IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE PIUS C.KURIAKOSE & THE HONOURABLE MR. JUSTICE C.K.ABDUL REHIM TUESDAY, THE 6TH JULY 2010 / 15TH ASHADHA 1932 Co.Appeal.No.23 of 2010(E) ------------------------------- AGAINST THE ORDER DATED 23/04/2010 IN CA 1/2010 IN CP.30/2003 OF COMPANY LAW BOARD, ADDL. PRINCIPAL BENCH, CHENNAI. .................... APPELLANTS/RESPONDENTS 1 AND 2 ------------------------------------------ 1. M/S. ST.MARY'S HOTELS (P) LTD., ST.MARY'S BUILDINGS, MUTHOOR P.O., THIRUVALLA TALUK, PATHANAMTHITTA, REPRESENTED BY T.O.ABRAHAM, ITS MANAGING DIRECTOR. 2. T.O.ABRAHAM, S/O. LATE KURUVILLA UNNITTAN, MANAGING DIRECTOR, M/S. ST.MARY'S HOTELS (P) LTD., MALIYEKKAL HOUSE, THURUTHICAUD P.O., MALLAPPALLY TALUK, PATHANAMTHITTA DISTRICT. BY ADV. SRI.BECHU KURIAN THOMAS SRI.PAUL JACOB (P) SRI.ROSHEN.D.ALEXANDER SMT.INDU SUSAN JACOB SMT.NISHA JOHN SRI.ENOCH DAVID SIMON JOEL RESPONDENT(S): PETITIONERS & RESPONDENTS 3 TO 6 --------------------------------------------------------------- 1. T.O.ALEYAS, S/O. LATE KURUVILLA UNNITTAN, RESIDING AT THOTTATHIL HOUSE, RAMANCHIRA, MUTHOOR P.O., THIRUVALLA VILLAGE, THIRUVALLA TALUK, PATHANAMTHITTA DISTRICT. 2. BOBBY T.KURIAKOSE, S/O. LATE T.O.KURIYAKOSE, THOTTATHIL HOUSE, THURUTHICAUD P.O., MALLAPPALLY TALUK, PATHANAMTHITTA DISTRICT. COA. 23/2010 -2- 3. ABRAHAM BABY, S/O. LATE T.O.BABY, RESIDING AT MARY SADANAM, THURUTHICAUD P.O., MALLAPPALLY TALUK, PATHANAMTHITTA DISTRICT. 4. GIGY KURIAKOSE, S/O.LATE T.O.KURIYAKOSE, THOTTATHIL HOUSE, THURUTHICAUD P.O., MALLAPPALLY TALUK, PATHANAMTHITTA DISTRICT. 5. BINU ZACHARIAH, S/O. LATE T.S.SKARIAH, URUMBIKUNNEL, THURUTHICAUD P.O.,MALLAPPALLY TALUK, PATHANAMTHITTA DISTRICT. 6. THOMAS SKARIAH, S/O. LATE T.S.SKARIAH, URUMBIKUNNEL, THURUTHICAUD P.O.,MALLAPPALLY TALUK, PATHANAMTHITTA DISTRICT. 7. STEPHEN BABY, S/O. LATE T.O.BABY, RESIDING AT URUMBIKUNNEL, THURUTHICAUD P.O., MALLAPPALLY TALUK, PATHANAMTHITTA DISTRICT. 8. BINOJ BABY, S/O. LATE T.O.BABY, RESIDING AT URUMBIKUNNEL, THURUTHICAUD P.O., MALLAPPALLY TALUK, PATHANAMTHITTA DISTRICT. ADV. SRI.E.K.NANDAKUMAR FOR R1 SRI.A.K.JAYASANKAR NAMBIAR FOR R1 SRI.B.HARRYLAL FOR R1 SRI.P.BENNY THOMAS FOR R1 SRI.P.GOPINATH FOR R1 SRI.P.HARIDAS FOR R2,3,4,7,8 THIS COMPANY APPEAL HAVING BEEN FINALLY HEARD ON 06/07/2010,THE COURT ON THE SAME DAY PASSED THE FOLLOWING: PIUS C. KURIAKOSE & C. K. ABDUL REHIM, JJ. ------------------------------------------------ Company Appeal No.23 of 2010 ------------------------------------------------ Dated this the 6th day of July, 2010 JUDGMENT Pius C. Kuriakose, J The respondents in C.P.30/03 on the files of the Company Law Board, Additional Principal Bench, Chennai transferred to the Principal Bench, New Delhi, challenge in this appeal filed under Section 10-F of the Companies Act the order passed by the Company Law Board in C.A.1/10 which was an application for amendment of C.P. No.30/03. C.P. No.30/03 was filed by respondents 1 to 4 herein under Sections 397, 398 and 402 read with Section 111 of the Companies Act, 1956. The reliefs sought for in the C.P are as Company Appeal No.23 of 2010 -2- follows:- a) To declare that the proceedings of the alleged Extraordinary General Meeting held on 25/04/2003 are invalid and the resolutions passed there on are fabricated and therefore null and void; b) Declare that the notice convening the Board meeting purported to have been held on 03/06/2003 is invalid and any resolution purported to have been passed at the said meeting is null and void; c) Declare that the notice purporting to convene the Extraordinary General meeting on 30/06/03 is invalid in law; d) Declare that the transfer of shares from Company Appeal No.23 of 2010 -3- the second petitioner to the second respondent to the extent of 220000 purported to have been approved at the meeting of the Board of Shareholders held on 17/04/02 is null and void. e) Rectify the Register of Members of the company so as to ensure equality of shareholding among each branch of the family i.e. 20% as was effected at the Board meeting on 17/04/02. 2. Common order was passed by the Company Law Board taking the view that the purported transfer of Rs.2,20,000/- shares cannot be implemented since minutes of the Director Board meeting held on 17/04/02 were not signed by the Directors in accordance with Article 13(o) of the Articles of Association. Against that order Company Appeal No.23 of 2010 -4- appeal was preferred to this Court by the respondents and this Court by judgment dated 01/03/05 set aside the order and remitted the matter back to the Company Law Board for adjudicating the issue afresh. This Court directed also that till then, the status quo will be maintained. 3. The judgment of this Court was challenged before the Supreme Court by the respondents herein. The challenge was turned down by the Supreme Court which dismissed the appeals however, giving liberty to the appellants before the Supreme Court to apply to the Company Law Board for amendment and directing the Company Law Board to give opportunity to the parties to Company Appeal No.23 of 2010 -5- adduce additional evidence and to adjudicate the matter afresh. The Supreme Court set a time frame of four months for taking decision in the matter. In its order, the Supreme Court also observed that if any of the parties pray for interim orders, the Company Law Board can pass interim orders. The allegation of the appellants is that respondents 1 to 4 have been attempting to delay the final hearing of the proceedings before the Company Law Board under one pretext or the other. It is alleged that when the case was posted for final hearing, they moved an application for interim orders. Finding them not successful in obtaining interim orders even after two months, the respondents filed an application for Company Appeal No.23 of 2010 -6- amendment of the main company petition by incorporating the very averments in the application for interim orders i.e. C.A. No.610/09. The grievance voiced by the appellants is that the Company Law Board allowed the amendment application in a very casual manner without comprehending the scope of the amendment and without appreciating the serious objections which were raised by the appellants. Challenging the order of amendment dated 23/04/10 passed in the amendment application C.A.1/10 in C.P. No.30/03, the appeal is filed urging various grounds raising the following questions of law:- 1) Whether the Company Law Board was justified in permitting amendment of the Company Company Appeal No.23 of 2010 -7- Petitions after seven years of its filing ? 2) Whether the Company Law Board was justified in permitting amendment of the Company Petition without even referring to the nature of amendment sought for ? 3) Whether the Company Law Board was correct in allowing the application C.A. No.1/2010 in C.P.30/2003 when it sought to set up an entirely new case of fraud, mismanagement and siphoning off of funds, regarding which no allegations whatsoever had been made in the company petition as originally filed ? 4) Whether the Company Law Board was correct in coming to the conclusion that the amendments sought were necessary to decide the Company Appeal No.23 of 2010 -8- real dispute between the parties, when the real dispute between the parties as discernible from the averments made and prayers sought in the original Company Petition C.P. No.30/03 as originally filed was never one of siphoning off of funds or mismanagement. 5) Whether the Company Law Board was correct in its conclusion that no prejudice would be caused to the Appellants herein by allowing the C.A. No.1/2010 in C.P. No.30/2003, especially in light of the fact that the Company Law Board had refused to pass exactly same interim orders sought to be introduced through the process of amendment, while hearing C.A. No.610/09 in C.P. No.30/2003 previously filed by the respondents 1 Company Appeal No.23 of 2010 -9- to 4 herein ? 6) Whether the Company Law Board was correct in allowing the amendments sought in C.A. No.1/2010 in C.P. No.20/2003, in light of the mala fide conduct of the respondents 1 to 4 herein while making the said application ? 7) Whether the Company Law Board contradicted itself by holding that “Merit, correctness or falsity of the amendment sought are not to be gone into while considering an application for amendment”, while at the same time having recourse to the affidavit dt.24/10/2009, filed by the respondents 1 to 4 herein in C.A. No.610/2009, and that too without at all considering the reply averment made by the Company Appeal No.23 of 2010 -10- appellants herein to that affidavit ? 8) Whether the Company Law Board, whilst professing to act in the larger interest and for doing full and complete justice to the parties to the case, has in fact caused grave and serious prejudice to the appellants herein by allowing the C.A. No.1/2010 in C.P. No.30/03 as prayed for by the respondents 1 to 4 herein ? 4. Sri.Bechu Kurian Thomas, the learned counsel for the appellant addressed strenuous and extensive arguments before us, on the basis of the various grounds raised in this appeal assailing the impugned order of the Company Law Board. The learned counsel referred to Ext.A2 order of the Supreme Court dismissing the SLP. Counsel Company Appeal No.23 of 2010 -11- also referred to the application for amendment filed before the Company Law Board and particularly Annexure-A document which was attached to the amendment application. Counsel submitted that it was a drastic amendment of the company petition that was sought for and presently allowed under the impugned order. According to the learned counsel serious prejudice has been occasioned to the appellants as a result of the amendment presently granted. The real purpose in seeking amendment is to protract the final disposal of the main proceeding pending before the Company Law Board. The amendments sought for enlarges the scope of the main proceedings and hence the same should not have Company Appeal No.23 of 2010 -12- been allowed. Relying on the judgment of the Supreme Court Revajeetu Builders & Developers v. Narayanaswamy & sons (2009 (10) SCC 84) Sri.Bechu Kurian Thomas submitted that the basic test which should govern grant or refusal of amendment is whether such amendment is necessary for determination of real question in controversy or for proper and effective adjudication of the case as it obtained at the time of the amendment application. According to him the proposed amendment will constitutionally or fundamentally change the nature and character of the case and hence, should not have been allowed by the Company Law Board. Sri.Bechu Kurian Thomas would refer to Section 397 of the Company Appeal No.23 of 2010 -13- Companies Act and submit that in the petition before the Company Law Board as originally filed no case is made out for granting relief. The objective behind seeking amendments is to introduce pleadings and prayers based on Section 397 and this will result in prejudice to the appellants. 5. Sri.A.M.Shafeeque, the learned senior counsel appearing for the contesting respondents would however, support the impugned order. According to him, allegations regarding manipulation of records are already there in the petition before the Company Law Board. No prejudice as stated by the appellants will be caused to the appellants by allowing the Company Appeal No.23 of 2010 -14- amendments as presently granted. The learned senior counsel submitted that the respondents are not to blame for the delay which has been occasioned so far in finally disposing of the proceedings before the Company Law Board. He submitted that it was the appellants who contributed more to the delay by raising wanton accusations against the members of the Madras Bench which was originally in seizin of the matter, thus paving the way for the order to be passed by the Principal Bench. Sri.Shafeeque would submit that the Supreme Court by its order in Civil Appeal No.3446/06 has specifically permitted the respondents to seek amendment of the petition filed before the Company Law Board and the Company Appeal No.23 of 2010 -15- Company Law Board had been authorised by the Supreme Court to pass appropriate orders on the amendment application. Under the impugned order the Company Law Board has exercised its discretion in favour of allowing the amendment and this Court according to the learned senior counsel will not be justified in interfering with the discretion so exercised by the Company Law Board within the contours of this court's jurisdiction under Section 10(f) of the Companies Act as it is not possible to say that any question of law arises out of the said order. Sri.A.M.Shafeeque was supported in its submissions by Sri.P.Haridas appearing for respondents 2, 3, 4, 7, and 8. Company Appeal No.23 of 2010 -16- 6. We have very anxiously considered the rival submissions addressed at the Bar in the light of the materials placed on record. We have kept in mind the principles of law relating to amendment of pleadings as emerging from the various decisions rendered by this Court and by the Supreme Court in the context of Order 6 Rule 17 CPC and also Section 153 of the same Code. It is clear on a reading of Annexure-A2 order passed by the Supreme Court in C.A.3446/06 that there was some discussion at the Bar as the Supreme Court was about to dismiss the Civil Appeal, whether the appellants before the Supreme Court namely the respondents herein should be allowed to amend the petition originally filed before the Company Appeal No.23 of 2010 -17- Company Law Board. The Supreme Court under Annexure-A2 order has certainly not directed the Company Law Board to allow the amendment petition for the mere asking. What the Supreme Court directed is that the Company Law Board “may or may not allow the proposed amendment” thereby indicating clearly that the Company Law Board was free to pass any proper and correct order on the amendment application in accordance with law i.e. after inviting objections from the appellants and after hearing both sides. The very next sentence in the Supreme Court's order is as follows:- “The Company Law Board shall give an opportunity to the parties to lead additional Company Appeal No.23 of 2010 -18- evidence in addition to the evidence already filed before it”. 7. It is clear from the above sentence that the Supreme Court at that time did contemplate a situation of the Company Law Board becoming inclined to allow the amendment application. Under the impugned order we notice that the Company Law board has kept in mind the principles which are to govern while allowing or refusing amendment of pleadings. We do not think that any legal prejudice will be occasioned to the appellant by the proposed amendment as the newly introduced pleadings though in a rudimentary form stood raised in the petition originally filed also. By the amendments what has Company Appeal No.23 of 2010 -19- been done is to expand and expatiate the existing pleadings. We do not think that any injustice or prejudice will be occasioned to the appellants. But we do think that the appellant will be inconvenienced. It appears to us that the Company Law Board was totally unmindful of the inconvenience which will be caused to the appellant by allowing the amendment at that belated stage. But then as rightly submitted by Sri.Shafeeque the entire blame for the delay is not to be put on the shoulders of the respondents. The appellants also contributed very much to the delay. Nevertheless, we feel that the appellants should be compensated for the inconveniences being caused to them on account of the belated Company Appeal No.23 of 2010 -20- grant of the amendment application. Hence, even as we confirm the impugned order, we direct that the impugned order will operate only if the respondents together pay a consolidated amount of Rs.10,000/- to the appellants through their counsel in this Court within three weeks from today. If payment is not made as ordered above, the impugned order will stand vacated and the amendment application will stand dismissed. 8. Considering the apprehensions voiced by both sides about the delay in the matter of final disposal of the petition before the Company Law Board we direct the Company Law Board to expedite matters and to ensure that the main proceedings before the Company Law Board is Company Appeal No.23 of 2010 -21- disposed of at its earliest i.e. at any rate within six months of receiving copy of this judgment. PIUS C. KURIAKOSE JUDGE C. K. ABDUL REHIM JUDGE kns/-