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Madhya Pradesh High Court · body

2015 DIGILAW 339 (MP)

Anshul Gurha v. Green Tree Foods Private Limited

2015-03-24

SUJOY PAUL

body2015
JUDGMENT : Sujoy Paul, J. 1. This appeal is filed under Section 10-F of the Companies Act, 1956 (for brevity, the 'Act') challenging the orders dated 2.9.2013 and 20.9.2013, passed by the Company Law Board (CLB), Mumbai in Company Petition No. 50/2012. 2. It is contended by the appellants that the respondents/petitioners filed a Contempt Petition No. 397/398 of the Act seeking certain reliefs. The present appellants filed their reply and raised a preliminary objection about maintainability of the petition. The appellants also filed an application under Regulation 44 of the Company Law Board Regulations, 1991 (for brevity, the 'Regulation') on maintainability of the petition. This application was registered as CA No. 206/2012. This application is filed as Annexure A/2. The Company Board in its proceedings dated 21.2.2013 recorded that "CA No. 206/2012 on maintainability of company petition mentioned by the respondents, petitioners to reply within two weeks thereafter. Adjourned to 2.4.2013 at 2.30 pm for argument on CA 206/2012." This order sheet is filed as Annexure A/3. The respondents/petitioners filed their reply to the said CA on 18.3.2013. Thereafter, the matter was taken up by CLB on 2.4.2013. The CLB ordered that "parties are hereby required to negotiate with the auditors for a date for even two years at present, i.e., 10-11 and 11-12. Dates be informed accordingly to commence orders at the earlier. In any case, not later than 20.4.2013. CA No. 206/2012 to be heard after audit report." On the strength of this order, it is contended by Shri Manoj Munshi, learned counsel for the appellants that CLB made it clear that it will hear the parties on the question of maintainability of company petition after receiving the audit report. 3. Shri Manoj Munshi, learned counsel for the appellants submits that no hearing took place after 2.4.2013 and the said company petition was kept sine-die by the CLB. It is contended that no valid notice of hearing was given to the appellants and behind their back, the CLB took up the matter on 2.9.2013. On the said date, the CLB passed the impugned order. The order dated 2.9.2013 was further modified on 20.9.2013 (Annexure A/8). It is urged that for this hearing also, no opportunity was provided to the appellants. They were neither put to notice nor were present at the time of passing of the aforesaid orders. 4. On the said date, the CLB passed the impugned order. The order dated 2.9.2013 was further modified on 20.9.2013 (Annexure A/8). It is urged that for this hearing also, no opportunity was provided to the appellants. They were neither put to notice nor were present at the time of passing of the aforesaid orders. 4. The appellants have raised following points in the course of arguments:- (i) that, no notice as contemplated under Regulation 21 of the Regulations was served upon the parties for the hearing held on 2.9.2013 and 20.9.2013. (ii) that, CLB had no jurisdiction to entertain the petition as there was no case of oppression or mismanagement under section 397/398 of the Companies Act, 1956. (iii) that, there was no pleading or averments in the entire petition which amounts to oppression of majority by minority. The majority have many option under the Act against the minority. They may pass any resolution and reverse any act or deed of the minority, whereas such remedy is not available to them therefore remedy under section 397/398 has been provided to minority and not the majority. (iv) that, there was no conduct of minority which amounts to oppression of majority. (v) that, at the time of filing of petition the R/2, R/3 and R/4 had already resigned from the R/1 Company, therefore there was no continuous oppression even for the sake of arguments and it is one of the condition that oppression must continue. (vi) that, CLB erred in not deciding the issue of maintainability of the Petition despite having on record CA 206/2012. (vii) that, any order passed without jurisdiction over subject matter is nullity. (viii) that, even by consent no jurisdiction can be conferred upon CLB. (ix) that, the Compliance Report cannot be read in isolation, it has to be read in totality where emphasis has been given for deciding the CA 206/2012 before proceeding further." 5. In support of said points, synopsis of arguments is filed by the appellants. It is contended therein that question of jurisdiction should have been decided by the CLB as a preliminary issue. Reliance is placed on the judgment of Madras High Court in the case of Mrs. Saroj Goenka and others vs. Nariman Point Building Services and Trading Pvt.Ltd. and others, (1990) 90 Comp Case 205. It is contended therein that question of jurisdiction should have been decided by the CLB as a preliminary issue. Reliance is placed on the judgment of Madras High Court in the case of Mrs. Saroj Goenka and others vs. Nariman Point Building Services and Trading Pvt.Ltd. and others, (1990) 90 Comp Case 205. It is argued that in view of CLB's order dated 2.4.2013 and said judgment of Madras High Court, the CLB was required to decide the question of maintainability of company petition. It is contended that a single line from CA 206/2012 could not have been picked up by treating it as consent. It is contended that in view of settled legal position, jurisdiction cannot be assumed even on the basis of consent. The defect of jurisdiction strikes at the very authority of the court and, therefore, it cannot be cured by consent or waiver of the party. In support of this, Shri Munshi relied on (1993) 2 SCC 507 (Chiranjilal Shrilal Goenka vs. Jasjit Singh & ors.) and (1990) 1 SCC 193 (Sushil Kumar Mehta vs. Gobing Ram Bohra). In addition, it is contended that the CLB had no jurisdiction to entertain the petition filed by the majority. Reliance is placed on Shanti Prasad Jain v. Kalinga Tubes Ltd. [(1965) 35 Comp Case 351]. The judgment of Delhi High Court on the same point in case of Suresh Kumar Sanghi vs. Supreme Motors Ltd. & others [(1983) 54 Comp Case 235] is also relied upon. It is contended that in the entire company petition, there is no averment, which shows that there was oppression of minority over majority. At the cost of repetition, it is contended that after 2.4.2013, the appellants have not received any notice from the CLB. No proceedings took place on 23.8.2013. The matter was suddenly listed on 2.9.2013 without notice to the appellants and they were taken by surprise when they received impugned order dated 2.9.2013 wherein it is mentioned that the appellants had given the consent. It is submitted that the order of CLB is bad in law. 6. Shri Mayur Khandeparkar, learned counsel for the respondents/ petitioners opposed the relief and argued the matter at length. In addition, they filed written submissions and additional written submissions. 7. It is submitted that the order of CLB is bad in law. 6. Shri Mayur Khandeparkar, learned counsel for the respondents/ petitioners opposed the relief and argued the matter at length. In addition, they filed written submissions and additional written submissions. 7. The matter was earlier heard by this Court on 18.2.2015 but was released on 24.2.2015 by directing the parties to file the order sheet of CLB dated 23.8.2013. Learned counsel for the parties prayed for time on certain dates and then made a statement on 18.3.2015 that "there is no order sheet dated 23.8.2013 in CLB". It is pertinent to mention that after release of matter on 24.2.2015, the respondents have filed additional written submissions. 8. It is contended by learned counsel for the respondents that appeal under section 10-F of the Act is maintainable only on a question of law. The appeal can be preferred only by "any person aggrieved". Since the appellants specifically pleaded in their stand before the CLB that they have no objection even if prayer clauses (a), (c), (d) and (e) were to be allowed. It is contended that in view of this consent by the appellants before the CLB, by no stretch of imagination, they can be treated as "person aggrieved". Learned counsel submits that the order sheet dated 2.9.2013 is a consent order and, therefore, appeal is not maintainable by virtue of Section 96(3) of the Civil Procedure Code, 1908 (CPC). It is contended that in view of Rule 6 of Company Court Rules, 1959, the provisions of CPC were borrowed. 9. Shri Parkar contends that the appellants were put to a proper notice. The Advocate for respondents No. 2 to 4 had given specific notice of the hearing held before the CLB. In the said notice, sufficient time was given to the appellants. Another notice was given by the counsel for the petitioners to the counsel for the appellants for the hearing scheduled on 20.9.2013. It is contended that the pleadings in this regard mentioned in the return of this appeal are not denied. The factum of service of said notices through Advocates are not denied by the appellants and, therefore, it cannot be held that the appellants were not put to a proper notice for the hearings in question. It is contended that the pleadings in this regard mentioned in the return of this appeal are not denied. The factum of service of said notices through Advocates are not denied by the appellants and, therefore, it cannot be held that the appellants were not put to a proper notice for the hearings in question. To elaborate, it is contended that for the hearing scheduled on 23.8.2013 a notice was given to the Advocate for the appellants vide letter dated 17.8.2013. The appellants remained absent on 23.8.2013. It is mentioned in para 5 of written submissions of the respondent that "the CLB on the application made by the Advocate for respondents No. 2 to 4 scheduled the company petition along with MA for hearing on 2.9.2013 at 10.30 am". It is further stated that a notice in regard to the coming up of company petition for hearing before the CLB on 2.9.2013 at 10.30 am was also given by the Advocate for respondents No. 2 to 4 to the Advocate for the appellants vide letter dated 23.8.2013, which was received by the appellants' Advocate on 24.8.2013. In addition, another notice was given for the hearing scheduled on 20.9.2013. In additional written submissions, it is contended that Regulation 21(1) has no application in the present matter. The modes prescribed under sub-rule (1) of Regulation 21 are applicable only in cases where any notice or process is issued by the Bench/CLB. In the present case, notices have not been issued by CLB and, therefore, sub-rule (1) of Regulation 21 has no application. Regulation 21(1) is applicable only in cases where any notice or process is to be issued by the Bench whereas procedure for service of notice in all other cases is governed by sub-rule (3) of Regulation 21. Reliance is also placed on Regulation 26(3) and (4) to submit that the CLB has right to proceed ex-parte and even in absence of other party. Shri Parkar contends that the maintainability of company petition needs to be tested on the anvil of section 397 of the Act. It is not necessary that oppression must be of minority share-holders by majority share-holders. The judgment of Bombay High Court is relied upon, wherein it is held that it is possible that even minority shareholders can cause oppression of the majority. (Maharashtra Power Development Corporation Limited vs. Dabhol Power Company and others, reported in Vol. It is not necessary that oppression must be of minority share-holders by majority share-holders. The judgment of Bombay High Court is relied upon, wherein it is held that it is possible that even minority shareholders can cause oppression of the majority. (Maharashtra Power Development Corporation Limited vs. Dabhol Power Company and others, reported in Vol. 117, Company Cases 506). In other words, the stand is that section 397 contemplates a complaint of oppression by any member of the company. It does not confine such oppression only to a minority share-holders. In view of this stand, it is contended that the argument that CLB had no jurisdiction, is without any substance. 10. No other point is pressed by learned counsel for the parties. 11. I have heard the parties, perused the record and written submissions. 12. The objection of learned counsel for the respondents about maintainability of this appeal goes to the root of the matter. Hence, I deem it proper to deal this objection at the threshold. 13. No doubt, appeal under section 10-F of the Act can be preferred by a person aggrieved and only on a question of law. Thus, pivotal question is whether any question of law is involved in this matter and whether the appellants can be treated as "persons aggrieved". To determine this question, I deem it proper to first deal with the issue whether the appellants were put to notice in accordance with law for the hearings scheduled on 2.9.2013 and 20.9.2013 before the CLB. It is apposite to quote Regulation 21, which deals with "service of notice and process issued by the Bench". The relevant portion reads as under:- "21. It is apposite to quote Regulation 21, which deals with "service of notice and process issued by the Bench". The relevant portion reads as under:- "21. Service of notice and process issued by the Bench - (1) Any notice or process to be issued by the Bench may be served by any of the following modes directed by the Bench: (i) service by the party itself; (ii) by hand delivery (dasti) through a messenger of the Office of the Bench; (iii) under Certificate of Posting; (iv) by registered post with acknowledgment due if so required by an order of the Bench; (v) where the Central Government is a party, through the Secretary of the concerned Ministry or Department or through Branch Secretariat of the Ministry of Law or through Standing Counsel of the Central Government; (vi) where the State Government is a party, through the Chief Secretary or the Standing Counsel of the State Government. (2) Where a notice is required to be served on a company, it shall be served in the manner specified in section 51 or, in the case of a foreign company, in the manner specified in section 496, and may also be served in such other manner as the Secretary or the Bench Officer may direct. (3) Save as otherwise provided in sub-regulation (2), notices and other documents, which are required to be served on any person, other than a company, shall be served by delivering or tendering a copy thereof to such person or his authorized representative, where he appears by such representative or by prepaid registered post, acknowledgment due, addressed to the last-known address of such person. (4) Where a notice is served by registered post the Secretary or Bench Officer may, if the acknowledgment is not received, determine the question as to the sufficiency of the service of the notice. (5) Where the notice sent by registered post is returned by the post office with the remark "refused", the notice may be presumed to have been duly served. (6) Every notice, of the petition or reference issued by the Bench shall, unless otherwise ordered, be accompanied by a copy of the petition or reference, as the case may be. (5) Where the notice sent by registered post is returned by the post office with the remark "refused", the notice may be presumed to have been duly served. (6) Every notice, of the petition or reference issued by the Bench shall, unless otherwise ordered, be accompanied by a copy of the petition or reference, as the case may be. (7) Notwithstanding anything contained in subregulation (1) to (6), where, for any reason whatsoever, it is not reasonably practicable to serve notice of petition on all the 9 respondents, the notice may be served by public advertisement, as the Bench may in each case direct. (8) The Bench shall in such cases, determine who shall bear the cost of the public advertisement." (Emphasis Supplied) Regulation 21 (1) makes it clear that there are six modes by which a notice or process issued by the Bench may be served on the other side. The keywords in these regulations are "issued by the Bench" and "directed by the bench". Sub-rule (3) of Regulation 21, on which heavy reliance is placed by the respondents, provides that notices and other documents, which are required to be served on any person shall be served by delivering or tendering a copy thereof to such person or his authorised representative. Sub-rule (3) aforesaid deals with service of "notice" and "other documents". A microscopic reading of sub-rule (3) makes it clear that notices and other documents which are required to be served may be served in the manner provided therein. 14. In the present case, this Court is concerned with the question of service of "notice" for hearing scheduled on 2.9.2013 and 20.9.2013. The question of service of other documents etc. is not involved here. In my view, sub-rule (1) of Regulation 21 makes it clear that the notices which may be served by adopting any of the modes out of six modes prescribed must be a notice or process issued/directed by the Bench. Sub-rule (3) also makes it clear that notices which are required to be served may be served in a particular manner. For the purpose of issuing a notice by adopting any of the modes prescribed in Regulation 21, the primary requirement is direction of issuance of the notice by the CLB. Sub-rule (3) also makes it clear that notices which are required to be served may be served in a particular manner. For the purpose of issuing a notice by adopting any of the modes prescribed in Regulation 21, the primary requirement is direction of issuance of the notice by the CLB. Putting it differently, if CLB fixed a date for next hearing and permitted the parties to serve the other side by any of the modes prescribed, the parties can very well serve the other side as per Regulation. It may be remembered in the present case that after 2.4.2013 the matter remained without date/sine-die before the CLB. The Advocate notice was served on the respondents for 23.8.2013 before the CLB. Pursuant to the order of this Court dated 24.2.2015, learned counsel for the parties fairly admitted that there is no order sheet of CLB dated 23.8.2013. Thus, it is clear that CLB has not passed any order on 23.8.2013 directing the listing of the matter on 2.9.2013. The contention of the respondents is, therefore, factually incorrect that the CLB on application made by the Advocate for respondents No. 2 to 4 scheduled the company petition for hearing on 2.9.2013 at 10.30 am. On the contrary, the stand of appellants appears to be correct that on 23.8.2013 no mention of matter was made and matter was suddenly fixed by CLB on 2.9.2013. The aforesaid analysis makes it clear that CLB, after the last date of hearing, i.e., 2.4.2013, never directed for issuance of the notice to the appellants nor fixed the matter by a specific order for 2.9.2013. The notice must be issued in accordance with Regulation. I am of the considered opinion that once a matter is kept sine-die, the CLB was required to ensure that other party is put to a valid notice. The issuance and service of notice has a direct bearing on the procedural fairness and a proper and effective right of hearing. Thus, it can be safely concluded that question of issuance and service of notice is related with procedural propriety of CLB and, therefore, the same is an important question of law. The case of the appellants is that the consent is wrongly recorded by the CLB, jurisdiction cannot be assumed on the basis of consent. Thus, it can be safely concluded that question of issuance and service of notice is related with procedural propriety of CLB and, therefore, the same is an important question of law. The case of the appellants is that the consent is wrongly recorded by the CLB, jurisdiction cannot be assumed on the basis of consent. The CLB has erred in acting contrary to its own order dated 2.4.2013, wherein it has been mentioned that CA No. 206/2012 shall be heard after audit report. CA No. 206/2012 was filed by taking objection about maintainability of the petition. If the petition itself was not maintainable, the question of consent did not arise. Admittedly, the CLB has not decided CA No. 206/2012 before passing the impugned order. 15. In the aforesaid factual backdrop, in my view, the basic question in this appeal is whether the appellants were put to a proper notice. As analyzed above, the notice issued by the respondents through their Advocate cannot be treated as notice in accordance with regulation. Learned counsel for the respondents were unable to show that matter was mentioned on 23.8.2013 and then CLB directed for posting the petition on 2.9.2013. In absence of any such specific order by CLB, I find force in the argument of appellants that CLB has erred in taking up the matter on 2.9.2013 without notice to the appellants. If the appellants would have been put to notice, they would have been in a position to press their CA No. 206/2012 and explain as to whether the alleged consent can be treated to be a consent or not. The impugned orders of CLB show that the CLB did not deal with the aspect of maintainability of the petition and on the assumption that the appellants have given consent, decided the petition. It was the primary duty of the CLB to ensure that the appellants were given proper notice for 2.9.2013. The finding was also required to be given on the maintainability of the company petition. The appellants had a valuable right to address the CLB and contend that despite the pleadings regarding prayer No. (a), (c), (d) and (e), consent cannot be presumed nor jurisdiction can be assumed. The impugned order is based without giving adequate opportunity to the appellants to put forth their case. The appellants had a valuable right to address the CLB and contend that despite the pleadings regarding prayer No. (a), (c), (d) and (e), consent cannot be presumed nor jurisdiction can be assumed. The impugned order is based without giving adequate opportunity to the appellants to put forth their case. The appellants, who were not put to valid notice for hearing scheduled on 2.9.2013 and 20.9.2013 and suffered an adverse order, must be treated as "persons aggrieved". I am unable to hold that the appellants cannot be treated as "person aggrieved". 16. This is trite that the soul of natural justice is 'fair play in action'. In one case, it has been defined as "quintessence of the process of justice inspired and guided by 'fair play in action'". AIR 1978 SC 597 (Menka Gandhi vs. Union of India). In another case, it is described "as a distillate of due process of law". The Apex Court held that in absence of notice "hearing becomes hollow, the right becomes a ritual". See, (1978) 1 SCC 405 (Mohinder Singh Gill vs. Chief Election Officer). It can be safely concluded that issuance and service of proper notice is inseparable part of principle of natural justice, which is codified in the shape of Regulation 21 aforesaid. Any deviation shows that "due process" is not followed. In the present case, the CLB has passed the orders dated 02.09.2013 and 20.9.2013 without following 'due process'. 17. In the said background, I am not inclined to address the other points raised by learned counsel for the parties including the question of maintainability of company petition before the CLB. In view of its order dated 2.4.2013, the CLB should have dealt with this aspect before passing the order dated 2.9.2013. Thus, on other points also on which learned counsel for the parties have taken a diametrically opposite stand, I deem it proper to remit this matter to CLB to deal with those aspects. Since the appellants' right to address on the maintainability is not dealt with by the CLB, in the fitness of things I deem it proper to set aside the orders of the CLB and direct it to hear the parties afresh. 18. Resultantly, the order dated 2.9.2013 and modification order dated 20.9.2013 are set aside. Matter is remitted back to the CLB to hear the parties in accordance with law. 18. Resultantly, the order dated 2.9.2013 and modification order dated 20.9.2013 are set aside. Matter is remitted back to the CLB to hear the parties in accordance with law. The parties shall appear before the CLB on 20th April, 2015. For this purpose, no notices are required to be issued by the CLB to the parties. The CLB, on or after the said date, shall decide the petition in accordance with law. The parties shall file copy of this order before the CLB within ten days from today. It is made clear that this Court has not expressed any view on the merits of the company petition. 19. Appeal is allowed. No cost.