appointment. He submits that the said Srila Mitra does not and cannot acquire the requisite share as it is claimed by her that she acquired the share from her husband after his death who was surviving as on 5th September 2006 i.e. the alleged date of appointment. He succinctly argues that if there is a restriction in relation to the transfer of shares without previous sanction of the directors such transfer is not valid in the eye of law as held by the Supreme Court in case of John Tinson and Co. Pvt. Ltd. and; Ors. Vs. Mrs. Surjeet Malhan and; Anr. reported in 88 Company Cases 750.
Mr. Joy Saha, learned Advocate appearing for Srila Mitra raised a preliminary objection that this court has no jurisdiction to entertain a company petition under section 397 and 398 of the Companies Act. According to him, the jurisdiction has been vested upon the Company Law Board and not upon the court. He strenuously argues that the cause of action which arose in the year 1988 is no longer subsisting and cannot be substituted by new cause of action which has been pleaded in the instant interim application. He submits that his client has categorically asserted in affidavit in opposition filed in C.A 485 of 2011 that the Director's Identification Number (hereinafter referred to as DIN) was inserted subsequently and not at the time of issuance of the letter dated 5.9.2006. by placing reliance upon a judgment of the apex court in case of Sree Jain Swetambar Terapanthi Vid (S) Vs. Phundan Singh and; Ors. reported in 13
(1999) 2 SCC 377, he contends that the temporary injunction cannot be granted beyond the scope of the original proceeding. He further contends that if the relief sought in an inter locutory application is based on a fresh set of facts and independent to the original cause of action, the same cannot be granted and placed reliance upon a Single Bench judgment of this court in case of Andrew Yule and; Co. Ltd. Vs. Descon Ltd. and; Anr. reported in 2007(3) CHN 287. Mr. Saha succinctly argues that by the death of the petitioner no. 1 and 2, the petitioner no. 3 cannot maintain the petition in absence of holding the requisite shares as provided under section 399 of the said Act. Mr. Joydeep Kar, learned Advocate appearing for Jayati Roy and Indrajit Roy submits that the special officer is already appointed by this court to collect the rent from the tenants of the company and to disburse the salaries and other admissible allowances to the permanent workers of the company. He further submits that there is already an order of status quo in respect of the directorship as well as shareholding of the respondent no. 1 passed by this court on 19th May 2011 in the earlier two interim applications. He further contended that the order which is now sought in the instant application shall in effect nullify the order of status quo passed in this proceeding. Lastly he contends that there is no business activities of the respondent no. 1 company excepting the collection of rents from the different tenants which is well-protected by the interim order passed in this proceeding on an earlier interim application. 14
In reply, Mr. Sen, learned Senior Counsel submits that the company petition under section 397 and 398 of the Companies Act cannot be thrown for want of share qualification by subsequent event if the same is found to be validly presented at its inception and relies upon a judgment of the apex court in case of Rajahumundry Electric supply Corporation Ltd. Vs. Nageshwara Rao and; Ors. reported in AIR 1956 SC 213 and a Single Bench judgment of Madras High Court in case of L. RM. K. Naryanan and; Anr. Vs. Pudhuthotam Estates Ltd. and; Ors. reported in 74 Company Cases 30. He further contends that at the time when the company petition was initiated the power was vested upon the high court to entertain the same which has not been taken away by the Companies (Amendment) Act 1988 w.e.f. 31.5.1991 by section 68 of the said Amendment Act.
It is undisputed that there is no business activities in the said company. Admittedly vast properties belonging to the company have been let out to the various tenants and the only income the company could derive is the rental income from the different tenants and the occupants. There is already a special officer appointed by this court in this proceeding for collection of rent from the various tenants. Even in an earlier application the allegation as to the dealing of the property of the company by the said Indrajit Roy and his wife Jayati Roy is incorporated and precisely for such allegation prayer (d) to the interim application being C.A 493 of 2011 was made. The petitioner pressed the said order before the company court while moving the said interim application being 15
C.A 493 of 2011 but the company court passed an order of status quo as on 19th May 2011 to be maintained in respect of the directorship as well as the shareholding of the respondent no. 1 until further orders. It is tried to be contended by the petitioner no. 3 that the security guards employed by the company have been removed forcefully by the said Indrajit Roy and Jayati Roy and deployed their own security guards. It is further tried to be contended that the acquisition of alleged equity shares by the said Indrajit Roy and Jayati Roy are false as they have not disclosed the source of such acquisition.
However much stress has been made by the petitioner no. 3 that the conduct of the alleged persons invites the intervention of the court to pass interim order by superceding the board of directors. The power under section 402 of the Companies Act are enormous and wide. The court can make such suitable order to regulate the conduct of the company's affair on such terms as would, in opinion of the court, be just and equitable. This court in case of Richardson Cruddas Ltd. LICI (supra) and Pradip Kumar Sarkar (supra) lend the support to the proposition in respect of the power of the company court to pass interim order. In case of Pradip Kumar Sarkar (supra) the persons in management were increasing their strength day-by-day by execution of several invalid and/or void transfers and the company was found to have a business activities. The another Single Bench of this court in case of Amal Kumar Mukherjee and; Anr. (supra) 16
reiterated the same principle that the company court has power to pass interim order appointing special officer to supervise and control the business and management of the company to facilitate the smooth running of the company. Even from Article of Association there is a fetter of acquisition of share without previous sanction by the board of directors. The company court in appropriate cases specially for the purpose of corporate existence has a power to supplant the entire corporate management.
Had there been a case that the company is engaged in a business activities such consideration would have valued much but in the instant case admittedly the company has no business activities. The rental income from the tenants are being collected by the special officer and there is already an order in the form of status quo so far as the directorship as well as the transfer of shares are concerned. The allegation as to acquisition of seizable quantity of shares from an undisclosed source at the interim stage cannot be a ground to supplant the corporate management by superseding the present one unless the affidavits are invited to answer such allegation it would not be just and proper to pass any interim order in the form of supersession of the board of directors by appointing a special officer or a receiver.
I find that the interim order for supersession of the board of directors cannot be passed without inviting the affidavits by the respective parties. 17
The interim order is refused at this stage.
Let the affidavit in opposition be filed by the respondents within one week after the reopening of the court after long vacation. Reply, if there be any, within two weeks thereafter.
Put up this matter after three weeks of the reopening of this court after long vacation along with CA 493 of 2011 and CA 485 of 2011. Urgent photostat certified copy of this judgment, if applied for, be supplied to the parties subject to compliance of all requisite formalities. (Harish Tandon, J)