S. v. Sivalinga Nadar VS S. V. Chandrapandian — 1984 DIGILAW 433 (MAD)

Judgment :- RAMANUJAM, J. 1. The controversy between the parties in this appeal is very limited, it relates to the interpretation of an order passed by the Supreme Court in S.L.P. (Civil) No. 5270 of 1984. 2. The appellant, respondents 1 to 4 and one S.V. Harikrishnan agreed to refer the disputes inter se to arbitration including the dispute regarding the share holding and management of the Company, Madras Vanaspatbi Limited, under an agreement dated 8th October, 1981. In view of the said reference of the dispute to arbitration, it is said to have been agreed between the parties that the appellant would continue as Managing Director as before and the third respondent will be co-opted as additional Director pending the arbitration proceedings. Originally the arbitrators passed an award without reference to the share holding and the management of the Madras Vanaspathi Limited. When this was pointed out by the appellant, the Arbitrators withdrew their award for passing a fresh award, taking into account the objections raised by the appellant that the share holding and the management of Madras Vanaspathi Limited was not considered by the Arbitrators. 3. At that stage the appellant filed C.S. No. 433 of 1983 for a declaration that the reference to arbitration includes the dispute regarding the share holding and the management of the Madras Vanaspathi Limited and for an injunction restraining the respondents 1 to 5 from interfering with the functioning of the appellant as the Managing Director of the said Company and for a mandatory injunction to the Arbitrators to pass a suitable award including the Management and share holdings of the Madras Vanaspathi Limited. In the said suit, the appellant also filed an Application No. 3063 of 1983 seeking an interim injunction restraining the respondents 1 to 4 from altering the position of the appellant as Managing Director of the company by holding the proposed meeting for the purpose of removing the appellant from the position as Managing Director. Though an interim injunction was granted in the first instance in the said application, final orders have been passed therein vacating the ad interim injunction and dismissing the petition by an order dt. 31st October, 1983. As against the said dismissal order the appellant filed O.S.A. 165/83. In the said appeal, a Division Bench of this Court passed a consent order on 7th March, 1984 which is as follows: “1. 31st October, 1983. As against the said dismissal order the appellant filed O.S.A. 165/83. In the said appeal, a Division Bench of this Court passed a consent order on 7th March, 1984 which is as follows: “1. The arbitrators, viz., defendants 6 to 8 shall pass the award on or before 15th May, 1984. 2. It will be open to the defendants 1 to 5 or any share-holder of the company to give notice of a resolution under S. 188 of the Companies Act and for consideration of the same. Such a resolution shall be placed before the Company on or before 15th March, 1984. 3. On receipt of such a resolution the Company shall circulate the same to the share-holders and fix the meeting on 16th May, 1984 at 11 am for consideration of the resolution and for adoption if deemed fit; 4. This consideration by the general body of the Company will be irrespective of the Award. 5. This order will be effective notwithstanding any other order to the contrary obtained by any shareholder in any civil court. 6. This appeal is ordered in the above terms. No costs.” 4. Aggrieved by the said order, the appellant filed a special leave petition before the Supreme Court. The main contention urged by the appellant before the Supreme Court appears to be that the order passed by the Division Bench is not an order by consent. After considering the said question, the Supreme Court took the view that the order is a consent one and, therefore, it is not possible for it to interfere with the same. However, the Supreme Court modified the Bench order in the following terms: “As the order under challenge clearly recites that the same was passed with consent of the parties, we are wholly disinclined to examine the matter on merits or on collateral grounds. However, we make it distinctly clear that according to clause (1) of the consent order the Arbitrators have to give the award by May 15, 1984. However, we make it distinctly clear that according to clause (1) of the consent order the Arbitrators have to give the award by May 15, 1984. Therefore the meeting of the Company shall not be convened to consider the proper resolution for continuance or removal of the appellant, till the award is declared and placed for examination by the Company Judge in the High Court and further appropriate directions obtained.” It is only the latter portion of the order of the Supreme Court dated 3rd May, 1984 which has led to the present controversy between the parties in this appeal. 5. Subsequently the Arbitrators have passed an award on 9th July, 1984 and the respondents 1 to 4 have filed O.P. No. 230 of 1984 on 28th July, 1984 under S. 14(2) of the Arbitration Act for filing the award into Court. The appellant, in his turn has filed O.P. No. 247 of 1984 under Ss. 30 and 33 of the Arbitration Act for setting aside the award. One S.V. Harikrishnan, one of the brothers of the appellant has also filed Application No. 275 of 1984 also under S. 30 of the Arbitration Act for setting aside the award. Those proceedings are pending consideration before the Judge sitting in the original side of the High Court. 6. At that stage the respondents 1 to 4 filed Company Application No. 502 of 1984 on 3rd August, 1984 seeking a direction to convene a meeting and for appointment of a chairman of that meeting for moving a resolution for removing the appellant as the Managing Director and Director. In the said Company Application the contention urged by respondents 1 to 4 was that as per the consent order passed by the Division Bench of this Court on 7th March, 1984 a meeting should be convened to consider the resolution for removal of the appellant as Managing Director or Director the next day after the award was passed and that therefore they are entitled to seek a direction from the Company Court to convene the meeting for the purpose of moving the resolution for removal of the appellant as Managing Director and Director especially when the Special Leave Petition filed by the appellant before the Supreme Court against that order had been dismissed. The stand taken by the appellant in the said Company Application No. 502 of 1984 was that though the Division Bench directed the consideration of such a resolution immediately after the award was passed, the Supreme Court has in effect modified that order and as per the order of the Supreme Court, the consideration of any such resolution can take place only after the award is made a decree of Court and is then placed before the Company Court. According to the Appellant, the order of the Division Bench dated 7th March, 1984 is substantially modified so far as the holding of a meeting for consideration of the resolution for removal of the appellant from the Board of Directors of the company is concerned. Shanmukham, J., has not chosen to accept the contention advanced by the appellant that the order of the Supreme Court has in effect varied the order passed by the Division Bench. According to the learned Judge, the observation of the Supreme Court can merely be understood as to enlarge or postpone the holding of the meeting for considering the resolution for removal of the appellant as the Managing Director or Director only upto the date of the filing of the award so as to enable the Company Court to consider the terms of the award before passing final orders regarding the holding of the meeting. In that view the learned Judge has proceeded to give a direction to hold the meeting on 28th November, 1984, appointing one Mr. Vijayarangam, a retired District Judge to convene and preside over such a meeting. The said order of the learned Judge is the subject matter of the appeal before us. 7. From the facts stated above it will be seen that while the parties were at variance as regards the interpretation of the order passed by the Supreme Court, the learned Judge accepted the respondents interpretation and held that the Supreme Court did not intend to postpone the consideration of the resolution proposed by the respondents 1 to 4 for an indefinite period but directed the postponing of the convening of the meeting to consider the said resolution only till the award is passed by the Arbitrators and the same is placed before the Company Court. Before us, Mr. Before us, Mr. Govind Swaminathan, the learned counsel for the appellant contends that the observations made by the Supreme Court make it abundantly clear that the meeting of the company to consider the resolution for continuance or removal of the appellant cannot be convened till the award is made a decree of Court and placed for examination by the Company Judge in the High Court for the issue of appropriate directions. The learned counsel pointed ou t that though the expression used in the order of the Supreme Court is “till the award is declared”, it should be understood as “the award is made a decree of Court”. The learned counsel also referred to the expression “Arbitrators have to give the award by 15th May, 1984” as showing that the Supreme Court used the expression “declared” in a way different from the expression “giving the award”. The question is whether the learned Judges of the Supreme Court intended to postpone the convening of the meeting of the company to consider the resolution either for the continuance or removal of the appellant till the award is made a decree of Court and till that is placed for examination by the Company Judge as contended by the learned counsel for the appellant. 8. On a due consideration of the matter, we are not in a position to accept the above contention as regards the interpretation of the order passed by the Supreme Court. It is no doubt true, in the earlier portion of the order they referred to the Arbitrators giving the award by 15th May, 1984 and in the later portion of the order they referred to the award being declared and placed for examination by the Company Judge. But the mere fact that they used the word “declared” in the latter portion of the order cannot lead to the inference that the learned Judge meant by the word “declared”, a decree of Court. It is well known that an award becomes enforceable only if it is made a decree of Court and before the award which is filed before the Court is made a decree of Court, there are possibilities of so many proceedings intervening which may sometimes result in the award being set aside. It is well known that an award becomes enforceable only if it is made a decree of Court and before the award which is filed before the Court is made a decree of Court, there are possibilities of so many proceedings intervening which may sometimes result in the award being set aside. Therefore when the learned Judges of the Supreme Court used the expression, “award is declared”, they could not have meant to refer to the case of the award being made a decree of Court. As in this case after the filing of the award the parties are having opposing claims as regards the award passed, the appellant and his another brother having filed applications for setting aside the award on various grounds and the respondents 1 to 4 having sought a decree on the basis of the award. Therefore, if the interpretation suggested by the learned counsel for the appellant were to be accepted, it will mean that the Supreme Court has postponed the convening of the meeting of the company for consideration of the proposed resolution indefinitely till the award is made a decree of Court which may happen or may not happen depending upon the proceedings taken by the parties before the Judge sitting on the original side of this Court and the rights of respondents 1 to 4 and the other shareholders of the company to convene the meeting will be jeopardised. We have to therefore construe the expression “declared” to mean only as “given”. Further the circumstances under which the above observation has been made by the Supreme Court has to be kept in view while interpreting its order. The consent order passed by the Division Bench proceeds on the basis that the meeting of the Company has to be convened on 16th May, 1984 after the consideration of the resolution and such consideration should be irrespective of the award passed by the Arbitrator. It is only with reference to this portion of the order the Supreme Court observed that the meeting of the company shall not be convened to consider the resolution till the award is declared and placed for examination by the Company Judge in the High Court. It is only with reference to this portion of the order the Supreme Court observed that the meeting of the company shall not be convened to consider the resolution till the award is declared and placed for examination by the Company Judge in the High Court. The learned Judges of the Supreme Court appear to have shown some indulgence to the appellant after dismissing the Special Leave Petition by extending the time for holding the meeting of the company which the Division Bench has directed to be held on 16th May, 1984. The Supreme Court appeared to have taken the view that after the passing of an award on 16th March, 1984 as directed by the Division Bench, the appellant should have some breathing time to consider the nature of the award and place it before the Company Court before the Company Court considers the question of convening of the meeting of the company. It is for that purpose they have said that no meetings shall be convened till the award is declared and placed for examination by the Company Judge in the High Court. Thus the order of the Supreme Court does not have the effect of postponing of the convening of the meeting till the award is made a decree of the Court and placed before the Company Judge for examination as contended by the appellant. 9. One further question arises as to whether the order of the Supreme Court has been properly applied in this case. No doubt, the learned Judge, in the order under appeal, has proceeded on the basis that there is no impediment as at present for convening of the meeting of the company for considering the proposed resolution. He therefore straightway ordered the convening of the meeting and proceeded to appoint a chairman as prayed for by the respondents 1 to 4. But the order of the learned Judge does not give full effect to the direction of the Supreme Court. The Supreme Court specifically says that no meeting of the company shall be convened to consider the proper resolution for continuance or removal of the appellant till the award is declared and placed for examination by the Company Judge. In this case, the learned Company Judge has not examined and considered the terms of the award. The Supreme Court specifically says that no meeting of the company shall be convened to consider the proper resolution for continuance or removal of the appellant till the award is declared and placed for examination by the Company Judge. In this case, the learned Company Judge has not examined and considered the terms of the award. A perusal of the judgment of the learned Judge does not indicate that the award passed by the Arbitrators which was placed before him was examined by him as directed by the Supreme Court. Since the Supreme Court has ordered that no meeting shall be convened till the award is placed for examination in the Company Court, the Company Judge has to necessarily examine the award and pass an order for consideration of the terms of the award before passing the appropriate order in the Company Application C.A. No. 502 of 1984. Thus, though we uphold the view taken by the learned Judge that there is no impediment for the convening of the meeting of the Company, now that the award has been passed by the Arbitrators and the convening of the meeting need not be postponed until it is made a decree of the Court as suggested by the learned counsel for the appellant, we are of the view that the order directing the holding of the meeting and appointing the Chairman without examination and consideration of the award as directed by the Supreme Court cannot be sustained. We have to, therefore, allow the appeal in part with a direction to the Company Judge to take up for examination the award placed before him and pass suitable final orders in the said company application after consideration of the award of the Arbitrators. In view of the urgency of the matter, we direct that the matter may be posted before the Company Judge for his orders as to posting, without delay. There will be no order as to costs in this appeal.