RAYMAN ENGINEERING WORKS LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) This is an appeal against the judgment and order dated April 24, 1969 of Rangarajan J.. whereby he dismissed the appelllants' petition (Civil Writ No. 357 of 1968) which had challenged, inter cilia, orders dated December 31, J964 and February 28, 1967 passed by the Company Law Board in purported exercise of powers under section 269 of the Companies Act, 1956, hereinafter referred to as "the Act" as amended by the Companies (Amendment) Act, 1960 (Act 65 of 1960), hereinafter referred to as the "Amendment Act". Shortly stated, the Company Law Board had, by the first order, imposed various conditions while granting approval to the first appointment of M.C. Ray as Managing Director of the appellant. Two. of the conditions to which objection has been raised are (1) that M.C. Ray will secure repayment of Rs. 2,75,000.00 to the appellants and (2) that approval shall be obtained also to the re-appointment, if any, of the said M. C. Ray after the expiry of the period of his first appointment. By the second order, the Company Law Board dismissed the application of the appellant Company for approval to the re-appointment of M. C. Ray. These two orders were challenged on the ground that they were ultra vires section 269 of the Act and were mala fide, unjust and unconscionable. The learned Single Judge did not accept these contentions and dismissed the writ petition.

(2.) The appellant Company was incorporated on November 30, 1954 as a public limited company. It was, therefore, an existing company within the meaning of section 3 (2) of the Act. Raymon & Comapny (India) Private Limited, hereafter referred to as "the Private Company", was incorporated in 1951 with two shareholders, namely, M. C. Ray and his wife. The Private Company was appointed Managing Agent of the appellant Company on February 7, 1956 for a period of ten years. By a deed of conveyance dated June 25, 1957, the Private Company had purchased a Bone Mill in consideration of a sum of Rs. 3,25,000.00. By a resolution dated June 12, 1957 of its Board of Directors, the appellant Company agreed to purchase the aforesaid Bone Mill from the Private Company for Rs. 10,00,000.00 to be paid to the Private Company in shares in the appellant Company. For that purpose the appellant company applied to the Controller of Capital Issues in July 1967 for the issue of 100,000 equity shares of the value of Rs. 10.00 each to the Private Company. As a result of negotiations, the Controller of Capital Issues agreed, by his letter dated January 5, 1969, to the issue by the appellant company of ordinary shares worth Rs. 6,50,000.00 to the Private Company as full consideration for the purchase of the Bone Mill.

(3.) The sale deed was executed on January 17, 1959.