COSMOSTEELS PRIVATE LIMITED Vs. JAIRAM DAS GUPTA

JUDGEMENT

(1.) This miscellaneous petition by interveners raises a short but interesting question in the field of Company Law.

(2.) Briefly stated, the facts leading to the present miscellaneous petition are that Company Petition No. 85 of 1975 was filed by Jairam Das Gupta and others (for short 'Gupta Group') in the Calcutta High Court under Ss. 397-398 of the Companies Act, 1956, complaining of oppression by the majority, and praying for various reliefs. Respondents in this petition were Cosmosteels Private Limited (for short 'the Company') and three others who would be referred to in this judgment as 'Jain Group'. By an order made by the Company Judge on 21st April 1977 the Board of Directors of the Company was superseded and one Mr. Sachin Sinha, Advocate, was appointed as Administrator to discharge various functions set out in the order. The Court also appointed Mr. N. Chakraborty, a Chartered Accountant and Auditor to investigate into the accounts of the Company and one Mr. A. K. Dey, Engineer and Surveyor for valuation of the assets of the Company and further the Auditor and the Surveyor after investigation of the accounts and evaluation of the assets of the Company were to determine the break-up value of the shares as on the date of the petition and on the determination of such break-up value the Administrator was to call upon the Jain Group to purchase the shares belonging to the Gupta Group within a period of three months from the date of service of notice failing which the Administrator was directed to purchase the shares of the Gupta Group for the Company at the break-up value determined as hereinabove mentioned. A further direction was given that if the Company was required to purchase the shares of Gupta Group on the failure of the Jain Group. the capital of the Company would pro tanto stand reduced. There were also some other directions which are not relevant for the purpose of this judgment. Against this Order made by the Company Judge, the Jain Group and the Company preferred an appeal under the Letters Patent and certain interim reliefs were sought. On an undertaking given on behalf of the Jain Group, the order superseding the Board of Directors and payment of Rs. 7 lacs to certain parties was stayed but the order directing valuation of the shares was not stayed and the proceeding for valuation was to go on. The Company was restrained by an injunction of the Court from creating any encumbrance on the assets of the Company and dealing with or disposing of its assets or spending any of its money except in usual course of business with a certain ceiling fixed. This interim relief was modified by the order made on 25th April 1977 by which the Company wad directed to carry out the order for payment of Rs. 7 lacs to the persons named in the order under appeal within a fortnight form the date of the order failing which the Administrator appointed by the learned trial Judge was to take over possession for the purpose of making payment of Rs. 7 lacs. The direction for investigation of the accounts of the Company was stayed and simultaneously the proceeding for evaluation was also stayed. This order dated 25th April 1977 was challenged in Special Leave Petition No. 2042 of 1977 preferred by the Company and the Jain Group. CMP. 3801/77 was moved on behalf of the appellants for certain interim reliefs. This Court by an order dated 12th May 1977 granted stay of the order of the Division Bench dated 25th April 1977 directing refund of Rs. 7 lacs by the Company and in default by the Administrator. The order of injunction granted by the learned trial Judge and confirmed by the Division Bench was kept alive subject to the same condition about not encumbering the assets of the Company. The appellants then sought liberty to amend the Special Leave Petition by including a prayer for special leave against the order of the learned Company Judge dated 21st April 1977 which was granted by the Court and also special leave to appeal was granted. The appeal came to be numbered as Civil Appeal No. 1347 (N) of 1977. The parties settled the dispute as per the consent terms and requested this Court to make an order in terms of the consent terms. The Court accordingly made an order on 31st May 1977 disposing of the appeal in terms of the consent terms. The only term relevant for the present purpose is the one by which the Company was directed to purchase 1300 shares held by the Gupta Group. The price of the shares was to be determined by Messrs. Price Water House and Peet, Chartered Accountants and Auditors, as on the date of the filing of the petition under Sections 397-398 on the basis of the existing as also contingent and anticipated debts, liabilities, claims, payments and receipts of the Company. The Chartered Accountants were to determine the value of the shares after examining accounts and calling for necessary explanations and after giving opportunity to both the groups to be heard in the matter and the determination of the value by the Chartered Accountants was to be final and binding and not open to any challenge by either side on any ground whatsoever. On the value being so determined the Company had to purchase the shares and on such purchase, the share capital of the company was to stand reduced pro tanto.

(3.) After the appeal was thus disposed of on 31st May 1977, the interveners filed the present miscellaneous petition on 22nd August 1977 requesting the Court to permit them to intervene in the proceedings pending in Civil Appeal No. 1347 of 1977 and to postpone the purchase of shares by the Company until such time as the Company adopts proceedings in a competent Court by following the procedure laid down by the Companies Act, 1956. and particularly Sections 100 to 104 for reduction of the share capital. In the alternative there was a prayer for safeguarding the claims of interveners by modifying the order dated 31st May 1977.