Prasanta Kumar Mitra and ors. Vs. India Steam Laundry (P) Ltd. and ors. - Court Judgment

IN THE HIGH COURT AT CALCUTTA Ordinary Original Civil Jurisdiction ORIGINAL SIDE CA No.755 OF2011CP No.611 OF1988CA No.485 OF2011CA No.493 OF2011Prasanta Kumar Mitra & ORS.VERSUS India Steam Laundry (P) LTD.& 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 & Jayati Roy Mr.Joy Saha, Adv.Mr.Debdut Mukherjee, Adv.Mr.Ranjit Kumar Mitra, Adv.….for Srila Mitra & 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.Judgment On HARISH : 06.02.2014 TANDON, J : All these three applications are interconnected and, therefore, have been taken up for hearing together to avoid the prolixity of repetition.

These applications are taken out in a Company Petition No.611 of 1988 filed under Sections 397 and 398 of the Companies Act, 1956 alleging the oppression and mismanagement by the then majority shareholdeRs.The facts leading to the present litigations are enumerated herein below: One Benoy Krishna Mitra, since deceased, was a resident of Muzaffarpur in the State of Bihar and migrated to Calcutta in the year 1946 after disposing of his various landed properties and other assets which he possessed at the previous place of his abode.

The said Benoy Krishna Mitra as Managing Director incorporated the respondent no.1 Company i.e.India Steam Laundry PVT.Ltd on December 3, 1948.

The said Company was primarily a Family Company as the shares were held by the members of the family and their relatives.

The said deceased was managing the said Company along with his three sons namely Prasanta Kumar Mitra, Tarun Kumar Mitra and Prabhat Kumar Mitra who were assisting the said Managing Director in managing and running the said Company.

Till his death i.e January 31, 1974, the said Benoy Krishna Mitra was holding the post of a Chairman and Managing Director of the said Company.

Upon the death of the Benoy Krishna Mitra, his eldest son Tarun Kumar Mitra was appointed as a Managing Director and continued as such till his death i.e.April 27, 2011.

In the year 1973, it was decided to take a financial assistance to augment the income of the Company to pledge the certain quantity of shares to RIBI now renamed as IIBI, the respondent no.9 herein, with clear stipulation that the said financial Company shall have a representation in a Board of DirectORS.It further appears that 7,100 fully paid up equity shares of the face value of Rs.10/- of the Company was pledged with the IIBI for securing the said financial assistance.

Since, the respondent no.2 and 3 who were in the helm of the affairs of the company were indulged in various acts of mismanagement and oppression, a Company Petition being C.P.No.611 of 1988 was filed under Sections 397 and 398 of the Companies Act for seeking a various reliefs as contemplated therein.

In an interlocutory application filed therein, an order was passed on September 29, 1988 appointing two practicing advocates if this Court as Special Officers for making inventory of all the statutory books of accounts and assets lying at the registered and Branch Office of the said Company.

The matter was kept pending till the year 2005, when another interlocutory application being C.A.707 of 2005 was taken out by the petitioneRs.interalia, praying for an order of injunction restraining the respondent Nos.2 and 3 from alienating, mortgaging, letting out or otherwise transferring the assets of the Company and also from participating with the management and affairs of the company and/or dissipating the funds and assets thereof.

On November 23, 2005, an order was passed in the said application in terms of prayer (k) to the judges summon which reads thus: “(k) An order of injunction be passed restraining the respondent no.2 & 3 and the Board of Directors of the respondent company from letting out or creating any encumbrances relating to the movable and immovable properties of the company situated at 80, Jawpur Road, Kolkata 700 074 with a direction on the respondent No.2 to furnish a list of persons to whom the factory sheds have been let out and the rent received therefrom and also a list of the shop-rooms of the respondent company which have been surrendered by the respondent No.2.” By subsequent order dated December 6, 2005, the rents received from the tenants of the respondent company was directed to be kept in separate account which would be operated by the Special Officer appointed therein.

Thereafter, several consequential orders were passed relating to the opening and operation of bank account and its disbursement thereof towards the statutory liabilities.

In the month of May 2008, the petitioner No.1 died.

Subsequently, an application was taken out by the petitioner no.3 being C.A.485 of 2011 alleging that the respondent no.2 had been making an efforts to let out the factory and was contemplating to give an inspection of the factory premises to an outsider.

It is further alleged that upon an inquiry being made with the Registrar of Companies, West Bengal, it appears that one Smt.

Srila Mitra, widow of Prasanta Kumar Mitra, the petitioner no.1 had been appointed as an Additional Director of the respondent no.1 Company with effect from September 5, 2006 and Form No.32 was filed with the said register on August 27, 2010.

It is further alleged that the said purported appointment had been shown to be made by the respondent no.2 as Managing Director on the basis of an authorization by the Board of Directors taken on August 27, 2010.

It is further evident from the said Form 32 that the Former Directors of the Company namely Subimal Bhattacharyya, Dhiman Chandra Biswas & Debranjuan Basu Mallick resigned from the Board of Directors with effect from September 30, 2006.

A leave was also sought therein to serve the copy of the said petition upon the said Srila Mitra.

Before the said application being C.A.No.485 of 2011 could be moved another application being C.A.No.493 of 2011 was filed by the petitioner no.3 seeking an order of injunction against Indrajit Roy, Jayati Roy and Sudipto Mitra from holding out themselves as the Director of the respondent no.1 company and also from dealing with, encumbering and disposing of the movable and immovable assets of the respondent no.1 company as they claim to have been newly appointed as Directors of the said Company.

On May 19, 2011, the Hon’ble Single Bench directed the impleadment of the said Indrajit Roy and Jayati Roy and also Smt.

Srila Mitra as Additional Respondent in the aforesaid two applications.

Since the order dated May 19, 2011 does not reflect the impleadment of Sudipto Mitra and Binota Basu as Additional Respondent, they were impleaded by a subsequent order dated July 22, 2011.

On May 19, 2011, the Court recorded the submission of Mr.Joydeep Kar, learned Advocate appearing for the Indrajit Roy and Jayati Roy, that no steps are being taken to create a third party interest.

The Court did not pass any interim order on the basis of such submission.

However, an order of status quo as on that date was directed to be maintained in respect of a directorship as well as the shares of the respondent company until further orders of the Court.

It was further recorded therein that the Company is not engaged in any business at present for which it was incorporated.

A further application being C.A.755 of 2011 is filed on August 4, 2011 for recording the death of the petitioner no.2 and deletion of her name from the cause title of the petition and an order of injunction restraining the respondent nos.2 and 3 and the Board of Directors of the respondent company from letting out and/or creating and/or encumbering the movable and immovable assets of the Company.

It is alleged in the said application that on May 16, 2011, the said Indrajit Roy aided and abetted by other persons removed the sign board and have ousted the security guard of the Company and posted their own security guard.

It is further alleged that the books and relevant in documents of the company has been removed by ransacking the office room of the Company.

All these three applications have been assigned to this bench and the parties have exchanged their affidavits.

The respondent no.4, Prabhat Kumar Mitra, supported the contention made in an application being C.A.485 of 2011 in his affidavit affirmed on June 25, 2011.

The salient features of his contentions in the said affidavit are that no annual general meeting of the Company was ever held as alleged by the respondent no.2.

It is further contended that the purported appointment of Mr.Indrajit Roy and Jayati Roy as Directors of the Company on April 27, 2011 could not be made as the said Tarun Kumar Mitra expired on the same day.

It would further be evident that there was an election in the State of West Bengal on April 27, 2011 and, therefore, the alleged appointment is bad and illegal.

It is recorded therein that Smt.

Srila Mitra sold her share of her husband which she inherited on his death in pursuance of the terms of settlement dated September 12, 1995 for valuable consideration which would be corroborated by letter dated August 16, 2007 issued by the said Srila Mitra to the respondent no.2.

Srila Mitra in her affidavit said that she was appointed as a Director of the Company which was ratified and confirmed in the resolution adopted in the general meeting held on September 30, 2006.

It is further said that the annual general meeting was held on diveRs.dates between the year 2006 and September 6, 2010, taking several decisions and those cannot be said to be an illegal.

However, an objection was taken therein that the petitioner no.3 is not competent to take out the said application after the death of the petitioner nos.1 and 2.

The affidavit affirmed by the respondent no.3 shows that he held 200 shares of the respondent no.1 company and by a Board meeting held on November 1, 1983 it was resolved that he would be inducted as a Director of the Company.

It is further alleged that the said respondent was prevented from entering the factory premises and for such illegal act, a proceeding under Section 144 (2) of the Code of Criminal Procedure being M.P.Case No.1544 of 2011 is filed in the Court of the learned Executive Magistrate, Barracpore, 24 Parganas North).He, however, claims that 1980 sq.ft.

of land with permanent structure standing thereon was let out to him as proprietor of M/s S Textile at a monthly rent of Rs.1386/- on the basis of an agreement dated April 24, 1984.

In substance he also supported the contention made in the said application filed by the petitioner no.3.

Mr.Sudipto Sarkar, the learned Advocate appearing for the petitioner in all the three applications vehemently submits that the declaration dated September 5, 2006 which reflects the Directors Identification Number (DIN) allotted to the Director is a fabricated document, in as much as, the DIN was allotted on August 17, 2010.

He strenuously submits the appointments of the Directors as on April 27, 2011 is afterthought for two simple reasons firstly on the same day, the Managing Director namely Tarun Kumar Das, the respondent no.2 died and secondly, the election was held on the said date in the State of West Bengal which means there was a holiday.

He further submits that no general meeting could be held on a public holiday which could otherwise be not held unless at least 21 days prior notice is given.

He vehemently submits that the original share scripts were pledged with the IIBI and, therefore, duplicate shares could not be issued.

The Sub-division of shares could not be made without a valid board resolution which alleged to have been done in the year 2006.

He placed the memorandum and articles of association of the Company to contend that the transfer of shares without the previous sanction of the Board of Directors in absence of assigning any reason is not permissible in terms of Clause 10 thereof.

Therefore, he contends that because of the specific embargo relating to the transfer, the alleged transfer is not valid and, therefore, no right could be accrued in favour of the alleged impleaded respondents.

It is further contended that since the incorporation of the Company, the respondent no.1 herein, all the shares were held by the family members and their friends and relatives and there were no outsiders and the embargo created under Article of Association is clearly attracted and, therefore, the transfer made to an outsider is invalid and placed reliance upon a judgment of the Supreme Court in case of John Tinson & Co.LTD.& ORS.–versus MRS.Surjeet Malhan & Anr., reported in (1997) 88 Company Cases 750 and of the Principal Bench, Company Law Board in case of V.

Ramesh Kumar & ORS.–versus S.

Jayakrishnan & Ors., reported in (2008) 141 Company Cases 915.

Mr.Sarkar strenuously submits that 50,162 shares of the respondent no.1 Company were deposited with IIBI as security for advancement of the loan to the Company which is still retained by the said IIBI and, therefore, the issuance of the duplicate shares is opposed to Rule 4 (3) of the Companies (issue of shares certificates) Rules 1960 and placed reliance upon a judgment of the Madras High Court in case of Shoe Specialities LTD.–versus Tracstar Investment reported in (1997) 88 Company Cases 471 and in case of Stridewell Leather –versus Shoe Specialties reported in (2001) 33 SCL797 According to Mr.Sarkar, the duplicate shares, certificates can only be issued if those are lost and destroyed and with the prior consent of the Board and not otherwise.

According to him, when it is an admitted position that the shares are not destroyed and/or lost but in the custody of the IIBI, the purported issuance of the duplicate certificate is invalid.

He further contends that the duplicate certificate, even if, is required to be issued if the conditions laid down in Rule 4 (3) of the aforesaid rules are complied with, the same should be issued in the name of the original recorded share holder and not in the name of a person whose name is not recorded in the register of the share holders maintained by the Company and placed reliance upon a judgment rendered in case of Tracstar Investments Limited & another –versus Gordon Woodroffe Limited & OtheRs.reported in 87 Company Cases 941.

Mr.Sarkar audaciously submits that Smt.

Srila Mitra allegedly claim to have been appointed with effect from September 5, 2006 and Form 32 pertaining to such appointment was filed on 27.8.2010, along with the declaration which contains a Directors Identification Number (DIN) which admittedly was allotted on August 17, 2010.

The purported declaration filed on September 5, 2006, therefore, could not contain the DIN at the footnote.

He, therefore, submits that the aforesaid documents would suggest that the Srila Mitra was not appointed as a director as on September 5, 2006 so claimed by her.

Mr.Sarkar further submits that the annual returns of the Company ending March 31, 2006 filed on August 31, 2010 showed the annual general meeting alleged to have been held on September 30, 2006 bearing the DIN of the said Srila Mitra.

He further placed the annual returns of the Company from 2006 to 2009 to contend that the Srila Mitra does not possess the requisite shares required under Article 17 of the Article of Association of the Company.

According to him, to constitute a valid Board, there must be at least two directors and the invalid appointment of Srila Mitra upon consequent resignation by the other directors excepting the said Tarun Kumar Mitra, the respondent No.2 herein, there was only one director and, therefore, all acts done subsequently are invalid.

He further submitted that on the information received from the web site of the Ministry of Corporate AffaiRs.it would appear that one Binota Basu was appointed as an Additional Director of the Company with effect from 12 April, 2012 and after the death of the Managing Director, the respondent no.2, the said Binota Basu and Srila Mitra allegedly appointed one Jayati Roy and Indrajit Roy as directors on the basis of the resolution of the Board of Company held on 27th April, 2011, the day on which the said Tarun Kumar Mitra died.

The said day was also a public holiday because of the ensuing election and, therefore, those are invalid and the alleged directors cannot claim in such capacity as validly appointed directORS.According to Mr.Sarkar, Sections 397 and 398 of the Companies Act, 1956 provides a remedy against the oppression and mismanagement of the Company and is maintainable at the instance of an individual member who acts in a representative capacity.

The death of any of the person does not abate the proceedings as any party to the proceeding can be allowed to continue with the said proceedings upon transposition to the category of the petitioner and placed reliance upon a judgment of the Calcutta High Court in case of Ajit Kumar Agarwal –versus Nischintapur Tea Co.Ltd., reported in (2011) 168 Company Cases 388; a judgment of the Patna High Court in case of Rai Mathura Prasad –versus Hanuman Prasad Bhagat & Ors., reported in 56 Company Cases 467 and a judgment rendered by Madras High Court in case of S.

Narayanan & ORS.–versus Century Flour Mills LTD.& Ors., reported in (1985) (3) Company Law Journal 209.

In support of the contention that the proceedings under Sections 397 and 398 of the Act are not akin to the suit as the interest of the Company is paramount and gives bestowed jurisdiction upon the Court to dispose of the same in the larger interest of the Company, reliance is placed upon a judgment of the Madras High Court in case of Syed Mohamed Ali –versus R Sundaramoorthy reported in AIR1958Madras 587 which is followed in case of J.L.Dutt & Anr –versus Hooghly Ink Co.reported in 1982 (1) CLJ422 It is further submitted that even after the promulgation of the Companies ( Amendment Act ).1988 which came into effect on 31st May, 1991, Section 68 thereof permits the continuance of the pending proceedings before the High Court.

A further reliance is placed upon a judgment rendered in case of A.P.Jain –versus Faridabad Metal Udyog PVT.LTD.& Ors., reported in (1999) 95 Company Cases 76 to contend that if at the time of the presentation, the petition is valid, it does not cease to be maintainable by reason of the subsequent events.

Mr.Sarkar placed reliance upon a judgment of the Apex Court in case of Rajahmundry Electric Supply Corporation –versus A.

Nageshwara Rao & Ors., reported in AIR1956SC213and a judgment of the Madras High Court in case of L.RM.K Narayanan & Anr.

–vsPudhuthotam Estates LTD.& Ors., reported in (1992) 74 Company Cases 30.

Lastly it is submitted that the subsequent act of oppression and mismanagement at the instance of the members who are in control of the said Company, can be taken note of and be allowed to be taken in a proceedings as a recurring one and placed reliance upon a judgment of the Madras High Court in case of S.

Narayanan & ORS.–versus Century Flour Mills LTD.& Ors., reported in (1987) 1 CLJ25 a judgment of the Calcutta High Court in case of Promode Kumar Mittal & ORS.–versus Southern Steel & Ors., reported in 50 Company Cases 555, J.L.Dutt & Anr.

–vsHooghly Ink Co.reported in 1982 (1) CLJ422and a judgment of the Apex Court in case of Jaiprakash Gupta –versus Riyaz Ahmed & Anr., reported in (2009) 10 SCC197 Mr.S.B.Mookherjee, the learned Senior Counsel appearing for the respondent no.3, supporting the petitioner, principally agreed to the submissions made by the petitioner and additionally submits that share transfer can only be made if the conditions engrafted under Section 108 of the Companies Act is followed.

He submits that the original certificates are lying with the IIBI and what is sought to be transferred is the duplicate shares allegedly issued in favour of the persons other than the recorded holders without properly executed instruments and, therefore, are illegal and invalid.

In support of the aforesaid contentions, he placed reliance upon the judgment of the Supreme Court in case of Mannalal Khetan –versus Kedar Nath Khetan reported in AIR1997SC536 Claude Lila Parulekar(Smt.) –versus Sakal Papers PVT.Ltd., reported in (2005) 11 SCC73and a judgment of this Court in case of Pradip Kumar Sarkar –versus Luxmi Tea Co.LTD.reported in (1990) 67 Company Cases 491.

He thus contends that the said Indrajit Roy who claim to have purchased the shares from Binota Basu, who in turn, allegedly received the same from Tarun Kumar Mitra on the strength of the joint affidavits, is not a valid transfer.

Mr.S.N.

Mukherjee, the learned Senior Advocate appearing for the respondent No.1 also supports the case of the petitioner and submits if the Article of Association bears an embargo relating to the transferror of shares, any Act done on the teeth thereof is invalid and illegal.

He further submits that the Companies (issue of share certificates) Rules 1960 framed by the Central Government providing the mechanism for issuance of the share certificates as well as the duplicate certificates clearly provides the methods for issuance of the duplicate certificates under Rule 4 (3) of the said Rules despite anything to the contrary contained in the Article of Association of the Company.

Thus, according to him, the duplicate shares have been issued in clear contravention to the aforesaid provisions contained in the said rules, the same are invalid and illegal and placed reliance upon a judgment in case of John Tinson & Co.PVT.LTD.& ORS.–versus MRS.Surjeet Malhan & Anr., reported in (1997) 88 Company Cases 750.

Mr.Joy Saha, the learned Advocate appearing for the Company vehemently submits that since the incorporation of the Company, there were outside directors and, therefore, cannot be contended that the Company was a closely held family Company.

He placed various paragraphs of the Company Petition No.611 of the 1988, in support of his contention that the alleged cause of action has eroded by passage of time and unless there is an amendment made therein, the new set of facts having brought by way of an interlocutory application should not be taken note of.

According to him, the interim relief as sought in the aforesaid applications can only be granted in aid of the final relief and if the final relief is no longer surviving, these applications are liable to be dismissed and in support thereof placed reliance upon a judgment of the Apex Court in case of Sree Jain Swetambar Terapanthi Vid (s) –v- Phundan Singh & Ors., reported in (1999) 2 SCC377and a judgment of this Court in case of Andrew Yule & Co.LTD.–versus DesCo.LTD.& Anr.

reported in 2007 (3) CHN287 In support of his contention that the Court can take into consideration the subsequent events provided; it has a nexus to the original cause of action and where the parties intend to rely upon a distinct and separate cause of action unconnected with the original one, the same cannot be considered because of the Companies (Amendment) Act, 1981 and placed reliance upon a judgment of the Supreme Court in case of Dabur India Ltd., -versus K.R.Industries reported in (2008) 10 SCC595and in case of DDA & Ors., -vsJoginder S.

Monga & Ors., reported in (2004) 2 SCC297and a judgment of this Court in case of Raj Kumar Dutta –versus Bimal Kumar Dhar reported in 2008 (2) CHN746and in case of C.P.Gnanasambandam –versus Tamilnand Transports (Combatore) PVT.Ltd., & ORS.reported in 41 Comp.

Cases 26.

He further submits that the transfer of shares by the Managing Director, the respondent No.2 and the Prasanta Kumar Mitra are within the realm of a private disputes and in absence of any challenge being thrown either by the said share holders or their heiRs.a third party cannot questioned such transfer and placed reliance upon a judgment of the Apex Court in case of Sangramsinh P.

Gaekwad & others –versus Shantadevi P.

Gaekwad & ORS.reported in (2005) 11 SCC314and in case of Chatterjee Petrochem (India) PVT.LTD.– versus Haldia Petrochemicals LTD.& ORS.reported in (2011) 10 SCC466 According to him, Section 108 (1) of the Companies Act permits the registration of any transfer if the Board of Directors is satisfied that the shares in question have been lost.

Since the IIBI, even after, receiving the full payment did not hand over the original share scripts, the same was deemed to have been lost and, therefore, the issuance of duplicate certificate and registration of the subsequent transfers cannot be termed to be invalid and/or illegal.

Section 109 of the said Act contains the provision relating to the transfer of shares of a deceased member by his legal representatives or heirs which does not require the compliance of Section 108 of the said Act.

He further submits that mere procedural lapses does not invalidate the entire act as the same shall be deemed to have been condoned by placing reliance upon a judgment rendered in case of Reliance Industries LTD.& Others reported in 89 Company Cases 67 and in case of A.K.M.N.Cylinders Private LTD.& another reported in 95 Company Cases 555.

He strenuously submits that on the basis of the terms of settlement dated 12 September, 1995, the petitioner agreed to divest their shares in favour of the Managing Director and, therefore, cannot contend contrary thereto.

Lastly, he submits that there has been a gross delay in taking out an application relating to the appointment of Srila Mitra as Additional Director and, therefore, does not admit any interim relief to be granted on the basis of such belated applications.

Mr.Joydeep Kar, the learned Advocate appearing for the added respondent Nos.13, 14 & 15 submits that the transmission of shares on the heirs upon the death of the share holder cannot be challenged by a third party who have no right of intestacy.

He further submits that the transfer of shares being private in nature cannot be questioned in a proceeding under Sections 397 and 398 of the said Act and placed reliance upon a judgment of the Supreme Court in case of Chatterjee Petrochem India PVT.LTD.– v- Haldia Petrochemicals Limited & OtheRs.reported in (2011) 10 SCC466 According to him, the share allegedly held by the heirs and the said Benoy Krishna Mitra, are not in dispute and the same having been transferred in favour of his clients cannot be questioned in the present proceedings.

The restrictions imposed under Article of Association does not put an absolute bar in transferring the shares when in fact, there was an outside directors and share holders than the members of the family.

He further submits that it is an admitted position that the Company is no longer involved in any business activities and the only source of income is, by realization of the rent from the tenants, inducted by the Company.

By way of an interim order passed by this Court, the interest of the share holders and/or members are sufficiently protected as the Special Officer appointed by this Court is realizing the rent.

The Company Petition, though become infractuous, is still recorded in the docket of this Court and there is no final recording relating to the disposal thereof have been passed.

Thus, he contends that by way of an interlocutory application, the petitioner cannot achieve the goal what he could not get in a main proceeding.

He concurs and adopts the submission of Mr.Saha that the alleged set of facts which are sought to be brought under the subsequent events are, in fact, a fresh cause of action and because of the interdiction of the amendments brought by Company (Amendments) Act, 1988, the proper forum is the Company Law Board.

Having considered the respective submissions, it is no doubt true that at the time of initiating the proceeding alleging oppression and mismanagement, the petitioners have the requisite qualification enshrined under Section 397 & 398 of the Companies Act.

Various applications are taken out in the main proceedings and from time to time, the interim orders are passed by this Court.

By way of an interim measures, the Special Officer/Receiver has been appointed to collect the rents from the tenants of the Company and keeping the same in a separate account.

Admittedly the Company does not have any business activities but certainly owns vast immovable properties which gains interest amongst its members because of steep rise in its market value.

The erstwhile managing director, against whom serious allegation of mismanagement and oppression is pleaded in the main petition, died in the meantime.

It is satisfactorily demonstrated before this Court that the meeting could not have been conveyed by the said erstwhile director on the date of his death which was also a declared holiday because of the general election of the assembly.

Those facts are brought in the aforesaid applications by laying foundation for an interim ordeRs.The foremost opposition to such relief at the instance of the added respondents and the other respondents who gained benefit by such act of the erstwhile managing director is that it constitutes a fresh cause of action, if at all there be any, and in view of the Companies (Amendment) Act, 1988, the remedy lies before the Company Law Board.

In other words, the High Court is denuded of its jurisdiction to entertain any disputes relating to oppression and mismanagement.

The said Companies (Amendment) Act, 1988 came into effect on and from 31st May, 1991 conferring the jurisdiction on the Company Law Board to entertain the Company Petition apart from other provisions including Section 397 & 398 of the Companies Act, 1956.

Section 68 of the said Amendment Act saves the proceedings which are pending before the coming in force of the said Amendment Act to be tried by the High Court under the Principle Act.

The instant proceeding is admittedly filed before the coming in force of the said Amendment Act and it is nobodies case that the same is not triable by the High Court.

According to the petitioners and the supporting respondents, if any subsequent events occurred during the pendency of the proceeding, the Court must take note thereof and can mould the relief if the main relief becomes inappropriate.

The subsequent events intrinsically connected with the original cause of action and have the material bearing on the principle issue involved therein, the Court should take note of the same to render complete, effective and appropriate remedies to the litigant.

The Court should take note of the subsequent events to minimize the litigation and to render complete and effective adjudication of a dispute between the parties.

It must be interconnected and intertwined with the original cause of action not capable of being divorced.

The subsequent event which stands alone independently and have no relevance to the context of original disputes constitutes a fresh cause of action.

The Court is not obliged to take note of all events subsequently arisen unless it has a material bearing on the original cause of action.

In a time consuming adversial litigation, some times the main relief becomes inappropriate because of the subsequent events which the parties cannot foresee at the time of initiating the proceeding.

In the context of the present case, it must bear in mind that the genesis of the initiation lies on an allegation of oppression and mismanagement by the majority members of the Company or the Board of Directors and any further act which amounts to oppression and mismanagement is connected to the original cause of action and not the fresh cause of action.

The judgment of the Apex Court rendered in case of Dabur India LTD.(supra) relied on by the descending respondents was dealing a matter relating to the infringement of the copy right as well as passing off under Section 25 (c) of the Copy Rights Act, 1957 and Trade and Merchandise Marks Act, 1958 respectively.

The proceeding was initiated in the Delhi High Court wherein the relief in the form of the permanent injunction was prayed for; an application under Order VII Rule 11 of the Code of Civil Procedure was taken out by the respondents on the plea that he is the resident of Andhra Pradesh and therefore the Delhi High Court has no jurisdiction.

The said contention was accepted as a consequence whereof the plaint was rejected by the Hon’ble Single Bench.

The order was carried in an intra court appeal which also stood dismissed.

A plea was sought to be raised that a composite suit covering the cause of actions under the aforesaid acts is not maintainable.

The Apex Court held that the composite suit is maintainable if the jurisdiction is vested in one Court but certainly does not lie when it constitutes two sets of cause of action where one cannot be entertained by the Court in view of the statutory interdiction in these words: “34.

What then would be meant by a composite suit?.

A composite suit would not entitle a court to entertain a suit in respect whereof it has no jurisdiction, territorial or otherwise.

Order 2 Rule 3 of the Code specifically states so and, thus, there is no reason as to why the same should be ignored.

A composite suit within the provisions of the 1957 Act as considered in Dhodha House, therefore, would mean the suit which is founded on infringement of a copyright and wherein the incidental power of the court is required to be invoked.

A plaintiff may seek a remedy which can otherwise be granted by the court.

It was that aspect of the matter which had not been considered in Dhodha House but it never meant that two suits having different causes of action can be clubbed together as a composite suit.” It appears from the above report that the composite suit in respect of the two distinct cause of action where the jurisdiction is specifically provided under the statute in respect of one cause of action cannot be entertained by the Court, having no jurisdiction pecuniary or territorial or otherwise.

There was admittedly two separate cause of action pleaded in the composite suit which are distinct, separate and stands on the independent footing.

The aforesaid principle in my view cannot be applicable in a case where a subsequent events are brought before the Court which is intertwined with the original cause of action.

Even in case of DDA & others –versus Joginder S Monga & others reported in (2004) 2 SCC297 the Supreme Court held that the Court can take into consideration the subsequent events to grant appropriate relief but if it substitutes the new relief based on fresh cause of action, the same is impermissible.

The Division Bench judgment in case of Raj Kumar Dutta (supra) relied on by the descending respondents cannot be made applicable in the present case; for the simple reason, it was held that by introduction of the subsequent events, the original case would be totally evaporated and a new case is sought to be incorporated in these words: “14.

We are quite conscious that in an appeal preferred against grant of a decree on the ground of reasonable requirement an Appellate Court can take into consideration the subsequent events but in such a case, the subsequent event must have relation with the original claim of requirement made in the plaint.

In the case before us, the original case of the plaintiff has totally wiped out and instead of that, the subsequent owner during the pendency of the appeal wants to assert his claim, which was not there in the original pleading.

This is not a case of additional requir3ement but is one where the original requirement is abandoned and a totally new requirement of the subsequent owner is sought to be incorporated.

The grandson is not an heir of the grandfather when his father is alive and at the same time, the original plaintiff never pleaded requirement for the said legatee and as such, by virtue of testamentary succession he having acquired title to the property, his position is no better than that of a transferee landlord and he cannot continue with the suit on the original ground of reasonable requirement although the provisions of section 13 (3A) will have no application if he intends to me a fresh suit on the ground of reasonable requirement as the said provision is attracted only in case of transfer inter vivos.” This Court, therefore, does not find any substance in the submission of the descending respondents that the said subsequent events amounts to a fresh cause of action and, therefore, cannot be taken note of in the instant proceeding because of the statutory embargo.

The petitioners and supporting respondents have put much emphasis on the facts that the acquisition of shares by Srila Mitra as well as the added respondents are in gross violation of the provisions contained under Section 108 of the Companies Act as well as the memorandum and article of association of the Company.

The ratio laid down by this Court in case of Amal Kumar Mukherjee and another –versus Clarian Advertising Service LTD.& others reported in 52 Company Cases 315 and Pradip Kumar Sarkar & others –versus Luxmi Tea Co.LTD.& others reported in 67 Company Cases 491 that the Company Court can pass an interim orders where the serious disputes relating to forgery and defalcation amounting to mismanagement, oppression and misappropriation is made.

The aforesaid judgment lend support to the proposition that the Court can appoint the receiver and/or pass the interim orders in an appropriate cases to take over the management and affairs of the Company to protect the interest of the other membeRs.The aforesaid judgments were passed on a distinguishing feature where the Companies were in operation and serious allegation relating to misappropriation and/or defalcation of the funds were brought before the Court.

Had it been a case where the Company is fully operational and serious allegation as to the misappropriation of the funds and monies by the majority members or the Board of Directors are prima facie proved before the Court, there is no hesitation in my mind that the CouRs.adopted by this Court in above reports was an inevitable consequence.

As indicated above, in the instant case, the Company does not have any commercial activities.

It has the immovable properties which are let out to the different tenants.

The interest of the complaining members are sufficiently protected by appointment of the special officer/receiver who is directed to collect the rents from the tenants and to keep the same in separate account.

It is only the share holding patterns as well as the introduction of the new directors are alleged by the petitioners and the supporting respondents.

The main application for oppression and mismanagement is pending and the Court is not denuded of any power to annul all the action which amounts to oppression and mismanagement.

Before proceeding to pass the appropriate order which this Court feels are the consequences to mitigate the situation that have arisen, the other points raised by the respective parties may be aptly dealt with.

The descending respondents are very much vocal in saying that the petitioners and the descending respondents do not have requisite member of shares to continue with the proceedings.

In this regard, the reference can be made to a judgment rendered by the Madras High Court in case of L.

RM.K.Narayanan & another –versus Pudhuthotam Estates LTD.& otheRs.reported in 74 Company Cases 30 wherein it is held: “Before adverting to the above judgments, it has to be considered whether a shareholder whose consent was obtained for filing petition under Section 397 of the Act, etc., can ask for substituting himself as a petitioning creditor even though his shareholding is less than 10 per cent as provided in Section 399 (1) (a).In this contention, the principal contention of Mr.G.Subramaniam is that such a person cannot ask for substitution and his only remedy is to file a separate petition.

No direct authority has been brought to my notice on this aspect of the matter.

In my considered opinion, when once a petition is validly presented, it is well open to a shareholder to ask for substitution and prosecute the proceedings even though such a shareholder by himself could not have presented a petition under Section 397 for want of required share qualification.

The Court has to only consider whether the petition was a valid petition at the time of its presentation.

If a valid petition has been presented, any shareholder can ask for substituting himself as the petitioning creditor.” This Court, therefore, does not find that the proceeding under Section 397 & 398 at the time of initiation was validly instituted and assumed the representative character, does not become invalidated because of the reduction of the requisite shares subsequently.

Although it is much debated by the warring parties that the issuance of the duplicate shares is clearly impermissible unless it is proved that the original is lost or the duplicate shares and can only be issued to the registered member, this Court feels that the same being the subject matter in the original proceeding and, therefore, is required to be dealt with for the purpose of granting the final relief.

The aforesaid applications are disposed of with the following directions: (i) The Special Officer/Receiver who is appointed and collecting the rents from the respective tenants and depositing the same in the separate account, shall continue to do so until further order.

(ii) The descending respondents are restrained from holding out as the director of the said Company and shall not deal with the assets and properties of the Company including the shares alleged to have been acquired and/or purchased by them by creating a third parties interest.

(iii) The Special Officer/Receiver is directed to remove the security guards placed by the added respondents and shall appoint another security agency and pay the remuneration thereof from the rents so collected.

In the events, the income generated from the rents of the respective tenants after the payment of the statutory liabilities are not sufficient to meet the above expenses, the petitioners and the respondents are directed to pay the differential amount in equal shares.

With these observations, the aforesaid applications are disposed of.

However, there shall be no order as to costs.

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)