Case Law Details

Case Name : Kailash Nath Roy Vs Bengal Bonded Warehouse Association (Kolkata Company Law Board)
Appeal Number : CP No. 35 of 2012
Date of Judgement/Order : 22/02/2012
Related Assessment Year :
Courts : Company Law Board (19)

COMPANY LAW BOARD, KOLKATA BENCH

Kailash Nath Roy

versus

Bengal Bonded Warehouse Association

B.S.V. PRAKASH KUMAR, JUDICIAL MEMBER

CP No. 35 of 2012

FEBRUARY  22, 2012

ORDER

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1. The petitioners KailashNath Roy, Kaushik Roy, Indira Roy, AlokeNath Roy and Anjali Roy together moved this petition under section 397/398 of the Companies Act, 1956 (‘the Act’) against the respondents on the ground of oppression and mismanagement alleging that the respondents 2 to 5 acting prejudicial to the interest of the petitioners and the company as well.

2. As the petitioners’ counsel Mr. ReetobrataMitra moved this petition for interim reliefs, Mr. S N Mookerjee, senior counsel appearing on behalf of the respondents raised a preliminary objection stating that the petitioners in this petition are short of requisite shareholding that is required under section 399 of the Act to invoke jurisdiction under section 397/398 of the Act, thereby he sought for the dismissal of this petition at the very threshold itself.

3. Learned senior counsel Mr. S N Mookerjee, representing the respondents, argued that the averments of the petition indicate that these petitioners together holding only 10.005 per cent in the company showing first petitioner shareholding as 8.72 per cent out of 10.005 per cent shareholding in the company. However, the fact is that the shareholding held by first petitioner is a joint shareholding held along with R-2 and R-5 as revealed in the annual return (Annexure 28 – p. Nos. 143 and 145 of this petition), so that it cannot be construed as exclusive shareholding held by 1st petitioner. Since sub-sections (1) and (2) of section 399 envisage that 10 per cent shareholding is a requisite qualification to invoke jurisdiction under section 397/398 of the Act, as these petitioners do not have exclusive shareholding of 10 per cent as envisaged under section 397/398, this petition is not maintainable in the eye of law, hence, to be dismissed.

4. On this point, petitioners’ counsel has submitted that the joint shareholding of 1st petitioner along with R-2 and R-5 is to be construed as shareholding of 1st petitioner for his name being shown as senior member in the share certificate and the annual return filed by R-1-company. He has further submitted since it being a procedural formality to be complied with for invoking jurisdiction under section 397/398 of the Act, a liberal interpretation is to be given to the procedure so as to look into the substantial grievance of the petitioners. In support of it, he has relied upon the ratio held by hon’ble Supreme Court in J P Srivastava& Sons (P.) Ltd. v. Gwalior Sugar Co. Ltd. [2004] 56 SCL 1 (SC); Canara Bank v. Nuclear Power Corpn. of India Ltd. [1995] 4 SCL 42 (SC) and Abdul Waheed Khan v. Bhawani AIR 1966 SC 1718 to justify that these petitioners, despite being joint shareholders along with R-2 and R-5, are entitled to invoke jurisdiction under section 397/398 of the Act to seek remedies for the grievances of them.

8. To which senior counsel Mr. Mookerjee argued that the ratio held in those cases are not applicable in the present case because in, Gwalior Sugar Co. Ltd. (surpa) the petitioner Mrs. NiniSrivastava is a trustee to J P Srivastava& Sons (P.) Ltd. representing the interest of the trust to which she has been authorised by the other co-trustees. In that situation, hon’ble Supreme Court held that as and when any authorisation has been therefrom co-trustees permitting the trustee to move proceedings, her right to invoke jurisdiction under section 397/398 could not be turned down saying that she has no authority to invoke jurisdiction under section 397/398 of the Act. The main issue in that case is whether Mrs. NiniSrivastava before Company Law Board (‘CLB’) represents the trustees or not. Hence, it is not applicable in the present case.

9.As to Nuclear Power Corpn. case (supra), the respondent counsel submitted that Special Court (Trial of Offences Related to Transaction in Securities) Act, 1992 equate Special Court constituted under the Act to court in general. Moreover, this construction is given when a matter was dealt with under section 111 of the Act, as such; it is also not applicable in the present case.

10. As to Abdul Waheed Khan case (supra), it is held that a court cannot be presumed to be barred from exercising jurisdiction unless it is expressly barred under an act, but whereas here it is a tribunal exercising jurisdiction conferred upon it with a qualification rider under section 399 of the Act. Thereby unless and until that qualification is present, shareholder is not entitled to invoke jurisdiction under section 399 of the Act, thereby this ratio is also not applicable in this case.

11. Apart from this, the respondent counsel relied upon T K Lathikav. Seth KarsandasJamunadas[1999] 6 SCC 632 to state that whenever a maintainability point is raised it must be decided first before merits can be gone into, thereby as per the ratio held in the case supra, he submits that maintainability is to be decided first before going into the merits of the case. By these submissions, the counsel urged this Bench to dismiss this petition at threshold itself.

12. On the submissions of both sides, the point to be decided is whether first petitioner shareholding, admittedly being joint shareholding of 8.72 per cent along with R-2 and R-5, could be construed as the exclusive shareholding of first petitioner to through it under section 399 of the Act.

13. Under section 399 of the Act, statute has made it clear that 10 per cent shareholding is requisite qualification to invoke jurisdiction under sections 397 and 398 of the Act. If the joint shareholding of first petitioner has become half, then certainly this petition is short of the requisite qualification that is required under section 399 of the Act.

14. In this situation, whether joint shareholding could be construed as shareholding of first petitioner in the light of section 399 of the Act. In Gwalior Sugar case (supra), Supreme Court has categorically mentioned that whether the petitioner’s representation on behalf of co-trustees is authorised or not and it is also said that the point to be seen is whether any authority is being given to petitioner regardless whether it is in the form of a consent letter or in the form of an affidavit authorising the petitioner in that case, but no point was decided where the interest is conflicting in between joint shareholders. Here in this case, petitioner who is a joint shareholder along with R-2 and R-5, wants to use the very joint shareholding against the joint shareholders arrayed as R-2 and R-5, whose interest is in conflict to the cause taken up by the petitioners, then, by no stretch of imagination such representation could be considered as representation on behalf of R-2, and R-5. Here the interest of the joint shareholders is in conflict, more so opposite to each other; thereby this Bench in all its wisdom believes that the shareholding shown by the petitioners is not a representation of 10 per cent shareholding in the company. Since there being no representation by the members holding 10 per cent as a whole, the petitioners’ representation cannot be construed as not less than 10 per cent as mentioned under section 399 of the Act. For the right under section 399 being a statutory right, unless and until such qualification is present, no member is authorised to invoke jurisdiction under section 397/398 of the Act.

15. For having the petitioners independently do not have requisite qualification required under section 399 of the Act, the petition is liable to be dismissed; accordingly, the petition is dismissed without costs.

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Category : Company Law (3438)
Type : Judiciary (9987)
Tags : CLB judgment (29) section 397 (31)

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