Calcutta High Court
The Punjab Produce And Trading Co. ... vs Harsh Vardhan Lodha And Ors on 22 September, 2023
Author: Arindam Mukherjee
Bench: Arindam Mukherjee
ORDER SHEET
OD-11
IN THE HIGH COURT AT CALCUTTA
ORDINARY ORIGINAL CIVIL JURISDICTION
IA No. GA/4/2023
In
CS/306/2022
THE PUNJAB PRODUCE AND TRADING CO. PRIVATE LIMITED AND ORS.
VERSUS
HARSH VARDHAN LODHA AND ORS.
BEFORE:
The Hon'ble JUSTICE ARINDAM MUKHERJEE
Date: 22nd September, 2023.
Appearance:
Mr. P. Chidambaram, Sr. Adv.
Mr. Jishnu Saha, Sr. Adv.
Mr. Anirban Ray, Adv.
Mr. Rajarshi Dutta, Adv.
Mr. Sankarsan Sarkar, Adv.
Ms. Pritha Basu, Adv.
Mr. Debartha Chakraborty, Adv.
Mr. Kritin Saraf, Adv.
For the plaintiffs/petitioners.
Mr. Abhrajit Mitra, Sr. Adv.
Mr. Debanjan Mondal, Adv.
Mr. Soumya Roy Chowdhury, Adv.
Mr. Sanjiv Kumar Trivedi, Adv.
Mr. Satadeep Bhattacharyya, Adv.
Ms. Iran Hassan, Adv.
Mr. Sanket Sarawgi, Adv.
Ms. Malina Chobra, Adv.
For the defendant/respondent no.1.
Mr. Ranjan Bachawat, Sr. Adv.
Mr. Jishnu Chowdhury, Adv.
Mr. Sayan Roychowdhury, Adv.
Mr. Shaunak Mitra, Adv.
Mr. Satyaki Mukherjee, Adv.
Mr. Paritosh Sinha, Adv.
Mr. Saubhik Chowdhury, Adv.
Ms. Tapasika Bose, Adv.
For the defendant/respondent no.2.
2
Mr. Rajat Gupta, Adv.
Mr. Avishek Guha, Adv.
Ms. Akansha Chopra, Adv.
Mr. Rajiv Kumar, Adv.
...for the defendant/respondent no.6 The Court :- Affidavit of service filed in Court today is taken on record. This application has been filed by the plaintiff no.4 in the suit seeking ad interim relief in respect of voting on behalf of the plaintiff no. 4 in the Annual General Meeting (in short AGM) of the defendant no.2 scheduled to be held today.
The background for making this application as submitted by the petitioner (plaintiff no. 4) can be briefly summarized as follows:-
The petitioner (plaintiff no.4) is a society registered under the Societies Registration Act, 1961. The Memorandum of Association and the bylaws of the plaintiff no.4, namely, Eastern India Educational Institution (in short EIEI) provides the following in Clause V and Clause 23 thereof :-
"V. a) i) All properties movable and immovable belonging to the Society shall vest in the Trustees.
ii) Notwithstanding any decision by members in any general meeting, the Trustees will have power to nominate the members of the Managing Committee and delegate such authority or authorities in the Managing Committee in relation to the management of the affairs of the Society as they may deem fit and the Managing Committee will be entitled to exercise only such power as are delegated by the Trustees from time to time.3
b) Subject to the aforesaid sub-clause (a), the management of the whole of the affair of the Society shall be entrusted to the Managing Committee consisting of not less than five and not more fifteen persons."
"23. Notwithstanding any decision by members in any general meeting the trustees will have power to delegate such authority or authorities in the Managing Committee in relation to the management of the affairs of the Society and the managing Committee will be entitled to exercise only such powers as are delegated by the Trustees from time to time."
The EIEI says that by virtue of the aforesaid Clauses V and 23, the decision of the Trustees have an overriding effect over the decision of the Managing Committee which is otherwise permitted to administer the Society as per the bylaws and the authority given by the trustees. The EIEI also submits that the entire share holding of defendant no.2, namely, Hindustan Gum & Chemicals Limited (in short HGCL) is held by the five shareholders. The plaintiff nos.1, 2 and 3 holds 10% each while the plaintiff no. 4, EIEI holds 20% of the share in Hindustan Gum & Chemicals Limited (HGCL). The balance 50% of the share is held by an USA based company, namely, Solvay India Holding INC. USA, the defendant no.3. The EIEI also says that on 11 th September, 2023, the Trustees of EIEI, the Society adopted the following resolution:-
"RESOLVED that Shri S.K. Daga or failing him Shri K. Damani or failing him Shri Ajay Choudhury or failing him Shri 4 Debartha Chakraborty are hereby authorized to act as a representative to attend and/or vote for and on behalf of the Society at the Annual General Meeting of M/s.
Hindustan Gum & Chemicals Ltd., to be held through Video Conference (VC). Other Audio Visual Means (OAVM) on 22nd September, 2023 or at any adjournment thereof."
"FURTHER RESOLVED that in terms of the directions from the Office of the Joint Administrators (Pendente Lite) of the Estate of Late Smt. Priyamvada Devi Birla as well as the decision by the Trustees, the representatives of the Society be and are hereby directed to vote in the following manner on the resolutions relating to the agenda as contained in the Notice dated 27th June, 2023 of the Annual General Meeting of M/s. Hindustan Gum & Chemicals Ltd., to be held on 22nd September, 2023 and at any adjournment thereof and to participate in the discussion and vote appropriately on any other resolutions at the said meeting as they may deem fit in the interest of the Society."
and had also decided the manner in which voting in respect of the various agenda to be placed for a consideration in the AGM of defendant no.2 on behalf of EIEI shall be cast.
EIEI further says that the defendant no.1 representing himself to be the Chairman and member of the Managing Committee of EIEI circulated a purported resolution intended to be taken by the Managing Committee with 5 regard to the representatives and the manner in which voting in respect of the various agenda to be considered at the AGM of defendant no.2 shall be done. The EIEI also says that the defendant no.1 had long been removed from the Managing Committee and he cannot also represent himself as the Chairman of the Society by valid resolutions being adopted by the Trustees of EIEI. It is also submitted by EIEI that the decision regarding the removal of defendant no.1 or the authority of the Trustees to remove the defendant no.1 has not been challenged by the defendant no.1. It has been only challenged by his wife, who is also a trustee of EIEI. The challenge has not proceeded to any substance for the defendant no.1 to contend that he still continues to be the member of the Managing Committee of EIEI and can represent it as its Chairman and Member of the Managing Committee of EIEI.
It is also the case of EIEI that the defendant no.1 has circulated a resolution and a decision as to a particular mode of voting at the AGM of defendant no.2 in respect of the various agenda to be considered therein is contrary to Rule 16 of the Rules and Regulations of EIEI. The letter and the resolution said to be taken by the members of the Managing Committee of EIEI by circulation is directly in conflict with the decision taken by the Trustees of EIEI at their meeting held on 11th September, 2023 and after knowing the same.
The learned senior advocate representing EIEI places the manner of voting as decided by the Trustees of the Society on 11 th September, 2023 and that taken by circulation to demonstrate the difference between the two manner of voting. It is further submitted by EIEI that the decision of the 6 Trustees of the Society having a overriding effect by virtue of the provisions of the Rules and Regulations of EIEI are required to be adhered to assuming without admitting that the Managing Committee of EIEI in a validly constituted manner has taken a contrary decision.
In the case in hand as submitted by the petitioner that it is not apparent as to whether the members of the Managing Committee to whom the resolution said to have been taken on 20 th September, 2023 has been circulated actually approved the same. The proposed resolution by circulation dated 20th September, 2023 also does not indicate the background behind which any such resolution can or could have been taken when the resolution of the Trustees taken in the meeting on 11 th September, 2023 were known to all.
It is further submitted by EIEI that upon coming to know about the purported resolution of the Managing Committee said to have been taken on 20th September, 2023, the EIEI had no other option but to approach this Court on urgent basis to prevent the illegal and wrongful acts of the defendant no.1, who intends to manipulate the decision that may be taken in the AGM of defendant no.2 by having the votes commensurate to 20% share holding of EIEI of and in defendant no.2 to be cast as per his desire.
EIEI also refers to a previous order in respect of EIEI in connection with the AGM of another company, namely, Birla Corporation Limited passed by the Hon'ble Supreme Court on 4th January, 2023 by which the Hon'ble Supreme Court has held that "decision by the majority of the Trustees will be treated as the decision of the Trustees". It is submitted by EIEI that going by such 7 direction the decision taken by the majority of the Trustees even if there is a dissenting view has to be considered to be the decision of the Trustees. The Trustees have taken a decision on 11 th September, 2023 and, as such, the Managing Committee cannot and could not have disputed such decision even under normal circumstances through a valid meeting of the Managing Committee which is also not in the instant case.
Learned senior advocate representing EIEI has also referred to the judgment delivered on 18th September, 2020 in TS 6 of 2004 [In the Goods of:
Priyamvada Devi Birla, (Dec.) And Ajay Kumar Newar & Ors. Vs Harsh Vardhan Lodha & Ors.] to impress upon the fact that the defendant no.2 is excluded from the purview of the testamentary suit and, as such, the instant suit with the relief claimed against defendant no.2 is maintainable and ad interim orders, as prayed for in this application can also be passed.
It is also submitted on behalf of EIEI that by virtue of the order of the Hon'ble Supreme Court dated 4th January, 2023, any resolution of the trustees taken by the majority will be binding decision post 4 th January, 2023 and the Managing Committee is bound by such decision.
On behalf of the defendant no.1, it is submitted that the defendant no.2 is a product of a joint venture agreement as will appear from the pleadings in paragraphs 15, 61 and 96 of the plaint. Any dispute in connection with such joint venture is a commercial dispute in view of the provisions of Section 2(1)(c)(xi) and as such this suit instituted in the ordinary original civil jurisdiction of this Court is not maintainable. The plaint is also liable to be rejected and the suit should, accordingly, dismissed as no leave for dispensation of the formalities 8 under Section 12A of the Commercial Courts Act, 2015 has been obtained by the plaintiffs including EIEI, the applicant herein. The suit is also not maintainable in view of the provisions of Section 430 of the Companies Act, 2013. That apart it is also submitted that the defendant no.1 was and still is the Chairman and a member of the Managing Committee of EIEI. By virtue of holding such office the defendant no.1 is competent to take decision on behalf of the managing committee. The managing committee as per bylaws of EIEI is the committee who administers the societies (EIEI). The managing committee has taken a decision naming the representatives, who will be entitled to cast vote for and on behalf of the society EIEI at the AGM of the defendant no.2. The managing committee has also decided the way and the manner in which votes are to be cast by the representative on behalf of EIEI with regard to the various agenda that will fall for consideration at the AGM of defendant no.2. The so-called trustees of EIEI have made the voting an issue at the AGM of different companies which the said trustees claim to be part of the Birla Group and are controlled by the shares now forming part of the estate left behind by Priyamvada Devi Birla only to cause prejudice to the defendant No.1. The defendants in the testamentary suit are all along trying to take control of these companies and entities in an indirect manner which they could not do directly. It is also a regular affair that the defendants in the testamentary suit through various instrumentalities approach the Court at the last hour to stall holding of the AGM, if possible, and disrupt the smooth functioning of the companies and entities which are outside the ambit of the testamentary suit. The defendant no.1, therefore, says that no interim or ad 9 interim order in the aid of the final relief(s) claimed in the suit should be passed at the instance of EIEI, the petitioner herein.
On behalf of the defendant no.1 by referring to an affidavit it is also submitted that Sushil Kumar Daga one of the persons who has been authorized to vote at the AGM of the defendant no.2 on behalf of EIEI in terms of purported resolution dated 11th September, 2023 said to have been taken by the trustees in an affidavit filed before the competent forum has admitted that it is the managing committee of EIEI which is the supreme body and is entitled to administer the Society according to the decision taken by such committee. It is also submitted that the said Mr. Sushil Kumar Daga also claims himself to be a trustee which is not disputed by EIEI. The said Sushil Kumar Daga has also verified the instant application and as such his stand as in the affidavit which is in sharp contrast to the statements made in this application should also be taken note of and no credence or reliance thereon should be placed. On this single ground alone the EIEI is not entitled to any relief(s) as claimed. The defendant no.1 also says that an application for rejection of plaint and dismissal of this suit has been filed long back by the said defendant. Direction for affidavits has been given therein. The petitioner (EIEI) has not used any affidavit in the said demurer application. Suppressing such fact the present application has been filed. The defendant no.1 relies upon the judgment reported in [(1999) 6 SCC 632 (T.K. Lathika Vs. Seth Karsandas Jamnadas)] to contend that the demurer application has to be heard first and then only any other application like the instant one should be heard.
The defendant no.1 has also relied upon an order dated 29 th August, 2023 passed in CS 228 of 2022 (Vijay Kumar Goyal & Ors.-Versus Anshul 10 Goyal & Ors.) wherein it has also been held that a demurer application is required to be heard first.
On behalf of the defendant no.1 two letters respectively dated 1 st July, 2023 and 11th September, 2023 written to Mr. Sushil Kumar Daga for and on behalf of Anamika Lodha, a trustee and member of the managing committee of EIEI by which it was categorically stated that the defendant no.1 still continues to be the Chairman, trustee and members of the Managing Committee of EIEI has also been referred to demonstrate that Sushil Kumar Daga the deponent should not be relied.
On behalf of the defendant no.2 it is submitted that the petitioner has not only suppressed the material fact about demurer applications taken out by the defendant nos. 1 and 2, but in fact obtained direction for affidavits on 21 st September, 2023 without even divulging that they have sought leave for short serve of the notice of motion to move the instant application today to pray ad interim relief in respect of AGM of defendant no.2 scheduled to be held today.
The defendant no.2 also says that it is like an yearly pilgrimage that EIEI approaches the Court whenever an AGM of a company wherein it holds share is scheduled to be held to disrupt the same as also the smooth functioning of such company or entity. The defendant no.2 is not at all concerned with who exercises voting right on behalf of EIEI in its AGM. It is an internal affair of EIEI. EIEI has not been able to resolve the internal disputes amongst the trustees and the members of the Managing Committee and in the garb of supremacy of the decision of the trustees of EIEI is trying to exercise voting rights through some particular persons in a particular manner which is likely to disrupt the holding of 11 the AGM and the decisions taken therein necessary for the purpose of smooth functioning of the defendant no.2. It is nobody's case that the defendant no.2 has prevented EIEI to exercise its voting right at the AGM of the defendant no.2. The internal dispute of EIEI has spilled over to infringe the right of the defendant no.2 which includes holding of its AGM on a decided day as per the statute. The defendant no.2 is only concerned with such infringement. The defendant no.2 also says that in a previous suit being CS 235 of 2022 EIEI came up with the same reliefs if not the main reliefs claimed in the present suit. The learned Senior Advocate appearing on behalf of the defendant no.2 places the reliefs claimed in CS 235 of 2022 and those claimed in the instant suit to demonstrate the similarity or identical reliefs being claimed in the two suits. It is submitted that the relief claimed in prayer (b) of the plaint filed in CS 235 of 2022 clearly demonstrates that EIEI had in the said suit sought for the decision of the trustees to have overriding effect of any decision taken by the Managing Committee under the leadership of the defendant no.1. The defendant no.2, therefore, says that the present suit is otherwise not maintainable if not barred by the principles of res judicata and no interim or ad interim order can be prayed in aid of the relief claimed therein. The interlocutory orders in aid of the final relief cannot also be granted in such circumstances and the instant application is required to be dismissed in limine. The defendant no.2 also says that the registered office of the defendant no.2 is at Haryana. The plaintiffs and in particular the plaintiff no.4 is seeking relief against the defendant no.2 in respect of its AGM which is also scheduled to be held at its registered office at Haryana through virtual mode. The defendant no.2 cites two judgments respectively 12 reported in (1994) 4 SCC 225 (Morgan Stanley Mutual Fund Vs. Kartick Das) and AIR 1999 Calcutta 123 (Smt. Smriti Jaiswal And Another Vs. Romi Jaiswal And Another) to contend that in view of the registered office of the defendant no.2 being situated at Haryana this Court lacks territorial jurisdiction to receive, try and determine the suit and also pass any interim relief in aid of the final reliefs claimed in the suit. The defendant no.2 also says that the defendant no.3 being 50% shareholder in the defendant no.2 has also not been served. In absence of the defendant no.3, no relief should be granted to the petitioners.
Responding to the arguments made by the defendant nos.1 and 2 it is submitted by the petitioner that affidavit of Sushil Kumar Daga referred to by the defendants was filed in 2010 before the Company Law Board in a proceedings between Birla Educational Trust and Birla Corporation Limited. It has no nexus with the disputes involved in the present suit and the reliefs claimed therein. In any event any proceeding or stand which may have been taken prior to the order of the Hon'ble Supreme Court dated 4 th January, 2023 cannot be cited or taken into consideration as the Supreme Court has clearly held that post 4 th January, 2023 the majority decision of the trustees of EIEI shall be considered to be the decision of the trustees. EIEI also says that defendant No.3 has been served.
To distinguish the judgment in Morgan Stanley (supra) the learned Senior Advocate on behalf of the petitioner says that the dates considered in the said judgment are extremely crucial as from the face of record it is apparent that there was some delay in approaching the Court on behalf of the plaintiff in the said judgment. It is further submitted by the learned Senior Advocate for the petitioners that the defendant no.1 who is instrumental behind the mischief 13 which has compelled the petitioners to approach this Court is a resident of Kolkata within the jurisdiction of this Court and as such this Court is not only the competent court but is the forum convenient to the parties. To distinguish the judgment in T. K. Lathika (supra) it is submitted on behalf of the petitioner that the same was not pronounced in respect of the provisions of Order VII Rule 11 of the Code of Civil Procedure, 1908 but was pronounced in connection with the Kerala Rent Control Act which stands in a different footing for the provisions contained therein. Learned Senior Advocate on behalf of the petitioner has also referred to the judgment reported in (1997) 3 SCC 443 (Tayabbhai M. Bagasarwalla And Another Vs. Hind Rubber Industries Pvt. Ltd. And Others) and 2021 SCC OnLine SC 29 (Rama Narang Vs. Ramesh Narang And Others) to contend that even if a demurrer point is taken or the jurisdiction of the Court is challenged, the Court is not powerless to grant interim protection in a fit case and the instant case falls in that category.
At the end it is submitted by the learned Advocate for the defendant no.2 that the AGM of defendant no.2 scheduled to be held today has taken place and the result therein has already been declared which fact is, however, disputed by the petitioners.
After hearing the parties and considering the materials on record, I find that the following issues are to be answered prima facie for the adjudication of the ad interim reliefs prayed by the petitioner (plaintiff no. 4):
1. Whether in view of the demurrer applications filed respectively by the defendant no. 1 and defendant no.2, the instant application for interim 14 relief with prayers for ad interim order can be taken up before deciding the said two applications.
2. Whether this Court has the jurisdiction to receive, try and adjudicate the suit wherein interlocutory reliefs are claimed by the petitioner.
3. Whether the resolution taken by the trustees on 11 th September, 2023 has an overriding effect over the resolution taken by the Chairman and the member of the Managing Committee by circulation on 20 th September, 2023.
With regard to the first issue, it is correct that prior to this application having been made the defendants no. 1 and 2 have filed separate applications for rejection of plaint and dismissal of suit. It is also true that the said application came up for consideration prior to this application being made and directions have been given for the applications to be heard on affidavits. Although, in T.K. Lathika (supra), it has been held that a demurrer application has to be heard before other applications but, it is also true at the same time that the Court is not powerless to pass interim measures during the pendency of such application when it finds necessary to extend interim protection. It will be a travesty of justice if during the pendency of an application for rejection of plaint, no interim relief can be passed even if situation demands so. If this contention is accepted then a mischievous litigant by keeping an application for rejection of plaint pending will prevent the Court from passing any interim protection if such relief is contemplated. In fact, the judgment in Tayabbhai (supra) and Rama Narang (supra) clearly hold that the Courts are empowered to pass ad interim order if 15 situation so demands, even if the demurrer application is pending and is not required to wait till such application is disposed of.
The order dated 29th August, 2023 was passed in a situation where the Appellate Court had passed interim orders and the plaintiff-petitioner submitted that they are entitled to further interim orders. In the instant case, the entire application will become infructuous as the AGM which is being held today will be over and if the Court has to hear out the demurrer application, the votes of EIEI will be cast at the AGM as decided by the Managing Committee and nothing will survive in effect for adjudication. Moreover, the suppression alleged is not such that it disentitles the petitioner of the reliefs claimed or foist embargo on the Court in passing such order if required. The defendants are heard and have brought the point to the notice of the Court.
I hold that the instant application can be taken up even during pendency of the applications for rejection of plaint wherein direction for affidavits have been passed.
So far as the second issue is concerned, admittedly, the defendant no. 1 resides within the jurisdiction of this Court. The pleadings in the plaint are such that it robes into its ambit the acts of the defendant no. 1 alleged to be wrongful by the plaintiffs. The suit has been filed by obtaining leave under Clause 12 of the Letters Patent, 1865. The Court was prima facie satisfied that part cause of action as accrued within the jurisdiction of this Court and as such had granted leave to institute the suit in this Court. Even if the defendant no. 2 has its registered office at Haryana and the AGM is the subject matter of this application, yet the allegations made against the defendant no. 1 being the 16 instrumentality according to the plaintiff for the dispute cannot be segregated. It is well-settled that a plaint cannot be bifurcated and as such at this stage it cannot be held that this Court does not have the jurisdiction to receive, try and determine the suit.
The bylaws of EIEI (the society) has a clear prima facie indication regarding the supremacy of the decision of the trustees over the decision of the Managing Committee as the Board of Trustees appears to be the superior body being empowered to appoint the members of the Managing Committee and allocate work to the said Committee. It cannot be said at this stage that the decision of the Managing Committee in respect of the administration of the society will prevail over the decision of the trustees. The defendant no. 1 has claimed himself to be the Chairman, and member of the Managing Committee. The letters dated 1st July, 2023 and 11th September, 2023 written to Mr. Sushil Kumar Daga for and on behalf of Anamika Lodha, the wife of defendant no.1 who is also a trustee and relied upon by the defendant no.1 also shows that the said trustee claims that her husband, the defendant no.1 is a trustee and the Chairman of the society. If the defendant no.1 is the Chairman and the trustee and his wife is a trustee has advocated in favour of such right of her husband, it is inconceivable to accept that the defendant no.1 was not aware about the resolution of trustees of EIEI taken on 11 th September, 2023.
The resolution clearly stated as to who will represent EI to cast vote on its behalf. The resolution also clearly shows the manner and pattern in which voting was to be made on behalf of EIEI in respect of the various agenda to be placed at the AGM of defendant no. 2. Despite all these, the defendant no. 1 holding 17 himself to be the Chairman and a member of the Managing Committee proposes a counter-resolution to that of trustees taken on 11 th September, 2023. The date on which this counter-resolution by circulation is taken by the defendant no. 1 is also crucial. It appears from the chain of events that such steps have been taken by the defendant no. 1 in a calculated manner to disrupt the voting already fixed by the trustees more than a week prior to the AGM of defendant no. 2.
In the aforesaid facts and circumstances, I find that the petitioner has been able to make out a strong prima facie case to go to trial. The balance of convenience and inconvenience is also in favour of the petitioner. There is urgency in the matter and the petitioner if not protected at this stage will suffer irreparable loss and prejudice. Preventive orders as prayed for by the petitioner, if refused at this stage, will lead to multiplicity of judicial proceedings. Even if the AGM has already taken place at the time when this order is passed then also, I direct the defendant no. 2, and/or its men, agents, servants and/or assigns, scrutinizer and observers appointed for the AGM to refrain from declaring the results of the AGM in respect of Agenda no. 3 and 5 appointment of Sudeep Roy and Smt. Mridula Jhunjhunwala as directors in respect of which there is a difference in the decision of the trustees and the members of the Managing Committee or giving effect to or further effect to in respect thereof.
The interim order shall continue till 30th November, 2023 or until further orders.
The scrutinizers appointed for the AGM of defendant no. 2 held on 22 nd September, 2023 are also directed to keep the decisions and all other documents 18 in connection of these agenda referred to hereinabove in a sealed envelope until further orders.
Let affidavits be filed. Affidavits in opposition be filed by 16 th October, 2023. Reply by 17th November, 2023.
Let this matter appear on 22nd November, 2023 under the heading adjourned motion.
(ARINDAM MUKHERJEE, J.) sb/snn/pa.