BENNET COLEMAN AND CO Vs. UNION OF INDIA

JUDGEMENT

(1.) These appeals have been preferred by respondent No. 1-company represented by its shareholders and by original respondents Nos. 8 and 10 in their capacity as directors of the company, principally challenging the judgment and order passed by Nain, J. on August 28, 1969, whereby the learned judge directed reconstitution of the board of directors for the company in the manner done for a period of seven years. Both the legality as well as propriety of the order directing reconstitution of the said board have been challenged on certain grounds. In appeal No. 154 of 1969, Mr. Khambatta appearing for the Union of India raised a two-fold preliminary objection to the maintainability of the appeal. According to him, this appeal by respondent No. 1-company is incompetent, inasmuch as the company had submitted to the orders of the court without any objection, subject to certain reservations that were made by it while submitting to the orders of the court. Secondly, he contended that this appeal which has been preferred in the mane of the company cannot be filed through the shareholders, especially, when there was no allegation that any wrong was done to the company. So far as Appeal No. 153 of 1969 is concerned, both Mr. Khambatta and Mr. Phadke appearing for the Union of India and respondent No. 1-company respectively raised a preliminary objection to the maintainability of that appeal on the ground that respondents Nos. 8, 10 who had preferred the appeal were not the shareholders but only the directors against whom no order had been made by the learned judge and who in fact had been continued on the reconstituted board as directors of the company for a period of seven years and they had submitted to the orders if the court subject to certain reservations that were made by them. Before dealing with these appeals on merits, therefore, it would be convenient to deal with the preliminary objections that were raised by Mr. Khambatta and Mr. Phadke to the maintainability of these appeals.

(2.) In amplification of the preliminary points that were raised by them, in Appeal No. 154 of 1969, Mr. Khambatta pointed out to us the relevant contents of the letter dated August 16, 1969, addressed by Messrs. Chimanlal Shah & CO., attorneys, who were acting as attorneys for the company in the proceedings, to the chairman of respondent No. 1-company and he relied upon the statement that was made by counsel who appeared for respondent No. 1-company on August 28, 1969, before the learned judge. According to him, the proceedings in the main petition were getting protracted and the parties before the learned judge were desirous of putting an end to those proceedings in proper manner so as to avoid leading of considerable evidence and waste of their time. On August 14, 1969, almost all the respondents who were appearing before the learned judge except respondent No. 1-company had made certain statements to the court such as that they would be submitting to the orders of the court subject, however, to certain reservations made by each. After such statements were made, Messrs. Chimanlal Shah & Co. addressed a letter dated August 16, 1969, to the chairman of the company by which the attorneys gave information as to what had transpired in the court and in particular the attorneys had stated that during the course of hearing of the petition, some days ago, a suggestion was made that if all the parties submitted to the order of the court, the court would make an appropriate order for reconstitution of the board of directors of the company for future management. By this letter the attorneys also clarified as to what was meant by "submitting to the order of the court" and it was stated by them that submitting to the order of the court meant that the could would make such order as it though fit in the circumstances of the case and no party would have any right of appeal against such order. After pointing out further what statements were made by the other respondents to the court and after pointing out what submissions had been made by counsel for the Union of India before the court the attorneys sought instructions from respondent No. 1-company as to what should be done in the matter. Mr. Khambatta then referred us to the minutes of proceedings of the adjourned extraordinary general meeting of the shareholders which was held at Calcutta on August 26, 1969, where the aforesaid letter of Messrs. Chimanlal Shah & Co., attorneys, dated August 16, 1969, was placed before them and considered by them. It appears that this meeting was adjourned to enable the members to consider the whole matter fully and the said meeting was adjourned to August 27, 1969. At this meeting the members passed certain resolutions which were moved by the chairman. By the first resolution the shareholders indicated that they were of the unanimous view that all possible efforts should be made to bring to an end the proceedings under section 398 of the Companies Act which were pending before the court and that counsel on their behalf should submit before the court to consider the terms of settlement already agreed to by the members with the Government (meaning the settlement said to have been arrived at on August 20, 1969). By the second resolution the shareholders resolved that the company's counsel should submit on behalf of the members of the company that a board be constituted by the High Court to manage the affairs of the company consisting of three representatives of the shareholders excepting those against whom there were allegations of mismanagement in the petition and four independent directors, the chairman being one of the representatives of the shareholders and with no nominee of the Government on the board. It was also decided at this meeting that it should be submitted before the court that the term of the reconstituted board should be as short as possible and the same should not be for more than two years and in any case not more than three years, considering the fact that the company had been under the management other than that of the shareholders for well over five years. Mr. Khambatta further pointed out that these resolutions which were passed by the members of the company were then considered by the board of directors at their meeting held on August 28, 1969, at 10 a.m. where, after considering the proceedings of the adjourned extraordinary general meeting of the shareholders held on August 26, 1969, and August 27, 1969, expressing the views of the shareholders in respect of matters pending before the High Court, the board of directors passed two resolutions; by the first resolution the board resolved that the company should submit to the orders of the court in Petition No. 114 of 1967 and that counsel for the company should be requested to convey to the court the wishes expressed by the shareholders at their meeting held on August 27, 1969, and by further resolution the board resolved that it should be made clear to the court that any order passed by it in the petition should not prejudice in any manner the appeal filed by the company under section 635B against the Company Law Board's objection in regard to the five officers of the company and the High Court suit filed by the company against respondent No. 2 and other employees, being Suit No. 603 of 1967. Mr. Khambatta further pointed out that it was pursuant to these resolutions that were passed by the board of directors at its meeting held on August 28, 1969, counsel on behalf of respondent No. 1-company on August 28, 1969, stated to the court that respondent No. 1-company would submit to the orders of the court without prejudice to the company's appeal in regard to the employees and civil suit filed by it against respondent No. 2 and certain other employees and it was after such submission was made on behalf of respondent No. 1-company what the learned judge proceeded to deliver his judgment and passed necessary orders disposing of the petition. In other words, according to Mr. Khambatta, since respondent No. 1-company had submitted to the orders of the court subject to certain reservations made in the matter of the company's appeal in regard to the employees and civil suit filed by it against respondent No. 2 and certain other employees, it was not open to respondent No. 1-company to prefer this appeal to this Court. In support of his contention Mr. Khambatta relied upon two decisions - one reported in Sayad Zain v. Kalabhai Lallubhai [1899] 1 Bom LR 366; ILR 23 Bom 752 and the other in Venkateswarulu v. Narasi Reddy AIR 1961 AP 71 [FB]. In the former case (Sayad Zain v. Lakabhai Lallubhai [1899] 1 Bom LR 366; ILR 23 Bom 752) the parties to a suit referred the matter in dispute to the subordinate judge, before whom the suit was pending, for a settlement of the dispute between the parties. The subordinate judge passed a decree accordingly when one of the parties, viz., the defendant, preferred an appeal, the court held that the judgment of the subordinate judge was in the nature of an arbitrator's award against which an appeal could not be entertained and that the fact that the subordinate judge gave his award in the form of a decree would not make it a decree from which a regular appeal could lie. At page 755 ([1899] ILR 23 Bom 752) the court observed as follows :

(3.) In the other decision of the Andhra Pradesh High Court (Venkateswarulu v. Narasi Reddy AIR 1961 AP 71 [FB], the test as to whether a party had lost his right of appeal has been stated thus (page 75) :