Gujarat High Court
Dwarka vs Writers
Author: M.R. Shah
Bench: M.R. Shah
OJMCA/172/2011 62/ 62 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD MISC. CIVIL APPLICATION No. 172 of 2011 In COMPANY PETITION No. 126 of 2006 In COMPANY APPLICATION No. 267 of 2006 For Approval and Signature: HONOURABLE MR.JUSTICE M.R. SHAH ========================================= 1. Whether Reporters of Local Papers may be allowed to see the judgment ? Yes 2. To be referred to the Reporter or not ? Yes 3. Whether their Lordships wish to see the fair copy of the judgment ? No 4. Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? No 5. Whether it is to be circulated to the civil judge ? No ========================================= DWARKA PRASAD AGARWAL & BROTHERS - THROUGH PARTNERS - Applicant(s) Versus WRITERS AND PUBLISHERS LIMITED & 1 - Respondent(s) ========================================= Appearance : MR PRASHANT CHANDRA, SR. ADVOCATE with MR YN OZA, SR. ADVOCATE with MR PRASHANT KUMAR with MR VISHWAS K SHAH with MR NACHIKET A DAVE with MR MASOOM K SHAH for Applicant(s) : 1, MR UK CHAUDHARY, SR. ADVOCATE for Respondent(s) : 1, MR SN SOPARKAR, SR. ADVOCATE with MR AS VAKIL for Respondent(s) : 2, ========================================= CORAM : HONOURABLE MR.JUSTICE M.R. SHAH Date : 22/06/2012 CAV JUDGMENT
[1.0] Present Miscellaneous Civil Application has been preferred by the applicant herein - M/s. Dwarka Prasad Agarwal & Ors. through its partner Smt. Kishori Devi to modify the Scheme of Arrangement entered into between the "Demerged Company" and the "Resulting Company" which has been sanctioned by this Court vide order dated 10.10.2006 passed in Company Petition No.126 of 2006 in Company Application No.267 of 2006 submitting that it has caused material prejudice to the rights of the applicant and restraining the D.B. Corp. Limited not to use the title "Dainik Bhaskar" Hindi daily newspaper.
[1.1] It is also further prayed to pass appropriate order to direct the competent authority/Court to initiate criminal proceedings as fraud has been practiced by the Directors of D.B. Corp Ltd. and M/s. Writers and Publishers Limited, who were parties to Company Petition Nos.126 of 2006 with Company Application No.267 of 2006.
[2.0] At the outset it is required to be noted that when the present OJMCA was filed by the applicant herein, it was not stated under which provision the applicant had preferred the present application and therefore, a preliminary objection was raised by the contesting respondents by filing an affidavit-in-reply raising preliminary objection with respect to maintainability of the present application submitting that the applicant does not state the provision of law under which the application is filed. It was also submitted that it has not been stated whether the application is filed under the provisions of Rule 6 of the Company (Court) Rules, 1959 read with provision of the Code of Civil Procedure, 1908 (hereinafter referred to as "CPC") or under Rule 9 of the Companies (Court) Rules, 1959 or under Section 392 of the Companies Act, 1956 or any other provision of law. It was also submitted that irrespective of any of the aforesaid provisions under which the application can be stated to have been filed, the application is barred by limitation. Number of other objections were also raised by the contesting respondent with respect to the maintainability of the present application even at the instance of the applicant herein against whom an injunction/restraint order is in operation restraining her from doing any correspondence on behalf of the applicant firm and/or acting as partner of applicant Firm. Having served with a copy of the preliminary affidavit-in-reply dated 22.12.2011, the learned counsel appearing on behalf of the applicant submitted the draft amendment submitting that the application be treated as application under Order 47 Rule 1 of the CPC and Section 392 of the Companies Act, 1956 (hereinafter referred to as "Act, 1956") also. The applicant also sought permission to amend the application by adding M/s. D.B. Corp Limited - "Resulting Company" to be joined as opponent No.2 and the draft amendment submitted by the applicant came to be allowed by this Court by order dated 31.01.2012 permitting the applicant to amend the application as prayed for. However, by making specific observation that the amendment is allowed, without expressing anything on merits with respect to the entertainability and/or maintainability of the present application by the applicant under Order 47 Rule 1 of the CPC and keeping all the objections / defences open to be raised by the respondent.
[2.1] It appears that pursuant to the said amendment, according to the applicant, the said application was under Order 47 Rule 1 of the CPC also and if that be so there was a delay in preferring the application under Order 47 Rule 1 of the CPC and therefore, the applicant submitted OJ Civil Application No.66 of 2012 in present application with a request to condone the delay of 1790 days in filing the OJMCA by submitting that in view of the order passed by the Registrar of Firms, Societies & Chits, Uttar Pradesh passed way back in 2003 i.e. prior to passing of the order dated 10.10.2006 by this Court in Company Petition No.126 of 2006, Smt. Kishori Devi was restrained from acting as partner of the applicant firm and therefore, she was under "legal disability" to make her stand against the demerger as the nub of the grievance is that the title of the firm "Dainik Bhaskar" is owned by the applicant firm and not by respondent No.1 Company. It was submitted that legal disability conferred on the applicant has been erased on 21.09.2011 by the order of the learned Single Judge of Allahabad High Court, Lucknow Bench by virtue of which the orders passed by the Registrar in 2003 and 2004 restraining Smt. Kishori Devi to act as partner of the applicant firm has been set aside, by judgment and order dated 21.09.2011. Therefore, it was submitted that the legal disability is the main ground of delay if any, otherwise according to the applicant actually there was no delay, if 21.09.2011 - date of order passed by the Allahabad High Court, Lucknow Bench removing the legal disability is taken as the starting point of limitation. Therefore, it was requested to condone the delay of 1790 days in filing the present OJMCA. Having served with the copy of the said application, a strong objection was raised by the learned counsel appearing on behalf of the contesting respondent submitting that there is a suppression of material fact in the application in as much as it has not been pointed out that order dated 21.09.2011 passed by the learned Single Judge of the Lucknow Bench of Allahabad High Court has been set aside by the Division Bench and the matter is remanded to the learned Single Judge. It was submitted that the aforesaid fact has not been mentioned in the application and the same has been suppressed. Shri Oza, learned counsel appearing on behalf of the applicant fairly conceded that in the application, there is no reference to the order passed by the Division Bench of the Allahabad High Court quashing and setting aside the order dated 21.09.2011 passed by the learned Single Judge. However, he submitted that there was no malafide intention on the part of the applicant in not disclosing the said fact in the application and it was bonafide error on the part of the learned advocate who drafted the said application. He tendered unconditional apology for not disclosing the aforesaid fact in the application and he requested to accept the same and permit him to withdraw the said application with a liberty to file a fresh application on the same subject matter with full facts and accurate pleadings. This Court accepted the request made by Shri Oza, learned counsel appearing on behalf of the applicant and accepted the unconditional apology and permitted the applicant to withdraw the said application (which was submitted to condone the delay of 1790 days in preferring the OJMCA) with a liberty to file a fresh application on the same subject matter with full facts and accurate pleadings. Accordingly the said application stood dismissed as withdrawn with above liberty.
[2.2] It is to be noted that thereafter no fresh application to condone the delay in preferring OJMCA has been preferred by the applicant. Therefore, at the time of hearing of the present application when it was submitted on behalf of the respondents that if the present application is also under Order 47 Rule 1 of the CPC, in that case, there is a delay and there is no application to condone the delay and therefore, the present application is not maintainable, Shri Prashant Chandra, learned counsel appearing on behalf of the applicant has declared at the Bar that the present application be treated as application under Section 392 of the Act, 1956 only and the present application may not be treated as having been filed under Order 47 Rule 1 of the CPC. Under the circumstances, present application is treated to have been filed under Section 392 of the Act, 1956 only and therefore, this Court is required to consider the present application considering Section 392 of the Act, 1956 only.
[2.3] It is also required to be noted at this stage that the learned counsels appearing on behalf of the respective parties have addressed the Court only with respect to prayer in terms of para 5(b) only and have not made any submissions with respect to prayer in terms of para 5(c). Therefore, this Court is required to consider the present application under Section 392 of the Act, 1956 only by which the applicant herein has requested to modify the Scheme of Arrangement entered into between the "Demerged Company" and the "Resulting Company" - respondents herein which has been sanctioned by this Court vide order dated 10.10.2006 while passing the order in Company Petition No.126 of 2006 connected with Company Petition No.267 of 2006.
[3.0] It is required to be noted that after the arguments were concluded, the learned counsel appearing on behalf of the respective parties were requested to submit the written submissions if they so choose, on or before 11.05.2012. However, no written submissions have been received by the Court from the applicant side till the date on which Court dictated the judgment and written submissions were received only from learned counsel appearing on behalf of respondent No.2.
[4.0] Before considering the present application on merits, facts leading to the present application deserve to be considered which in nut-shell are as under:
[4.1] That respondent Nos.1 and 2 herein - M/s. Writers & Publishers Limited ("Demerged Company") and D.B. Corp Limited ("Resulting Company") submitted the Company Petition Nos.126 of 2006 in Company Application No.267 of 2006 before this Court under Section 391 read with Section 394 of the Act, 1956 for sanction of the Scheme of Arrangement in the nature of demerger and transfer of the publishing business of the "Demerged Company"
into the "Resulting Company". That prior thereto vide order dated 13.06.2011 passed in Company Application No.226 of 2006, the meeting of the equity and preferential shareholders of the "Demerged Company" were dispensed with in view of written consents of all the equity preferential shareholders of the "Demerged Company" which were produced on record. As per the order of this Court, meeting of the secured creditors and unsecured creditors of the "Demerged Company" were convened and it was submitted that the secured and unsecured creditors of the "Demerged Company" unanimously approved the scheme in the meeting convened on 18.04.2006. That vide order dated 13.06.2011 passed in Company Application No.268 of 2006, the meeting of the equity preferential shareholders of the "Resulting Company" were dispensed with in view of the consent letters from the shareholders approving the scheme placed on record. It also appears that the extraordinary general meeting of the equity shareholders of the "Resulting Company" was duly convened and, equity shareholders passed a resolution with requisite majority approving share capital of the "Resulting Company". It appears that thereafter the aforesaid petitions came to be admitted and the same were duly advertised in the newspapers (Indian Express, English and Divya Bhaskar, Gujarati) both of Ahmedabad Editions. That no one came forward with any objection to the said petitions even after the publication. At the time of hearing of the aforesaid petitions, the learned Central Government Standing Counsel appeared on behalf of the Central Government and placed on record the affidavit dated 11.09.2006 filed by the Deputy Registrar of the Companies along with the letter from the Regional Director, by which the Regional Director decided not to oppose the petitions.
[4.2] That thereafter having heard the learned counsel appearing on behalf of the respective applicants - respondents herein i.e. the learned Advocates appearing on behalf of the "Demerged Company" as well as the "Resulting Company" and as such there was no opposition to the said applications by anybody and considering the proposed scheme of demerger and having satisfied with the proposed demerger which was found to be in the interest of the Company, their members and creditors, this Court allowed both the Company Petitions and sanctioned the Scheme of Arrangement between the "Demerged Company" and the "Resulting Company" -
respondents herein by common judgment and order dated 10.10.2006. That thereafter the Scheme of Demerger sanctioned by this Court by order dated 10.10.2006 has been fully implemented and acted upon and thereafter after a period of almost 5 years, the applicant Dwarka Prasad Agarwal and others a partnership firm through its partner Smt. Kishori Devi has preferred the present OJMCA under Section 392 of the Act, 1956 to modify the Scheme of Arrangement between the "Demerged Company" and the "Resulting Company" -
respondents herein.
[5.0] Shri Prashant Chandra, learned Senior Advocate has appeared with Shri Y.N. Oza, learned Senior Advocate on behalf of the applicant and Shri U.K. Chaudhary, learned Senior Advocate on behalf of respondent No.1 - "Demerged Company" and Shri S.N. Soparkar, learned counsel with Shri A.S. Vakil, learned advocate appearing on behalf of respondent No.2 - the "Resulting Company".
[5.1] At the outset it is required to be noted that the main ground on which the present application has been filed by the applicant is with respect to suppression of material facts including the facts pertaining to various litigations mentioned in para 4(a) of the present application and that there has been suppression of judgment and order dated 07.07.2003 passed by the Hon'ble Supreme Court in the case of Dwarka Prasad Agarwal (D) By LRs. and Anr. vs. B.D. Agarwal and Ors. reported in (2003)6 SCC 230, by which in a dispute with respect to ownership of the newspaper namely "Dainik Bhaskar"
(the business of which is now transferred to "Resulting Company"), the Hon'ble Supreme Court set aside the order dated 03.09.1992 passed by the Registrar of Newspapers for India by which pursuant to the order dated 29.06.1992 passed by the High Court of Madhya Pradesh at Jabalpur in Case No.1182 of 1992, the "Demerged Company" - M/s. Writers and Publishers Limited, Bhopal was declared to be the owner of "Dainik Bhaskar" came to be set aside. Shri Chandra, learned counsel appearing on behalf of the applicant has vehemently submitted that in view of the above judgment and order passed by the Hon'ble Supreme Court and the dispute with respect to the ownership of the "Dainik Bhaskar" was at large and/or atleast the order passed by the Registrar, Newspapers for India declaring the "Demerged Company" as owner of the "Dainik Bhaskar" came to be set aside, the respondent No.1 - "Demerged Company" atleast was required to declare the same before this Court in the aforesaid Company Petition. Therefore, it is submitted that there is a suppression of material fact and while getting the scheme sanctioned, respondent No.1 has not declared the correct facts. It is further submitted by Shri Chandra, learned counsel that even number of other litigations / various proceedings pending between the parties as mentioned in para 4(a) of the application, though required to be declared, were not declared while submitting the application for demerger of the scheme by respondent No.1. It is submitted that if correct facts would have been pointed out, this Court might not have sanctioned the Scheme of Demerger.
[5.2] Shri Chandra, learned counsel appearing on behalf of the applicant has further submitted that as such "Dainik Bhaskar" was owned by the partnership firm M/s. Dwarka Prasad Agarwal & Brothers And the said partnership firm was the member / shareholder of the respondent Company i.e. M/s. Writers & Publishers Limited. It is further submitted that as such Dwarka Prasad Agarwal & Brothers was constituted of Dwarka Prasad Agarwal, Visambardas Dayal and Mahesh - two sons of Keshavdev Agrawal and Ramesh Chandra Agarwalchandra Agrawal, as son of Dwarka Prasad Agarwal in the year 1972 as partners thereof. Each partner contributed towards the capital of the firm in the shares to the extent of 25%, 30%, 30% and 15% respectively. It is submitted that prior to the constitution of the said firm, a newspaper known as "Dainik Bhaskar" was being published by Dwarka Prasad Agarwal and his name was recorded in the Registrar of Newspapers for India (hereinafter referred to as "RNI"). It is submitted that the said Dwarka Prasad Agarwal was the karta of larger HUF consisting of himself and his partners. He had two wives namely Kasturidevi and Kishori Devi (applicant herein). It is submitted that the firm transferred the business of publication of Dainik Bhaskar, at Gwalior to newly incorporated M/s. Bhaskar Publication and Allied Industries Pvt. Ltd. of which the Dwarka Prasad Agarwal was the life time Managing Director and Chairman and therein Bishambhar Dayal Agarwal and his son Ramesh Chandra Agarwal were shareholders and Directors. A printing press of which Dwarka Prasad Agarwal was the owner, was transferred to the said Company for the purpose of printing of the afore-mentioned newspaper. It is submitted that in the annual report of the RNI, name of the firm was shown as owner of the said newspapers. It is submitted that thereafter Ramesh Chandra Agarwalchandra Agrawal concocted some document and filed a declaration on or above 13.10.1984 along with authority letter dated 10.01.1983 from Dwarka Prasad Agarwal in respect of publication of Dainik Bhaskar, at Indore for admitting to be the owner of the newspaper and the Company as a lessee. It is submitted that certain documents were created on 13.03.1985 by Ramesh Chandra Agarwal for the said purpose, one of them being an agreement of sale which is alleged to have been entered by and between the firm and a company of M/s. Writers and Publishers Limited (respondent No.1), the genuineness or otherwise of which was the subject matter of a suit being Suit No.57A/1988. It is submitted that certain other documents were also got created by the said Ramesh Chandra Agarwal in terms whereof the firm's assets, several other properties, fixed deposits, money and business including those situated at Bombay, Delhi, Raipur, Indore were divided between Dwarka Prasad Agarwal, Bishambar Dayal Agrawal, Mahesh Agrawal and Ramesh Chandra Agarwal. It is submitted that as such Dwarka Prasad Agarwal never signed the said deed of partition/family settlement as he suffered from a paralytic attack and was unable to attend business activities. It is submitted that the said deed of partition / family settlement was never acted upon and infact was questioned as forged and non-existent by Visambardas Agrawal in a proceeding before the District Magistrate, Jabalpur and same was also the subject matter of Suit No.57A/1988 which was pending in the Court of District Judge, Bhopal. It is submitted that several other suits were also filed by the parties at several places. Several proceedings were also initiated before different forums with regard to the publication of said newspaper at different places. It is submitted that Visambardas Dayal Agrawal, questioned authentication made by the Additional District Magistrate, Jabalpur of the declaration filed by Sudhir Agrawal - son of Ramesh Chandra Agarwal for the newspaper Nav Bhaskar as regard the publication from Jabalpur as also purported order passed thereon by the said authority on 03.12.1981 and filed a Writ Petition before the Madhya Pradesh, High Court being M.P. No.802 of 1992. It is submitted that in the said proceedings various reliefs were sought. It is submitted that during the pendency of the writ proceedings, the petitioner therein (Bishambar Dayal Agarwal), Ramesh Chandra Agarwal
- son of Dwarka Prasad Agarwal and Mahesh P. Agarwal along with their sons Kailash, Sudhir and Sanjay entered into a deed of settlement. It is submitted that though the Dwarka Prasad Agarwal was respondent therein and although his rights as partners were directly affected thereby, he was neither a party to the said settlement nor a signatory to the said deed. It is submitted that said agreement was filed before the Madhya Pradesh High Court by the petitioner of that petition alleging that he and the contesting respondents have reached a full and final settlement of "disputes raised in the petition and other connected matters" pending before various courts and the bodies and the writ petition be disposed of in terms of the said agreement. The said settlement was accepted and the writ petition came to be disposed of by the Madhya Pradesh High Court in terms thereof on 29.06.1992. It is further submitted that pursuant to the order passed by the Madhya Pradesh High Court dated 29.06.1992, RNI altered the name of the owner of the "Dainik Bhaskar" in its register from the firm (partnership firm) to M/s. Writers & Publishers Limited on or above 03.09.1992. It is submitted that the Dwarka Prasad Agarwal filed the review petition before the Madhya Pradesh High Court which came to be dismissed. It is submitted that the order passed by the Madhya Pradesh High Court dated 29.06.1992 disposing of the writ petition filed by the Bishambar Dayal Agarwal in terms of the settlement dated 29.06.1992 and even the order passed by the RNI dated 03.09.1992 altering the name of the owner of the "Dainik Bhaskar" from the "firm" to M/s. Writers & Publishers Limited, Bhopal were subject matter before the Hon'ble Supreme Court in a decision reported in (2003)6 SCC 230 and the Hon'ble Supreme Court allowed the said Appeals and set aside the orders dated 29.06.1992 and 13.11.1992 passed by the Madhya Pradesh High Court as also the order dated 03.09.1992 passed by the RNI. It is submitted that the Hon'ble Supreme Court also further passed the order that all actions taken and all orders passed by the statutory authorities and the Civil Courts shall also stand quashed and as a logical corollary to the said order it was held that the writ petition filed by late Bishambar Dayal Agarwal does not survive and therefore, the same also came to be dismissed. It is submitted that the Hon'ble Supreme Court further clarified that the consequence of the said order would be that the parties shall be relegated to the same position in which they were immediately prior to passing of the order dated 29.06.1992. Therefore, it is submitted by Shri Chandra, learned counsel appearing on behalf of the applicant that pursuant to the decision of the Hon'ble Supreme Court in the case of Dwarka Prasad Agarwal (Supra), the position which was prevailing prior to the order dated 29.06.1992 stood restored meaning thereby the ownership of the newspaper Dainik Bhaskar continued to be with the partnership firm M/s. Dwarka Prasad Agarwal & Brothers. Therefore, it is submitted that as the ownership of the newspaper 'Dainik Bhaskar' continued to be of the partnership firm and the order passed by RNI declaring M/s. Writers & Publishers Limited as owner of the Dainik Bhaskar dated 03.09.1992 came to be set aside, the respondent No.1 could not have submitted the scheme by transferring the business of Dainik Bhaskar to the "Resulting Company" as M/s. Writers & Publishers Limited - respondent No.1 was not the owner. It is submitted that as such the aforesaid facts as well as the decision of the Hon'ble Supreme Court was required to be pointed out before this Court while submitting the scheme. It is submitted that as such the aforesaid material facts have been suppressed by the respondent while submitting the scheme which has been subsequently sanctioned by this Court and therefore, it is requested to exercise powers under Section 392 of the Act, 1956. It is submitted by Shri Chandra, learned counsel that as such by not producing the relevant materials and suppressing the material facts, the respondent No.1 has played a fraud even with the Court and therefore, it is requested to recall the order sanctioning the Scheme of Arrangement which the respondent No.1 has obtained by suppressing the material facts and by playing the fraud. It is submitted that fraud vitiates everything and any order which has been obtained by playing fraud with the Court is a nullity. It is further submitted by Shri Chandra, learned Counsel that while submitting the scheme for arrangement, the correct facts ought to have been brought on record. It is further submitted that as such nothing should have been concealed and it was not open for the respondent to consider which facts were relevant.
[5.3] Shri Chandra, learned counsel appearing on behalf of the applicant has relied upon the decision of the Hon'ble Supreme Court in the case of Ganpatbhai Mahijibhai Solanki vs. State of Gujarat and Ors. reported in AIR 2009 SC (Supp) 986 by submitting that as held by the Hon'ble Supreme Court, order obtained by practicing fraud on the Court is liable to be recalled. It is submitted that as observed by the Hon'ble Supreme Court, even if the application for recall is made after inordinate delay, notwithstanding the same, the order obtained from the Court by fraud or by suppression of material fact is liable to be recalled, as the fraud vitiates all solemn acts. Shri Chandra, learned counsel has also relied upon the following decisions of the Hon'ble Supreme Court in support of his submission that as respondent No.1 while submitting the scheme before this Court had not pointed out the correct facts and by suppressing the material facts has obtained the order by committing fraud on the Court and therefore, the order passed by this Court sanctioning the scheme for arrangement is to be recalled.
(1994)1 SCC 1 S.P. Chengalvaraya Naidu (Dead) By LRs vs. Jagannath (dead) By LRs and Ors.
(1996)5 SCC 550 Indian Bank vs. Satyam Fibres (India) Pvt. Ltd.
(2000)3 SCC 581 United India Insurance Co. Ltd. vs. Rajendra Singh & Ors.
(2003)8 SCC 311 (Para 18) Ram Preeti Yadav vs. U.P. Board of High School and Intermediate Education and Ors.
(2005)4 SCC 605 MCD vs. State of Delhi and Anr.
(2005)7 SCC 605 Bhaurao Dagdu Paralkar vs. State of Maharashtra and Ors.
(2007)4 SCC 221 A.V. Papayya Sastry and Ors. vs. Govt. of A.P. and Ors.
(2008)3 SCC 440 Food Corporation of India and Anr. vs. Seil Ltd. and Ors.
[5.4] Now so far as the objection raised by the respondents with respect to the locus standi of the applicant and to move the present application under Section 392 of the Act, 1956 by the applicant Smt. Kishori Devi is concerned, Shri Chandra, learned counsel appearing on behalf of the applicant has relied upon the decision of the Hon'ble Supreme Court in the case of S.K. Gupta and Anr. vs. K.P. Jain and Anr. reported in (1979)3 SCC 54.
It is submitted that as held by the Hon'ble Supreme Court in the said decision, High Court can act under sub-Sections (1) and (2) of Section 392 of the Act, 1956 either suo motu or on the application of "any person interested in the affairs of the Company", which expression includes even non-members or non-creditors.
[5.5] Shri Chandra, learned counsel appearing on behalf of the applicant has also relied upon the recent decision of the Delhi High Court in the case of Spice Communications Ltd. and Anr.
reported in (2011) 165 Company Cases 334 (Delhi) by submitting that as held by the Delhi High Court suppression of material fact or a material document by a litigant disqualifies such a litigant from obtaining any relief. It is submitted that the Delhi High Court in the said decision modified the scheme which was already sanctioned in exercise of powers under Section 392 of the Act, 1956.
[5.6] Shri Chandra, learned counsel appearing on behalf of the applicant has also relied upon the decision of the Hon'ble Supreme Court in the case of S.K. Gupta and Anr. vs. K.P. Jain and Anr. reported in (1979) 3 SCC 54 by submitting that as held by the Hon'ble Supreme Court, High Court can act under sub-Section (1) or (2) of Section 392 either suo motu or on the application of 'any person interested in the affairs of the Company'. Therefore, it is submitted that the present application at the instance of the applicant who is very much interested in the affairs of the Company is maintainable. It is further submitted that as observed by the Hon'ble Supreme Court in the said decision, even the High Court can act suo motu.
Therefore, it is submitted that when it has been pointed out to this Court with respect to the fraud committed by respondent No.1 insofar as not disclosing the correct facts before this Court, it is requested to exercise the powers even suo motu as provided under Section 392 of the Act, 1956.
Making above submissions and relying upon above decisions and submitting that as true facts and the various litigations between the parties which were very material were not disclosed before this Court while submitting the scheme and thereby committed the fraud with the Court and thereby obtained the order of sanctioning the Scheme of Arrangement and by the said scheme, rights of the applicant are very much affected, it is requested to recall the order passed by this Court sanctioning the scheme, in exercise of powers under section 392 of the Act, 1956.
[6.0] Application is opposed by Shri U.K. Chaudhary, learned counsel appearing on behalf of respondent No.1 the "Demerged Company". It is submitted that the cause title of the application suggests that the applicant is M/s. Dwarka Prasad Agarwal and Brothers (a partnership firm), through its partner - Smt. Kishori Devi. It is submitted that however, it is nowhere stated that the partnership firm of M/s. Dwarka Prasad Agarwal & Brothers have authorized Smt. Kishori Devi to file the present application. It is submitted that even Smt. Kishori Devi has no authority to represent the applicant firm M/s. Dwarka Prasad Agarwal & Brothers It is submitted that Smt. Kishori Devi is still under "legal disability" to act as partner of M/s. Dwarka Prasad Agarwal & Brothers It is submitted that even Smt. Kishori Devi in the present application has stated that earlier she was under "legal disability" to act as partner of M/s. Dwarka Prasad Agarwal & Brothers pursuant to the restraint order / injunction passed by the Registrar of Firms, Societies and Chits, Uttar Pradesh dated 08.09.2003 and 07.01.2004, however, the same has been set aside by the learned Single Judge of Allahabad High Court, Lucknow Bench. It is submitted that however the order passed by the learned Single Judge dated 21.09.2011 passed in Writ Petition No.2996 (MH)/2004 quashing and setting aside the orders passed by the Registrar, Firms dated 08.09.2003 and 07.01.2004 has been set aside by the Division Bench of the Allahabad High Court vide judgment and order dated 15.11.2011 and the matter has been remanded to the learned Single Judge to decide the aforesaid writ petition afresh on merits and the said writ petition is still pending before the Allahabad High Court. Therefore, it is submitted by Shri Chaudhary, learned counsel appearing on behalf of respondent No.1 that the orders passed by the Registrar of Firms dated 08.09.2003 and 07.01.2004 under which Smt. Kishori Devi is restrained from acting as partner of the applicant firm are in existence and therefore, Smt. Kishori Devi is still under a "legal disability" to act as a partner of the applicant firm. Therefore, it is submitted that as such Smt. Kishori Devi has no authority to represent the applicant firm as its partner.
[6.1] Present application is opposed by the respondents also on the ground of delay and laches and on the ground that the scheme sanctioned by this Court which is sought to be recalled has been acted upon fully since long and is in operation since last more than 5 years. It is submitted that the scheme which has been sanctioned which is sought to be recalled has been sanctioned by this Court as far as back in the year 2006 and the present application under Section 392 of the Act, 1956 to modify the Scheme of Arrangement and/or recall the order sanctioning the scheme has been made after a period of 5 years of sanctioning the scheme. It is submitted that as the scheme which has been sanctioned is fully acted upon and the shares under the demerged scheme are already transferred in favour of the respective shareholders, it is requested not to recall the order by further submitting that if the Scheme of Arrangement sanctioned by this Court which is already acted upon is recalled in that case, there are likelihood of number of complications and as such it is not possible to restore the position and it is likely to create more complications and are likely to affect the rights of the other shareholders of the "Demerged Company" as well as the "Resulting Company".
[6.2] It is submitted that in the application it has been explained that as Smt. Kishori Devi was under a "legal disability" to act as partner of the applicant firm, earlier she could not file the objections to the scheme and she could not submit the application. However, in view of the order passed by the learned Single Judge quashing and setting aside the order passed by the Registrar, Firms, the said restraint is not there and therefore, she has approached and filed the present application. It is submitted that as stated herein above, in view of the order passed by the Division Bench quashing and setting aside the order passed by the learned Single Judge, the "legal disability" which according to Smt. Kishori Devi was already there prior to the order passed by the learned Single Judge, still continues.
[6.3] Now so far as the contention on behalf of the applicant of suppression of material fact and thereby committing fraud upon the Court is concerned, it is submitted by Shri Chaudhary, learned counsel appearing on behalf of respondent No.1 that as such there is no suppression at all. It is submitted that all the material facts which were required for the scheme under Section 392 and 393 and for proceedings under Sections 391 - 394 of the Act, 1956 were disclosed by respondent No.1. It is submitted that in the proceedings under Sections 391 - 394 of the Act, 1956, two type of disclosures are contemplated, viz. Disclosures as required under Section 391(2) proviso and disclosure contemplated under Sections 393(1) and (2) of the Act, 1956. It is submitted that as such the applicant has not clearly and specifically pleaded in the application whether alleged suppression would fall under Sections 393(1) and (2) of the Act, 1956. It is submitted that in any case there has not been any suppression, much less material suppression and/or non-disclosure of any facts which were statutorily required to be disclosed by the respondents in the proceedings under Sections 391 - 394 of the Act, 1956. It is further submitted that the words "and the like" at the end of proviso of Section 391(2) of the Act, 1956 is required to be considered ejusdm generis. It is submitted that the genus or the class of the items envisaged by the preceding words not having been exhaustive of genus or the class, the legislature, therefore, has supplied the words "and the like"
so as to bring in any other item of the same class or genus. In support of his above submission, he has relied upon the decision of the Hon'ble Supreme Court in the case of Express Hotels Private Limited Vs. State of Gujarat reported in AIR 1989 SC 1949.
[6.4] Now so far as the contention on behalf of the applicant with respect non-disclosure of the various litigations referred to in para 4(a) is concerned, Shri Chaudhary, learned counsel appearing on behalf of respondent No.1 has submitted that same were not disclosed as the same are totally irrelevant to the scheme proceedings/proceedings under Sections 391-394 of the Act, 1956. It is submitted that as such on a mere perusal of the "present status" of the said proceedings/litigations, it is evident that as such most of the said litigations stood disposed of and/or withdrawn as on the date the proceedings under Sections 391-394 of the Act, 1956 were commenced by the respondents. It is submitted that similarly, the non-disclosure of the judgment and order dated 07.07.2003 of the Hon'ble Supreme Court cannot also be considered to be "suppression" by the respondents, much less material suppression, which could have any bearing on the proceedings under Section 391 - 394 of the Act initiated by the respondents in the year 2006. It is submitted that the respondents are not party to most of the said proceedings/litigations. It is submitted that in any case nothing in any of the said proceedings would have any bearing on the present proceedings, which were under Sections 391 - 394 of the Act, 1956.
[6.5] On the aspect of disclosures contemplated under Section 391(2)(Proviso) and/or Section 393(1) and (2) of the Act, learned counsel appearing on behalf of respondent No.1 has relied upon the following decisions:(1970)
40 Company Cases 819 (Gujarat) Manekchowk and Ahmedabad Manufacturing Company Limited (Pages 820(i), 822(iv), 827(xxv)) (1972) 42 Company Cases 265 (Gujarat) Navjivan Mills Company Limited, Kalol (Pages 271-272) (2003) 46 SEBI and Corporate Laws 38 (Gujarat) Reliance Petroleum Limited) (Paras 29 and 31).(2003)
47 SEBI and Corporation Laws 227 (Delhi) Modiluft Limited (Pages 236, Para 16).(2004)
121 Company Cases 861 (Delhi) HCL Infosystems Limited (Paras 8-13) (2004) 122 Company Cases 854 (All) Jaypee Cement Limited (Paras 57-64, 68-72) AIR 2011 SC 1070 Sesa Industries Limited Vs. Krishna H. Bajaj & others (Paras 32-35,
37).
[6.6] Therefore, it is submitted that the non-disclosure of the various litigations enumerated in paragraph 4(a) (Pages 21-42) would not amount to suppression, much less suppression of any material fact, which could have any bearing on the proceedings under Section 391 - 394 of the Act, 1956.
[6.7] It is further submitted by Shri Chaudhary, learned counsel appearing on behalf of respondent No.1 that in a scheme proceedings, the Company Court is not concerned with the rights or liabilities of the Company vis-à-vis third party and they are in no way affected by the said proceedings. In support of his above submission, he has relied upon the decision of the Hon'ble Supreme Court in the case of Mafatlal Industries Ltd. reported in (1997) 90 Company Cases 247. It is submitted that the sanction of the Scheme of Arrangement, by this Hon'ble Court's judgment and order dated 10.10.2006 cannot and shall not affect any of the said proceedings that might have been pending on the date of sanction of the Scheme of Arrangement or that may have been commenced thereafter in relation to any of the liabilities arising from past activities. It is submitted that therefore, the so-called non-disclosure has no consequence at all.
[6.8] It is further submitted by Shri Chaudhary, learned counsel appearing on behalf of respondent No.1 that the judgment and order dated 10.10.2006 passed by this Court sanctioning the Scheme of Arrangement is sought to be modified and/or altered and/or reviewed also on the ground that as on the date of proceedings under Sections 391-394 of the Act, 1956, the ownership of the title "Dainik Bhaskar"
was not with the respondent No.1 - Writers and Publishers Limited, but was in fact with M/s. Dwarka Prasad Agarwal & Brothers (relying upon the decision of the Hon'ble Supreme Court dated 07.07.2003). It is submitted that at the outset, the proceedings under Sections 391-394 of the Act, 1956 are not proceedings for the purpose of determination of the rights and title of the parties concerned. It is submitted that while exercising jurisdiction under Sections 391-394 of the Act, 1956, the Court cannot held an inquiry and go into the questions as to who is entitled to the ownership of the brands, names, titles, etc. It is submitted that it is totally outside the purview of Section 391 of the Act, 1956. It is submitted that as such any sanction accorded by the Hon'ble Court to the Scheme of Arrangement could not be construed as taking away the rights of the parties, if they had any, and to that extent, such rights, if any, would stand protected. In support of his submission he has relied upon the decision of the Karnataka High Court in the case of Kirloskar Electric Company Limited reported in (2003) 43 SEBI and Corporate Laws 186 (Karnataka).
[6.9] It is further submitted by Shri Chaudhary, learned counsel appearing on behalf of respondent No.1 that even as such the judgment and order dated 07.07.2003 of the Hon'ble Supreme Court has nowhere determined the ownership of the title "Dainik Bhaskar" as sought to be contended on behalf of the applicant.
[6.10] It is further submitted by Shri Chaudhary, learned counsel that infact after the decision of the Hon'ble Supreme Court dated 07.07.2003, there was a further order passed by the RNI which was in favour of respondent No.1 and Ramesh Chandra Agarwal dated 18.06.2004. It is submitted that said order was challenged by one Mahesh Prasad Agarwal by way of writ petition before the Delhi High Court and the said challenge failed upto the Hon'ble Supreme Court.
[6.11] It is further submitted by Shri Chaudhary, learned counsel appearing on behalf of respondent No.1 that even as such Smt. Kishori Devi has subsequently filed a Civil Suit No.1663/2011 before the Hon'ble Delhi High Court for a declaration that the firm M/s. Dwarka Prasad Agarwal and Brothers is the sole and exclusive owner of the title "Dainik Bhaskar" all over India to the exclusion of any other person and the said suit is pending. It is, therefore, submitted that Smt. Kishori Devi and M/s. Dwarka Prasad Agarwal and Brothers are not the owners of title "Dainik Bhaskar" and infact the issue is sub-judice at the instance of and in the proceedings initiated by Smt. Kishori Devi herself. Therefore, it is submitted that the contention on behalf of the applicant / Smt. Kishori Devi relying upon the judgment of the Hon'ble Supreme Court dated 07.07.2003 that M/s. Dwarka Prasad Agarwal and Brothers is the owner of the title "Dainik Bhaskar" is absolutely baseless. Therefore, it is submitted that there cannot be any review / modification or alteration of this Hon'ble Court's order dated 10.10.2006 sanctioning the Scheme of Arrangement on the ground that respondent No.1 M/s. Writers & Publishers Limited was not the owner of the title "Dainik Bhaskar".
[6.12] It is further submitted by Shri Chaudhary, learned counsel appearing on behalf of respondent No.1 that as such even neither the applicant partnership firm nor Smt. Kishori Devi was the shareholder nor the creditor of respondent No.1. It is further submitted that the case on behalf of Smt. Kishori Devi based on the certificate dated 26.12.1987 that M/s. Dwarka Prasad Agarwal and Brothers hold 5000 redeemable preference shares of respondent No.1 - Writers and Publishers Limited, through its erstwhile partner Dwarka Prasad Agarwal, has no substance. It is submitted that the said Dwarka Prasad Agarwal has never been a member of respondent No.1 - Writers and Publishers Limited on behalf of M/s. Dwarka Prasad Agarwal and Brothers. It is submitted that for an individual to hold shares on behalf of the partnership firm, the filing of the necessary declaration, in terms of Section 187-C(1)(2)(3) of the Act, 1956, with respondent No.1 Company is necessary. It is submitted that no such declaration has been filed and consequently respondent No.1 Company had no occasion to file the form with the Registrar of Companies as per Section 187-C (4) of the Act, 1956. It is submitted that even in the register maintained by respondent No.1 Company, nowhere M/s. Dwarka Prasad Agarwal and Brothers is shown to be the shareholder. Therefore, it is submitted that when the Scheme of Arrangement was sanctioned, neither Dwarka Prasad Agarwal nor the partnership firm was the shareholder and/or, for the purpose of proceeding under Sections 391
- 394 of the Act, 1956 for sanctioning of the Scheme of Arrangement.
[6.13] It is further submitted that it is an admitted position that at the relevant time the applicant did not raise any objection opposing the Scheme of Arrangement and after following due procedure as required under the Act, 1956, this Court has sanctioned the scheme which is not required to be recalled and/or reviewed by this Court in exercise of powers under Section 392 of the Act, 1956.
[6.14] It is further submitted that the present application has been preferred under Section 392 of the Act, 1956. It is submitted that Section 392(1) contemplates powers to supervise "the carrying out the compromise or an arrangement", or giving such directions or making such modifications in the compromise or arrangement for the proper working of the compromise or arrangement. It is submitted that Section 392(1) does not contemplate making of an order of recalling "wholly"
the order sanctioning the compromise or arrangement.
[6.15] It is further submitted that Section 392(2) contemplates that if the Hon'ble Court is satisfied that the sanctioned compromise or arrangement cannot be worked satisfactorily, with or without modifications, the Hon'ble Court may make an order for winding up the company. It is submitted that there is no pleading that the "sanctioned scheme of arrangement"
cannot be worked satisfactorily. There is also no prayer for winding up of the Company. Therefore, it is submitted that no relief can be granted to the applicant in the present application which is under Section 392 of the Act, 1956.
[6.16] It is further submitted by Shri Chaudhary, learned counsel appearing on behalf of respondent No.1 that as stated herein above, neither M/s. Dwarka Prasad Agarwal and Brothers, nor Smt. Kishori Devi have the right/locus in law, to maintain the present Application as neither of them are creditors and/or shareholders of respondent No.1 - M/s. Writers and Publishers Limited. It is submitted that the order under Section 392(1)(b) of the Act, 1956 can be made only at the instance of shareholder or creditor of the Company. It is submitted that insofar as Smt. Kishori Devi is concerned, she is purporting to act as a partner of "M/s. Dwarka Prasad Agarwal and Brothers"
and even as on today she is under a "legal disability"
to act as a partner of M/s. Dwarka Prasad Agarwal and Brothers.
[6.17] Now so far as the reliance placed upon the decision of the Hon'ble Supreme Court in the case of S.K. Gupta and Anr. (Supra) on the locus of the applicant, it is submitted by Shri Chaudhary, learned counsel appearing on behalf of respondent No.1 that the said decision would not be applicable to the facts of the present case. It is submitted that assuming that the locus of the applicant i.e. either M/s. Dwarka Prasad Agarwal and Brothers or Smt. Kishori Devi is not relevant, in that case also, no such relief which is sought in the present application can be granted in an application under Section 392(1) of the Act, 1956. It is submitted that admittedly the present application is under Section 392(1) of the Act, 1956 seeking "modification" of the sanctioned Scheme of Arrangement. It is submitted that proposed modifications or directions are not specified. It is further submitted that as such in addition to not specifying the modifications, there is no pleading that the proposed modifications are necessary "for the proper working of the sanctioned Scheme of Arrangement"
and simultaneously there is also no pleading to suggest that the Scheme of Arrangement as sanctioned cannot properly work / implemented. It is submitted that infact the prayer for modification of the sanctioned Scheme of Arrangement is because "it causes material prejudice to the rights of the applicant." Therefore, it is submitted that the powers of this Court cannot be invoked (even suo motu) under Section 392(1) of the Act, 1956, for giving directions or for making modifications in the sanctioned Scheme of Arrangement because the same allegedly causes prejudice to the alleged rights of the applicant/third parties. It is submitted that in absence of any pleading to even remotely suggest that the sanctioned Scheme of Arrangement cannot be worked satisfactorily, with or without modification, the present application cannot be treated as an application under Section 392(2) of the Act, 1956. It is further submitted that the powers under Section 392 of the Act, 1956 cannot be exercised to recall/modify the scheme sanctioned under Section 391 of the Act, 1956 for alleged violation of third party rights.
In support of his above submission, Shri Chaudhary, learned counsel appearing on behalf of respondent No.1 has relied upon the decision of this Court in the case of Divya Vasundhara Financiers Pvt. Ltd. vs. Kamlakar Narayan Samant and Anr. reported in (1984) 56 Company Cases 487 (Gujarat).
[6.18] Present application is also opposed by respondents on the ground of delay and laches. It is submitted by Shri Chaudhary, learned counsel appearing on behalf of respondent No.1 that the Scheme of Arrangement has been sanctioned as far as back on 10.10.2006 and the same has been fully implemented. It is submitted that as such the sanctioned Scheme of Arrangement has taken effect long back and third party rights are also created.
By making above submissions and relying upon above decisions, it is requested to dismiss the present application.
[7.0] Present application is opposed by Shri Saurabh Soparkar, learned counsel appearing on behalf of respondent No.2. He has also opposed the present application on the grounds on which the application is opposed by respondent No.1.
[7.1] In addition it is submitted by Shri Soparkar, learned counsel appearing on behalf of respondent No.2 - "Resulting Company" that even whether Smt. Kishori Devi is the partner of M/s. Dwarka Prasad Agarwal and Brothers or not is sub-judice in the suit filed by Smt. Kishori Devi herself before the Delhi High Court. Therefore, it is submitted that Smt. Kishori Devi cannot represent the partnership firm M/s. Dwarka Prasad Agarwal and Brothers as its partner. It is submitted that as such by the present application Smt. Kishori Devi wants to take the advantage / benefit in the proceedings pending before various Courts.
[7.2] It is further submitted by Shri Soparkar, learned counsel appearing on behalf of respondent No.2 that even after the order passed by the Hon'ble Supreme Court dated 07.07.2003, RNI passed a further order on 18.06.2004 by which M/s. Writers & Publishers Limited, Bhopal is considered to be the owner of "Dainik Bhaskar" and the said copy was also send to Smt. Kishori Devi, still she did not challenge the same. It is submitted that as such the order dated 18.06.2004 passed by the RNI was pursuant to the order passed by the Madhya Pradesh, High Court dated 08.12.2003.
[7.3] It is further submitted by Shri Soparkar, learned counsel appearing on behalf of respondent No.2 that the Scheme of Arrangement sanctioned by this Court would be as such binding to its shareholders, creditors etc. and it does not bind the third parties. Relying upon decisions in the case of General Radio and Appliances Co. Ltd. and Ors. vs. M.A. Kihader (Decd.) By Legal Representatives reported in 60 Company Cases 1013;
Punjab National Bank Ltd. vs. Shri Vikram Cotton Mills Ltd. reported in (1970) 40 Company Cases 927 (SC) and Mafatlal Industries Ltd. reported in (1997) 90 Company Cases 247, it is submitted that by sanctioning such a Scheme of Arrangement, rights of the petitioner/Smt. Kishori Devi if any are not taken away and/or in any way affected.
[7.4] Now, so far as the allegation of the applicant with respect to non-disclosure of the pending litigations and/or history of the litigation, Shri Soparkar, learned counsel appearing on behalf of respondent No.2 has also relied upon the decision in the case of Mafatlal Industies Ltd. reported in 87 Company Cases 792. It is submitted that the word "and the like" referred to in proviso(2) of Section 392 of the Act, 1956, it is submitted that it is required to be read along with other disclosures mentioned in the said provision. It is further submitted that any litigation is not required to be disclosed while submitting the Scheme of Arrangement under Sections 391-392 of the Act, 1956. It is submitted that even as held by the Hon'ble Supreme Court in every litigation not having financial implication is not required to be disclosed. In support of his above submissions, he has relied upon the decision of the Hon'ble Supreme Court in the case of Express Hotels Pvt. Ltd. vs. State of Gujarat and Anr. reported in AIR 1989 SC 1949 as well as the recent decision of Hon'ble Supreme Court in the case of Sesa Industries Ltd. vs. Krishna H. Bajaj and Ors. reported in AIR 2011 SC 1070.
[7.5] On applicability of Section 392 of the Act, 1956, Shri Soparkar, learned counsel appearing on behalf of the "Resulting Company" has relied upon the decision of the Hon'ble Supreme Court in the case of S.K. Gupta and Another vs. K.P. Jain and Another reported in 49 Company Cases 342 as well as the decision of this Court in the case of Divya Vasundhara Financiers Pvt. Ltd. vs. Kamlakar Narayan Samant and Anr. reported in 56 Company Cases 487.
[7.6] Shri Soparkar, learned counsel appearing appearing on behalf of respondent No.2 has also opposed the present application on the ground of delay and laches. It is further submitted that the Scheme of Arrangement has been sanctioned by this Court by order dated 10.10.2006 and the present application has been preferred after a period of 5 years and in the meantime the Scheme of Arrangement has been fully implemented and the proportionate shares which were required to be allotted to respective shareholders under the Scheme have already been allotted. Therefore, it is submitted that when the Scheme of Arrangement has been fully implemented since last five years if the same is modified and/or recalled, in that case, it is likely to create number of complications. Therefore, it is requested not to exercise powers and/or modify the scheme.
By making above submissions, it is requested to dismiss the present application.
[7.7] In reply and on the submissions made by the learned Counsel appearing on behalf of the respondents with respect to the locus of Smt. Kishori Devi, it is submitted by Shri Chandra, learned counsel appearing on behalf of the applicant that as such the rights and locus of Smt. Kishori Devi had been approved by the Hon'ble Supreme Court in the decision dated 07.07.2003. It is submitted that in any case, respondent No.1 was required to bring the judgment of the Hon'ble Supreme Court dated 07.07.2003 to the notice of this Court. It is further submitted that as such subsequently respondent No.2 in its prospectus issued in the year 2009 have disclosed the dispute with respect to ownership. Therefore, it is submitted that when respondent No.2 has thought it fit to declare the same in the prospectus, it was the duty of respondent No.1 to disclose the dispute with respect to the ownership of the "Dainik Bhaskar". It is submitted that by not disclosing the same and obtaining the order of sanctioning the scheme, respondent No.1 has committed fraud.
[7.8] Now so far as the contention and submissions on behalf of the respondents with respect to the scope and ambit of this Court in exercise of powers under Section 392 of the Act, 1956, relying upon Section 2(29) of the Act, 1956, it is submitted that "modified" and "modification" shall include the making of additions and omissions. It is submitted that therefore, even the order can be passed in exercise of powers under sections 393 and 394 also.
[7.9] It is further submitted that any order passed by RNI subsequent to the order passed by the Hon'ble Supreme Court dated 07.07.2003 declaring respondent No.1 as owner of the "Dainik Bhaskar" are nullity as the same are just contrary to the direction of the Hon'ble Supreme Court in the order dated 07.07.2003 and therefore, no reliance can be placed upon the order passed by the RNI which is contrary to the direction of the Hon'ble Supreme Court. It is further submitted by Shri Chandra, learned counsel appearing on behalf of the applicant that it is not true to say that the scheme sanctioned under Section 391 is not in rem and binding to the Company, its shareholders and creditors etc. only.
Making above submissions, it is requested to allow the present application and to recall and modify the order dated 10.10.2006 passed by this Court sanctioning the Scheme of Arrangement between respondent Nos.1 and 2 by which the rights of the applicant are directly affected and such rights were not disclosed by this Court.
[8.0] Heard learned counsels appearing for respective parties at length. At the outset it is required to be noted that by way of present application, the applicant herein M/s. Dwarka Prasad Agarwal and Brothers through its partner Smt. Kishori Devi has prayed to recall and modify the Scheme of Arrangement entered into between the "Demerged Company" and the "Resulting Company" (respondent Nos.1 and 2) which has been sanctioned by this Court vide order dated 10.10.2006, alleging inter-alia that it causes material prejudice to the rights of the applicant and restraining the D.B. Corp Limited (respondent No.2 herein -
"Resulting Company") from using the title of "Dainik Bhaskar" Hindi Daily newspaper. It is also required to be noted at this stage and as recorded herein above that the learned counsel appearing on behalf of the applicant has declared at the Bar that the present application be treated under Section 392 of the Act, 1956 only. It is to be noted that earlier it was not disclosed and/or clarified under which provision of law the present application has been submitted i.e. either under Section 392 of the Act, 1956 or the review jurisdiction under Order 47 Rule 1 of the CPC. It is also to be noted that infact considering the present application as a review application under Order 47 Rule 1 of the CPC, the applicant did submit application to condone the delay of 1790 days which came to be dismissed as withdrawn as the correct facts were not disclosed in the said application and thereafter no fresh application has been filed and thereafter it has been declared by the learned counsel appearing on behalf of the applicant that the present application may not be treated as an application under Order 47 Rule 1 of the CPC and be treated as under
Section 392 of the Act, 1956 only. Therefore, present application is to be considered under Section 392 of the Act, 1956 and the present application is required to be considered within the scope and ambit of Section 392 of the Act, 1956 only.
[8.1] At the outset it is required to be noted that vide order dated 10.10.2006 passed in Company Petition No.126 of 2006 connected with Company Petition No.267 of 2006, this Court has sanctioned the Scheme of Arrangement under Sections 391 - 394 of the Act, 1956, between respondent No.1 M/s. Writers & Publishers Limited ("Demerged Company") and respondent No.2 D.B. Corp Limited ("Resulting Company"). It is also required to be noted at this stage that this Court sanctioned the scheme which was submitted by respondent No.2 after following due procedure as required under the provisions of the Act, 1956 i.e. after obtaining the consent of all the shareholders, creditors etc. of the respective Companies and after inviting the objections after issuing public notice inviting the objections, if any, against the proposed Scheme of Arrangement. As all the shareholders and creditors etc. of both the Companies approved the Scheme of Arrangement and nobody raised any objection against the proposed Scheme of Arrangement, this Court has sanctioned the scheme by order dated 10.10.2006 and the same has been fully implemented and/or acted upon and is in operation since last five years. It is also required to be noted at this stage that under the Scheme of Arrangement which is sanctioned, certain things are required to be done i.e. transfer allotment of shares etc. to the shareholders of the respective Companies proportionately as mentioned in the Scheme of Arrangement which has been sanctioned and it is reported that respective shares are already allotted under the Scheme of Arrangement which has been sanctioned. That after a period of five years of sanctioning the Scheme of Arrangement by this Court, the applicant herein has preferred the present application under Section 392 of the Act, 1956 to modify the Scheme submitting that by sanctioning of such a Scheme, the rights of the applicants have been affected.
[8.2] It is the case on behalf of the applicant relying upon the decision of the Hon'ble Supreme dated 07.07.2003 that the Hon'ble Supreme Court has approved and considered the rights of Smt. Kishori Devi in the affairs of M/s. Dwarka Prasad Agarwal & Brothers and as legal heir of Dwarka Prasad Agarwal and that the order passed by the RNI dated 03.09.1992 declaring Ramesh Chandra Agarwal as owner / declaring respondent No.1 M/s. Writers and Publishers Limited as owner of "Dainik Bhaskar" came to be set aside by the Hon'ble Supreme Court and the position which was prevailing prior to order dated 29.06.1992 came to be restored by the Hon'ble Supreme Court and prior to order dated 29.06.1992 the ownership of the "Dainik Bhaskar" was with the partnership firm M/s. Dwarka Prasad Agarwal & Brothers and the same was not disclosed by respondent No.1 by submitting the Scheme of Arrangement and therefore, respondent No.1 played a fraud and by not disclosing the material facts and various litigations mentioned in para 4(a) of the application have played fraud and therefore, the order passed by this Court dated 10.10.2006 sanctioning the Scheme of Arrangement is required to be modified. On the aspect that why at the relevant time the applicant - Smt. Kishori Devi did not submit the objections and/or she has submitted the present application after five years, it is the case on behalf of the applicant Smt. Kishori Devi that at the relevant time she was under "legal disability" as there was a restraint order passed by Registrar of Firms, Societies and Chits, Uttar Pradesh under which Smt. Kishori Devi was restrained from acting as a partner of partnership firm M/s. Dwarka Prasad Agarwal & Brothers and the same came to be set aside by the learned Single Judge of the Allahabad High Court, Lucknow Bench in the year 2011 by order dated 21.09.2011 and therefore, as the said "legal disability" has been removed immediately thereafter, the present application has been preferred. The locus of Smt. Kishori Devi to represent the applicant - partnership firm
- M/s. Dwarka Prasad Agarwal and Brothers and to act as partner of the partnership firm has been seriously disputed by respondent No.1. It is also the case on behalf of the respondent No.1 that still even as on today Smt. Kishori Devi is under the legal disability and the order passed by the learned Single Judge quashing and setting aside the restraint order passed by the Registrar of Firms has been set aside by the Division Bench. It is to be noted that it is the case on behalf of Smt. Kishori Devi that earlier, she was under "legal disability" pursuant to the restraint order passed by Registrar of Firms, which has been set aside by the learned Single Judge vide judgment and order dated 21.09.2011 and therefore, there is no restraint order now and therefore, she is not under "legal disability" now. However, it is not in dispute and it is an admitted position even by the applicant that the order passed by the learned Single Judge of the Madhya Pradesh High Court quashing and setting aside the order passed by the Registrar of Firms restraining Smt. Kishori Devi from acting as a partner of applicant partnership firm has been set aside by the Division Bench vide judgment and order dated 15.11.2011 and the matter is remanded to the learned Single Judge for passing a fresh order in accordance with law and on merits and the petition before the Madhya Pradesh High Court is still pending. Therefore, as such Smt. Kishori Devi would be still under "legal disability" and she is restrained from acting as partner of the partnership firm M/s. Dwarka Prasad Agarwal and Brothers. Therefore, as such Smt. Kishori Devi cannot represent the applicant partnership firm as its partner.
[8.3] Even otherwise it is required to be noted that even the very Smt. Kishori Devi in the year 2011 has filed a Civil Suit before the Delhi High Court being Civil Suit No.1663/2011 for a declaration to declare that she is partner of M/s. Dwarka Prasad Agarwal and Brothers. Under the circumstances, even the status of Smt. Kishori Devi as partner of M/s. Dwarka Prasad Agarwal & Brothers is under cloud and as stated herein above as such she is still under "legal disability" to act as partner of M/s. Dwarka Prasad Agarwal & Brothers.
[8.4] The contention on behalf of the applicant relying upon the decision of the Hon'ble Supreme Court dated 07.07.2003 that the Hon'ble Supreme Court has also approved the locus and the right of Smt. Kishori Devi as heir and legal representative of Dwarka Prasad Agarwal is concerned, considering the judgment of the Hon'ble Supreme Court dated 07.07.2003 as a whole, the aforesaid has no substance. In the decision by the Hon'ble Supreme Court, the Hon'ble Supreme Court has not crystallized the rights of the parties and even status of Smt. Kishori Devi either as heir of Dwarka Prasad Agarwal or the partner of partnership M/s. Dwarka Prasad Agarwal & Brothers. On the contrary the Hon'ble Supreme Court in the said decision has specifically observed that the disputed question with respect to the ownership of the newspapers are not decided. In any case as stated hereinabove, the very Smt. Kishori Devi has filed a Civil Suit in the year 2011 before the Delhi High Court for a declaration to declare that she is the partner of partnership firm M/s. Dwarka Prasad Agarwal & Brothers and the said suit is still pending. Under the circumstances, there is a serious dispute with respect to the locus of Smt. Kishori Devi to represent the applicant partnership firm as partner and in any case, as on today she is under "legal disability" pursuant to the restraint order passed by the Registrar of Firms and the writ petition before the Madhya Pradesh High Court against the said order is still pending. Therefore, it appears that Smt. Kishori Devi has no locus to represent the applicant partnership firm as its partner. However, it is clarified that the present finding may not be treated as the finding given by this Court with respect to status of Smt. Kishori Devi as partner and the present observation shall be confined to the present application only as the other proceedings are pending before the Madhya Pradesh High Court as well as Delhi High Court with respect to status of Smt. Kishori Devi as partner of partnership firm and the same shall be considered in accordance with law and on merits.
[8.5] Now, so far as the contention on behalf of the applicant relying upon sub-section (2) of Section 392 that even this Court can suo motu exercise powers and issue the direction and/or modify the Scheme is concerned, the aforesaid seems to be attractive but has no substance. On fair reading of sub-section (2) of Section 392, it confers power upon the Tribunal and/or the Court who has passed an order under Section 391 of the Act, 1956 to make an order of winding up of the Company if the Tribunal or the Court is satisfied that a compromise or an arrangement sanctioned under Section 391 of the Act, 1956 cannot work satisfactorily with or without modifications. That is not the case here. It is not the case on behalf of the applicant that the Scheme of Arrangement which has been sanctioned by this Court cannot work satisfactorily with or without modifications and therefore, the Company is required to be ordered to be wound up. Therefore, even the powers under sub-section (2) of Section 392 of the Act, 1956 cannot be exercised for the relief sought in the present application.
[8.6] Now, the next question which is required to be considered by this Court is whether the relief which is sought in the present application to modify the Scheme of Arrangement by this Court on the ground that the same affects the alleged rights of the applicant, in an application under Section 392 of the Act, 1956 can be granted or not? As stated herein above, the learned counsel appearing on behalf of the applicant has specifically stated at the Bar that the present application be treated to have been filed under Section 392 of the Act, 1956 only and not under Order 47 Rule 1 of the CPC.
[8.7] While considering the aforesaid issue, the scope and ambit of Section 392 of the Act, 1956 and the jurisdiction of the Act, 1956 while exercising powers under Section 392 of the Act, 1956 is required to be considered. Section 392 of the Act, 1956 reads as under:
392. Power of Tribunal to enforce compromise and arrangement.-
(1) Where the Tribunal makes an order under Section 391 sanctioning a compromise or an arrangement in respect of a company, it -
(a) shall have power to supervise the carrying out of the compromise or an arrangement; and
(b) may, at the time of making such order or at any time thereafter, give such directions in regard to any matter or make such modifications in the compromise or arrangement as it may consider necessary for the proper working of the compromise or arrangement.
(2) If the Tribunal aforesaid is satisfied that a compromise or an arrangement sanctioned under section 391 cannot be worked satisfactorily with or without modifications, it may, either on its own motion or on the application of any person interested in the affairs of the company, make an order winding up the company, and such an order shall be deemed to be an order made under section 433 of this Act.
(3) The provisions of this section shall, so far as may be, also apply to a company in respect of which an order has been made before the commencement of the Companies (Amendment) Act, 2001 sanctioning a compromise or an arrangement.
Considering Section 392 of the Act, 1956, it appears that it confers power upon the Tribunal and/or the Company Court who makes an order under Section 391 sanctioning a compromise or an arrangement in respect of a Company, (a) to supervise the carrying out of the compromise or an arrangement; and (b) to give such directions, at the time of making such order or at any time thereafter, in regard to any matter or make such modifications in the compromise or arrangement as it may consider necessary for the proper working of the compromise or arrangement. Sub-section (2) of Section 392 of the Act, 1956 confer powers upon such a Tribunal or Court to exercise powers either on his own motion or on the application of any person interested in the affairs of the Company to make the order of winding up of the Company, if the Tribunal is satisfied that such a compromise or arrangement sanctioned under Section 391 of the Act, 1956 cannot be worked satisfactorily with or without modification and such an order shall be deemed to be an order under Section 433 of the Act, 1956.
[8.8] Thus, on fair reading of Section 392 of the Act, 1956, it appears that the powers under Section 392 of the Act, 1956 can be exercised by the Tribunal or the Court who sanctioned the Scheme either at the time of making of such an order or any time thereafter with respect to the proper working of such compromise or arrangement sanctioned. The Tribunal and/or the Court who sanctioned the Scheme under Section 391 of the Act, 1956 has jurisdiction to issue directions from time to time or to make such modifications as it deems fit in the compromise or arrangement as it may consider necessary for the proper working of the compromise or arrangement. Thus, the powers under Section 392 of the Act, 1956 are required to be exercised and/or can be exercised by the Tribunal or the Court who sanctioned the Scheme under Section 391 of the Act, 1956 only with respect to the proper working of the compromise or the arrangement sanctioned. The Tribunal and/or the Court who sanctioned the scheme under Section 391 of the Act, 1956 has no other jurisdiction and/or power and/or authority under Section 392 of Act, 1956 either to recall the order of sanctioning a compromise or an arrangement and/or to modify the Scheme for the purpose other than proper working of the compromise or arrangement. On any ground other than mentioned in Section 392(1)(a) or (b), the Tribunal and/or the Court who sanctioned the scheme under Section 391 has no other power.
[8.9] It is to be noted that in the present application, the applicant has prayed to modify the scheme of arrangement entered into between "Demerged Company" and the "Resulting Company" (respondent Nos.1 and 2 herein) which has been sanctioned by this Court vide order dated 10.10.2006 on the ground that it causes material prejudice to the rights of the applicant. It is not the case of the applicant and/or it is not the prayer of the applicant to modify the scheme on the ground that the Scheme of Arrangement sanctioned as it is, is not properly workable and/or properly working. Therefore, the prayer of the applicant to modify the Scheme of Arrangement sanctioned by this Court on the alleged violation of the right of the applicant, the same is not required to be modified in exercise of powers under Section 392 of the Act, 1956. Under the circumstances, it appears that the present application under Section 392 of the Act, 1956 for the relief sought in the present application as such would not be maintainable and/or no such relief can be granted to the applicant in exercise of powers under Section 392 of the Act, 1956.
[8.10] Now, so far as the case on behalf of the applicant and/or the prayer of the applicant to modify the Scheme of Arrangement sanctioned by this Court on the ground that it causes material prejudice to the rights of the applicant is concerned, at the outset it is required to be noted that as such while sanctioning the Scheme of Arrangement, this Court has not considered the rights of any of the parties. Therefore, it cannot be said that by sanctioning the Scheme of Arrangement, any of the alleged rights of the applicant has been affected. Otherwise also, as held in the cases reported in Punjab National Bank Ltd. vs. Shri Vikram Cotton Mills Ltd. and Another reported in 40 Company Cases 927 and Mafatlal Industries Ltd. reported in 90 Company Cases 247, by sanctioning the Scheme of Arrangement and/or compromise, the rights of the applicant if any are not taken away and/or affected. Even otherwise as stated herein above the alleged rights of the applicant Smt. Kishori Devi and/or of M/s. Dwarka Prasad Agarwal & Brothers in the respondent Company and/or any other rights are yet to be adjudicated upon. The suit filed by Smt. Kishori Devi in the Delhi High Court for declaration that she be declared as partner of the partnership firm M/s. Dwarka Prasad Agarwal & Brothers is still pending. Under the circumstances, the prayer of the applicant to modify the Scheme of Arrangement sanctioned between the "Demerged Company" and the "Resulting Company" (respondent Nos.1 and 2 herein) on the ground that the same affects rights of the applicant, cannot be granted in an application under Section 392 of the Act, 1956. Such a relief and prayer is beyond the scope and ambit of Section 392 of the Act, 1956. Therefore, considering the provisions of Section 392 of the Act, 1956, it appears that the powers under Section 392 of the Act, 1956 can be exercised by the Court only for the proper implementation of the Scheme and not otherwise. The Court's power to modify the Scheme or Arrangement under Section 392 of the Act, 1956, relates only to the implementation and giving effect to the Scheme sanctioned by the Court and any thing relating to the proper implementation of the Scheme. Under the circumstances, the prayer of the applicant to modify the Scheme sanctioned by this Court cannot be granted under Section 392 of the Act, 1956 on the alleged violation of the alleged rights of the applicant if any. Under the circumstances, no relief can be granted to the applicant as sought in the present application under Section 392 of the Act, 1956.
[8.11] In view of the above as such this Court is not required to consider any other submissions on merits. However, as the learned counsel appearing for respective parties have addressed the Court at length on other issues i.e. non-disclosure of the order passed by the Hon'ble Supreme Court dated 07.07.2003 and other litigations mentioned in para 4(a) of the application, while submitting the application for sanctioning the Scheme of Arrangement between respondent Nos.1 and 2 and the effect of non-disclosure of such material and the contention on behalf of the applicant that by not disclosing the relevant materials, respondent No.1 has played a fraud upon the Court and therefore, this Court is considering the aforesaid issues also.
[8.12] It is the case on behalf of the applicant that in view of the decision of the Hon'ble Supreme Court dated 07.07.2003, the position which was prevailing prior to 29.06.1992, was required to be restored. Meaning thereby the ownership of Dainik Bhaskar continued with the partnership firm M/s. Dwarka Prasad Agarwal & Brothers as the order passed by the RNI dated 03.09.1992 came to be set aside and therefore, the same was required to be disclosed by respondent No.1 while submitting the Scheme of Arrangement. It is also the case on behalf of the applicant that there were various litigations pending between the parties as mentioned in para 4(a) of the applicant which have also not been disclosed by respondent No.1 while submitting the Scheme of Arrangement and thereby have committed the fraud and have obtained the order by committing fraud upon the Court and therefore, on the aforesaid ground it is requested to modify the scheme. On the other hand it is the case on behalf of respondent No.1 that whatever the materials required while submitting the scheme under Section 391 of the Act, 1956, as required under the law had been declared and disclosed and therefore, as such there was no concealment of relevant material which was required while submitting the application for sanctioning the Scheme. Therefore, this Court is required to consider whether respondent No.1 had withheld and/or not disclosed the relevant material as required while submitting the Scheme of Arrangement under Section 391 of the Act, 1956? For the aforesaid, the relevant provision for disclosure of relevant facts/materials while submitting the Scheme under Section 391 of the Act, 1956 are required to be referred to. Sections 391 and 393 of the Companies Act which are relevant for the aforesaid purpose which reads as under:
391. Power to compromise or make arrangements with creditors and members (1)Where a compromise or arrangement is proposed -
(A) between a company and its creditors or any class of them; or (B) between a company and its members or any class of them; the Court may, on the application of the company or of any creditor or member of the company, or, in the case of a company which is behind wound up, of the liquidator, order a meeting of the creditors or class of creditors, or of the members or class of members, as the case may be, to be called, held and conducted in such manner as the Court directs.
(2)If a majority in number representing three fourths n value of the creditors, or class of creditors, or members, or class of members, as the ease may be, present and voting either in person or, where proxies are allowed under the rules made under section 643, by proxy, at the meeting, agree to any compromise or arrangement, the compromise or arrangement shall, if sanctioned by the Court, be binding on all the creditors, all the creditors of the class, all the members, or all the members Of the class, as the case may be and also on the company, or, in the case of a company which is being wound up, on the liquidator and contributor's of the company : Provided that no order sanctioning any compromise or arrangement shall be made by the Court unless the Court is satisfied that the company or any other person by whom an application has been made under sub-section (1) has disclosed in the Court, by affidavit or otherwise, all material facts relating to the company, such as the latest finance at position of the company, the latest auditor's report on the accounts of the company, the pendency of any investigation proceedings in relation to the company under, sections 235 to 251, and the like.
(3)An order made by the Court under sub- section (2) shall have no effect until a certified copy of the order has been filed with the Registrar. "
393. Information as to compromises or arrangements with creditors and members.-(1)
Where a meeting of creditors or any class of creditors, or of members or any class of members, is called under section 391,-
(a) with every notice calling the meeting which is sent to a creditor or member, there shall be sent also a statement setting forth the terms of the compromise or arrangement and explaining its effect; and in particular, stating any material interests of the directors, managing director, managing agent, secretaries and treasurers or manager of the company, whether in their capacity as such or as members or creditors of the company or otherwise, and the effect on those interests, of the compromise or arrangement, if, and in so far as, it is different from the effect on the like interests of other persons;
and
(b) in every notice calling the meeting which is given by advertisement, there shall be included either such a statement as aforesaid or a notification of the place at which and the manner in which creditors or members entitled to attend the meeting may obtain copies of such a statement as aforesaid.
(2)Where the compromise or arrangement affects the rights of debenture holders of the company, the said statement shall give the like information and explanation as respects the trustees of any deed for securing the issue of the debentures as it is required to give as respects the company' s directors.
(3)Where a notice given by advertisement includes a notification that copies of a statement setting forth the terms of the compromise or arrangement proposed and explaining its effect can be obtained by creditors or members entitled to attend the meeting, every creditor or member so entitled shall, on making an application in the manner indicated by the notice, be furnished by the company, free of charge, with a copy of the statement.
(4)Where default is made in complying with any of the requirements of this section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five thousand rupees; and for the purpose of this sub- section any liquidator of the company and any trustee of a deed for securing the issue of debentures of the company shall be deemed to be an officer of the company: Provided that a person shall not be punishable under this sub- section if he shows that the default was due to the refusal of any other person, being a director, managing director, managing agent, secretaries and treasurers, manager or trustee for debenture holders, to supply the necessary particulars as to his material interests.
(5) Every director, managing director, managing agent, secre- taries and treasurers or manager of the company, and every trustee for debenture holders of the company, shall give notice to the company of such matters relating to himself as may be necessary for the purposes of this section; and if he falls to do so, he shall be punishable with fine which may extend to five hundred rupees.
[8.13] Considering sub-section (2) of Section 391 it appears that the applicant who submits the application/scheme under Section 391 is required to disclose in the Tribunal by affidavit or otherwise, all material facts relating to the Company, such as latest financial position of the Company, the latest auditor's report on account of the Company, the pendency of any investigation proceedings in relation to the Company under Section 235 to 351 and the like and unless the Tribunal is satisfied that the Company or any other person by whom the application has been made under sub-section (1) of Section 391 has disclosed to the Tribunal by affidavit or otherwise the aforesaid material facts, no order sanctioning any compromise or arrangement shall be made by the Tribunal. Therefore, while submitting the scheme under Section 391(1) of the Act, 1956, the Company or any other person by whom such an application is made is required to disclose the material facts relating to Company, such as the latest financial position of the company, latest auditor's report on the account of the company and the pendency of any investigation proceedings in relation to the company under Sections 235 to 351 and the like. The word "and the like" is to be construed in relation to the financial position of the company, auditor's report and the pendency of any investigation proceedings in relation to the company.
[8.14] Other relevant provision for disclosure would be section 393(1) & (2) of the Act, 1956 and it relates to the relevant information / facts to be disclosed to the creditors or of members or any class of members where a meeting of the creditors or any class of creditors, or of members or any class of members, is called under Section 391 of the Act, 1956. It provides that with every notice calling the meeting which is send to a creditor or member, there shall be send also the statement setting forth the terms of the compromise or arrangement and explaining its effect; and in particular stating any material interest of the Directors, Managing Director or Manager of the Company whether in their capacity as such or as members or the creditors of the company or otherwise, and the effect on those interests of the compromise or arrangement, if, and insofar as, it is different from the fact on the like interest of other persons. It is not the case on behalf of the applicant that there is a non-disclosure of the materials as required to be disclosed under Section 391(2) of the Act, 1956 and/or under Section 393(1) & (2) of the Act, 1956. However, it is the case on behalf of the applicant that as respondent No.1 has not disclosed the judgment of the Hon'ble Supreme Court dated 07.07.2003 and/or other particulars with respect to various litigations mentioned in para 4(a) of the applicant, respondent No.1 has not disclosed the relevant facts / materials and has obtained the order of sanctioning the Scheme of Arrangement by committing the fraud. Therefore, it is required to be considered whether for non-disclosure of any other materials and/or facts other than the required under Section 391(2) and/or 393(1) & (2) of the Act, 1956, the order sanctioning the Scheme is vitiated and/or the same is required to be recalled or not? and/or can it be said that by not disclosing the order passed by the Hon'ble Supreme Court dated 07.07.2003 and other litigations which are mentioned in para 4(a) of the Act, 1956, there has been suppression, much less material suppression and/or non-disclosure of any facts which are statutorily required to be disclosed by the respondents in proceedings under section 391 of the Act, 1956 and on that ground order passed sanctioning the scheme is required to be modified and/or received?
[8.15] On considering Sections 391 to 394 of the Act, 1956, it appears to the Court that while submitting the Scheme under Section 391(1) of the Act, 1956, the only statutory requirement by the Company would be to disclose the material facts relating to the companies latest financial position; latest auditors report on the accounts of Company and the pendency of any investigation proceedings in relation to the Company under Sections 235 to 351 and the like. Therefore, while submitting the Scheme under Section 391(1) of the Act, 1956, the Company who submits the Scheme is not obliged and/or required to disclose any other facts other than as required under Section 391(2) of the Act, 1956 or under Section 393(1) & (2) of the Act, 1956. Therefore, as such it cannot be said that by not disclosing the order passed by the Hon'ble Supreme Court dated 07.07.2003 or other litigations mentioned in para 4(a) of the application, while submitting the Scheme of Arrangement, there has been any suppression, much less material suppression and/or non-disclosure of the facts which were statutorily required to be disclosed. It is to be noted that and it appears that most of the litigations mentioned in para 4(a) of the application as such were disposed of and/or withdrawn as on the date of proceedings under Sections 391-394 of the Act, 1956. Be that as it may, it appears to the Court that when all the relevant materials which were required to be disclosed statutorily have been disclosed, by not disclosing the order passed by the Hon'ble Supreme Court dated 07.07.2003 and/or the other litigations mentioned in para 4(a) of the application, there has been no suppression and/or non-disclosure of the facts which are statutorily required to be disclosed and therefore also, on the aforesaid ground the order passed by this Court sanctioning the Scheme is not vitiated and/or the same is not required to be recalled and/or modified as prayed by the applicant.
[8.16] Now, so far as the words "and the like" at the end of proviso to Section 391(2) of the Act, 1956, the decision of the Hon'ble Supreme Court in the case of Express Hotels Pvt. Ltd. is required to be referred to. As held by the Hon'ble Supreme Court in the said decision, the expression "and the like" required to be considered ejusdm generis. Therefore, the word "and the like" at the end of proviso to Section 391(2) of the Act, 1956 is required to be considered along with earlier requirements as mentioned in the said provision.
[8.17] Even otherwise as stated hereinabove while submitting the Scheme / compromise under Section 391 of the Act, 1956, Company or any other person by whom an application has been made is required to give full particulars as mentioned in Section 391(2) of the Act, 1956 and required to furnish particulars to the creditor or any class of creditors or the members of any class of members the particulars mentioned in Section 393 of the Act, 1956 (at the time when the meeting is called under Section 391 of the Act, 1956). If any of the particulars mentioned in Section 391 of the Act, 1956 or under Section 393 of the Act, 1956 are not furnished and/or full particulars / disclosures are not given and/or some material facts related to the disclosures to be made under Section 391(2) of the Act, 1956 or under Section 393 of the Act, 1956 are withheld and/or suppressed and the Scheme is got sanctioned then and then only it can be said that the order is vitiated by not disclosing the full particulars as required. Therefore, it appears to the Court that for non-disclosure of the particulars other than the required under Section 391(2) and Section 393 of the Act, 1956, it cannot be said that the Company and/or the applicant has withheld the material facts which will affect sanctioning of the Scheme / arrangement. At this stage, the decision of the Hon'ble Supreme Court in the case of Miheer H. Mafatlal v. Mafatlal Industries Ltd. reported in (1997) 1 SCC 579 is required to be referred to. In the said decision, while examining the scope and ambit of jurisdiction of the Company Court, the Hon'ble Supreme Court has culled out following broad contours of such jurisdiction:
"(1) The sanctioning court has to see to it that all the requisite statutory procedure for supporting such a scheme has been complied with and that the requisite meetings as contemplated by section 391(1)(a) have been held.
(2) That the scheme put up for sanction of the court is backed up by the requisite majority vote as required by section 391(2).
(3) That the concerned meetings of the creditors or members or any class of them had the relevant material to enable the voters to arrive at an informed decision for approving the scheme in question. That the majority decision of the concerned class of voters is just and fair to the class as a whole so as to legitimately bind even the dissenting members of that class.
(4) That all necessary material indicated by section 393(1)(a) is placed before the voters at the concerned meetings as contemplated by section 391(1).
(5) That all the requisite material contemplated by the proviso to sub-section (2) of section 391 of the Act is placed before the court by the concerned applicant seeking sanction for such a scheme and the court gets satisfied about the same.
(6) That the proposed scheme of compromise and arrangement is not found to be violative of any provision of law and is not contrary to public policy. For ascertaining the real purpose underlying the scheme with a view to be satisfied on this aspect, the court, if necessary, can pierce the veil of apparent corporate purpose underlying the scheme and can judiciously x-ray the same.
(7) That the company court has also to satisfy itself that members or class of members or creditors or class of creditors, as the case may be, were acting bona fide and in good faith and were not coercing the minority in order to promote any interest adverse to that of the latter comprising the same class whom they purported to represent.
(8) That the scheme as a whole is also found to be just, fair and reasonable from the point of view of prudent men of business taking a commercial decision beneficial to the class represented by them for whom the scheme is meant.
(9) Once the aforesaid broad parameters about the requirements of a scheme for getting sanction of the court are found to have been met, the court will have no further jurisdiction to sit in appeal over the commercial wisdom of the majority of the class of persons who with their open eyes have given their approval to the scheme even if in the view of the court there could be a better scheme for the company and its members or creditors for whom the scheme is framed. The court cannot refuse to sanction such a scheme on that ground as it would otherwise amount to the court exercising appellate jurisdiction over the scheme rather than its supervisory jurisdiction."
Considering the aforesaid facts and circumstances and the aforesaid decision, it cannot be said that by not disclosing various litigations enumerated in para 4(a) of the present application and/or non-disclosing the decision of the Hon'ble Supreme Court dated 07.07.2003, there has been a material suppression which will affect sanctioning of the Scheme.
[8.18] The another question will arise whether on the aforesaid ground the Scheme can be modified in exercise of powers under Section 392 of the Act, 1956? As discussed hereinabove, the powers under Section 392 of the Act, 1956 can be exercised only for proper working of the Scheme and the powers under Section 392 of the Act, 1956 cannot be said to be akin to the review jurisdiction i.e. under Order 47 Rule 1 of the CPC. To modify the Scheme which is already sanctioned under Section 391 of the Act, 1956, for proper implementation and working and to supervise the Scheme for implementation and working as provided under Section 392 of the Act, 1956 and to modify the Scheme meaning thereby to recall the order of sanctioning the Scheme on the ground of non-disclosure meaning thereby to review the order of sanctioning the scheme would be different. It appears to the Court that even in a case it has been found that particulars/materials which were statutorily required under Section 391(2) of the Act, 1956 were not disclosed and the Scheme was got sanctioned, in that case also the same can be reviewed and/or recalled only while exercising the review jurisdiction under Order 47 Rule 1 of the CPC and not while exercising powers under Section 392 of the Act, 19546. As stated hereinabove and at the cost of repetition it is observed that as stated by the learned counsel appearing on behalf of the applicant, the present application is only under Section 392 of the Act, 1956 and not under Order 47 Rule 1 of the CPC.
[8.19] Now, so far as the reliance placed upon the decision of the Hon'ble Supreme Court in the case of S.K. Gupta and Anr. (Supra) by submitting that even the Tribunal / Court can exercise suo motu powers as provided under Section 393 of the Act, 1956 is concerned, on facts and for the relief sought in the present application, the provisions of Section 392(2) of the Act, 1956 would not be applicable. Only in a case where after an order passed by the Tribunal / Court under Section 391 sanctioning the compromise or arrangement in respect of company, the Tribunal is satisfied either on its own motion or on the application of any person interested in the affairs of the company, that a compromise or an arrangement sanctioned cannot work satisfactorily with or without modifications, the Tribunal/Court may make an order of winding up of the Company. That is not the case and the prayer herein. Therefore, the aforesaid decision would not be of any assistance to the applicant.
[8.20] Now, so far as the prayer of the applicant to modify the Scheme sanctioned by this Court on the ground that the same has affected rights of the applicant is concerned, first of all it is required to be noted that by sanctioning the Scheme of Demerger between respondent Nos.1 and 2, it cannot be said that rights of the applicant if any are in anyway affected. It is required to be noted that while sanctioning the Scheme of Arrangement under Section 391 of the Act, 1956, the Tribunal or the Court is not required to adjudicate the rights of the individuals. Under the circumstances, by sanctioning the Scheme, it cannot be said that any of the rights of the applicant are in anyway affected. Identical question came to be considered by the learned Single Judge in the case of Divya Vasundhara Financiers Pvt. Ltd. (Supra) and while considering the power of the Court under Section 392(1)(b) of the Act, 1956, it is observed and held as under:
The power of the court under s.392(1)(b) of the Companies Act, 1956, is of wide amplitude. But it cannot be said that it is a power without any limitation. There is an inbuilt limitation on the powre of the court in the section itself. The limitation is that it can be invoked only for purposes of proper working of compromise or arrangement. The power is a power of superintendence which is to be exercised by issuing appropriate directions or effecting necessary modifications so as to ensure the proper working of such compromise or arrangement. This power cannot be invoked for purposes of determination or adjudication of any right or interest claimed by a company against persons who are not parties to the scheme of compromise or arrangement, and who dispute such rights or interest in fact or in law. This is because, in the first place, the power under s.392 is a supervisory power for enforcement of a compromise or arrangement. The enforcement can be only against persons who are parties to it. Secondly, the power of issuing directions in the course of exercise of such a power of superintendence in regard to any matter or for modification, as may be necessary, is only for the proper working of the compromise or arrangement. The rights or claims of a company carrying on a scheme of compromise or arrangement between itself and the creditors and/or members, or any class of them, can only be enforced in the manner in which such rights or claims can be enforced under the law. Merely because a scheme of compromise or arrangement has been made between a company and its creditors or members, it cannot claim that its disputed rights or claims can be adjudicated upon by a company court which may be supervising such scheme. Thirdly, if the Legislature had intended that the company court supervising the scheme of compromise or arrangement between a company and its creditors or members should have the power of an ordinary court to hold trials for adjudication or determination of disputed rights or claims of that company against third parties as if it is a court of ordinary civil jurisdiction, it would have appropriately provided in the section and invested the company court with the necessary powers. A mere comparison of s.392(1) with s.446(2) fortifies this view. In the fourth place, if the power invested in a company court under s.392 is held to be one akin to one under s.446(2), the company court will be required to assume jurisdiction which it does not possess of adjudicating or determining the disputed rights between a company and the persons who are not parties to the scheme of compromise and/or arrangement as if it is a court of ordinary civil jurisdiction, irrespective of the question of the court itself and/or the territorial jurisdiction in the matter.
[8.21] Even as observed by the Hon'ble Supreme Court in the case of Punjab National Bank Ltd. vs. Shri Vikram Cotton Mills Ltd. reported in (1970) 40 Company Cases 927 (SC), the scheme sanctioned by the Court, as a statutory operation in the scheme does not release other persons nor party to the scheme from their obligations. Under the circumstances, when by sanctioning of the Scheme of Arrangement between respondent Nos.1 and 2, the rights of the applicant, if any, are not affected and/or taken away, the scheme sanctioned by this Court is not required to be modified as prayed by the applicant in the prayer clause. At this stage it is required to be noted that in the prayer clause, the applicant has sought to review / modify the scheme and that too under Section 392 of the Act, 1956 on the ground that the same has affected the rights of the applicant. Under the circumstances, when by sanctioning the scheme under Section 391 of the Act, 1956 by this Court, the rights of the applicant, if any, are not taken away and/or affected, the applicant is not entitled to any relief as sought in the present application. Still it is observed that by sanctioning of the Scheme vide order dated 10.10.2006 between respondent Nos.1 and 2, the right of any parties inclusive of the applicant, if any, are not affected.
[8.22] Now, the question would be whether any relief can be granted to the applicant in the present application which has been filed after a period of five years of sanctioning the Scheme of Arrangement by this Court. It is required to be noted and it is not in dispute that the Scheme of Arrangement between respondent Nos.1 and 2 has been sanctioned by this Court as far as back on 10.10.2006 and the present application has been preferred on 03.10.2011 i.e. approximately after a period of five years. It is also not in dispute that the Scheme of Arrangement sanctioned by this Court has been fully implemented and is in operation since last five years. Under the Scheme of Arrangement, there are certain rights and obligations and the transfer of shares etc. Thus, on implementation of the sanctioned Scheme of Arrangement, its effect has taken place long back and third party rights are created. Under the circumstances, if the Scheme which has been sanctioned by this Court as far as back on 10.10.2006 which has already been implemented since then is modified as prayed for by the applicant, in that case, number of complications are likely to arise. It is also required to be noted at this stage that the Scheme of Arrangement was sanctioned by this Court at the relevant time after having been satisfied that all the statutory requirements as provided under Sections 391 - 394 of the Act, 1956 have been complied with by the Company and all the shareholders, creditors of the respective Companies have approved the said Scheme and only thereafter the Scheme was sanctioned by this Court. It is also not in dispute that at the relevant time public notice was also issued, however, nobody on behalf of the applicant objected the Scheme. The applicant has come out with a case that at the relevant time she was under the "legal disability" to represent the applicant partnership firm and therefore, she could not raise objections at the relevant time and it is the case on behalf of the applicant Smt. Kishori Devi that in view of the order passed by the learned Single Judge of the Madhya Pradesh High Court dated 29.06.1992, the said "legal disability" has been removed and therefore, immediately thereafter present application has been preferred. However, it is required to be noted and as stated herein above, the order passed by the learned Single Judge of the Madhya Pradesh High Court quashing and setting aside the restraint orders dated 08.09.2003 and 07.01.2004 of the Registrar, Firms has been set aside by the Division Bench and therefore, still the "legal disability" injuncting Smt. Kishori Devi from acting as a partner of the applicant partnership firm still exists. Even otherwise as stated herein above, Smt. Kishori Devi herself has filed the suit before the Delhi High Court for a declaration to declare that she is the partner of applicant partnership firm and in which even respondent No.2-M/s. D.B. Corp Limited is also made a party. It is also required to be noted at this stage that even the applicant has failed to prove satisfactorily that the applicant was the shareholder and/or the creditor of respondent No.1 Company. It appears that even in the Register of respondent No.1 Company, neither the applicant partnership firm nor even Smt. Kishori Devi were shown as shareholder and/or the creditors of respondent No.1 Company. In any case on the ground of delay and laches and as the present applicant has been preferred after a period of five years of sanctioning the Scheme of Arrangement by this Court and when the Scheme of Arrangement has already been implemented and is in operation since last five years on that ground also the applicant is not entitled to any relief as prayed in the present application.
[8.23] Now, so far as the reliance placed upon the decision of the Hon'ble Supreme Court in the case of MDS and Ors. (Supra) by the learned counsel appearing on behalf of the applicant referred to hereinabove and on the aspect of fraud on Court by respondent No.1 by not disclosing various litigations mentioned in para 4(a) of the present application as well as not disclosing the decision of the Hon'ble Supreme Court dated 07.07.2003 is concerned, considering the aforesaid finding by this Court that while submitting the Scheme under Section 391 of the Act, 1956, respondent No.1 has disclosed all the relevant materials statutorily required and therefore, there is no suppression and/or material suppression which will affect the sanctioning of the Scheme, the aforesaid decision would not be of any assistance to the applicant.
[8.24] Now, so far as reliance placed upon the decision of the Delhi High Court in the case of Spice Communications Ltd & Anr. (Supra) by which the Delhi High Court entertained the application to recall the order sanctioning the Scheme of Amalgamation filed after a delay of 13 months is concerned, it is required to be noted that even the Delhi High Court did not recall the order of sanctioning the Scheme of Amalgamation in its entirety. Even in the said decision, the Delhi High Court also considered the decision of the Hon'ble Supreme Court in the case of Central Bank of India vs. Ambala Sarabhai Enterprises Ltd. [(1999)3 Comp. L.J. 98 (Guj)] observing that due to passage of time it would not be equitable at a belated stage to set aside the scheme in its entirety. It is to be noted that even in the case of Ambalal Sarabhai Enterprises (Supra), the Hon'ble Supreme Court set aside the decision of this Court. It appears to this Court in the decision of Delhi High Court in the case of Spice Communications Ltd. (Supra) the Court also considered the decision of the Hon'ble Supreme setting aside the decision of this Court in the case of Central Bank of India vs. Ambala Sarabhai Enterprises by which this Court set aside the Scheme of Arrangement on the ground that the Company played a fraud by suppressing the material fact and the Hon'ble Supreme Court observed that due to passage of time it would not be equitable at a belated stage to set aside the Scheme in its entirety and the Hon'ble Supreme Court in the said case decided to maintain the order sanctioning the Scheme with some additional conditions.
Therefore also, on the ground of delay and laches also and more particularly when the Scheme has been implemented since last five years, the prayer of the applicant to modify the Scheme of Arrangement sanctioned by this Court as far as back on 10.10.2006 cannot be accepted and granted.
[9.0] In view of the above and for the reasons stated above, the applicant is not entitled to any relief which is sought in the present application under Section 392 of the Act, 1956 on any ground. Hence, the present application fails and the same deserves to be dismissed and is, accordingly, dismissed. However, in the facts and circumstances of the case, there shall be no order as to costs.
Sd/-
(M.R. Shah, J.) menon