Case: S.P. Jain Vs. Union of India and Others

also the original proceedings which are initiated by a petition. Such as original petition is required to be verified under the Code in Order 6, rule 15. To construe it otherwise would lead to impossible results. ( 58 ) BOTH these decisions were brought to the notice of the learned judge deciding the Clive Mills case [1964] 34 Comp. Cas. 731 and the Bengal Luxmi Cotton Mills case [1965] 35 comp. Cas. 187, and these decisions have been distinguished by him merely by saying that the decisions have no application where the allegations of fraud, misconduct or misappropriation have been made. The distinction drawn, appears to be that a petition not containing allegations allegation of fraud or other grave charges like misconduct or mismanagement, etc. , can be verified by affidavits on information and belief, but a petition containing allegations of fraud or grave charge like misconduct, mismanagement etc. , is required to be verified by an affidavit on personal knowledge or by supporting affidavits of other persons having personal knowledge. With respect we are unable to concur in this view, because it would involve reading the relevant rule 21 framed by the Supreme Court differently. ( 59 ) TURNING to the facts of the case, it is not in dispute that the affidavit verifying the petition as well as the affidavit supplying further particulars have been sworn in accordance with the provisions of rule 21 of the Supreme Court Rules and the Form prescribed therein, as well as the regulations and the Form prescribed therein. The source of information and the grounds of belief have been with sufficient particularity stated in the affidavit. The petitioner had thus fulfilled the requirements of law and the petition , therefore, for the reasons already stated, is not liable to be dismissed in limine. similarly, for reasons already stated the petition is not liable to be dismissed on merits also at this stage merely on the ground that the affidavit verifying the petition or the affidavit supplying particular have not been sworn on personal having personal knowledge of the fact alleged in the petition. ( 60 ) WE have already reproduced paragraph 11 of the affidavit furnishing further particular, and in that affidavit Mr. Dang has stated that at the hearing evidence will be led in proof of the facts alleged in the petition. We have pointed out above the various provisions in the amended Act and the Regulations which empower the Tribunal to enforce the attendance of witnesses, examine witnesses on oath, or make orders relating to reception of evidence taken on affidavits. It would be for the Tribunal, after the reply of the respondents has been filed to decide whether it should record the evidence of these witnesses or order receiving evidence taken on affidavits. Mr. Mody however contended that as the Union of India did not state on affidavit that it was not possible for them to file affidavits of other persons who were acquainted with the facts, the union of India should not now be allowed to lead oral evidence. According to Mr. Mody, the union of India was flouting the provisions of law and deliberately avoiding filling of affidavits of persons acquainted with facts even though it was possible for them to do so. We are not impressed by this argument. Mr. Mody has not pointed out any express provisions of law or any decision except Bengal Luxmi Cotton Mills case [1965] 35 Comp. Cas. 187, which says that the failure on the part of the petitioners to file supporting affidavits of persons acquainted with facts disentitles him form leading evidence at the hearing of the petition. With the said decision, with respect we have been unable to concur. Further, there is no material on record form which it could be inferred that though it was possible for the Union of India to file affidavits of persons acquainted with the facts of the case, the Union of India is deliberately avoiding to file their affidavits. Mr. Khambatta on behalf of the petitioner had also argued that the appellant respondent No. 2 was not entitled to contend that the petition should be dismissed in limine inasmuch as respondent No. 2 himself has waived this defect in the affidavit in verification of the petition and has taken part in the proceedings of the petition since after its admission. It was urged that the petition was admitted on 12th October, 1964, and thereafter, respondent No. 2 appeared, filed affidavits for interim orders, and thus having taken part in the proceedings has submitted to the orders in applications for interim reliefs. Respondent No. 2 therefore is not entitled to raise the plea that the petition should be dismissed in limine because the affidavit verifying the petition was defective inasmuch as it was not based on personal knowledge. Mr. Mody on, the other hand, contended that the petitioner is not entitled to argue that respondent no. 2 had waived his right to claim that the petition should be dismissed in limine inasmuch as the plea of waiver had not been raised by the petitioner in any of the affidavits which have been allowed to be taken on record. It appears that the Tribunal has allowed the counsel for the petitioner to argue the point of waiver inasmuch as it was of the opinion that the plea of waiver was raised by the counsel on the basis of the records in the petition. In our opinion, Mr. Mody right in his contention that the plea , it should not be allowed to be raised in arguments. However, it is not necessary to go further in this mater inasmuch as the Tribunal has not decided this point, nor has the application been disposed of on his ground. On the other hand, the tribunal has dismissed respondent No. 2 s application on merits. For the reasons already stated, in our opinion, the Tribunal was right in dismissing respondent No. 2s aforesaid application NO. 37 of 1965.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]( 24 ) WE find it difficult to accept the arguments of Mr. Mody. We have already referred to the relevant provisions, and it is abundantly clear that the proceedings before the Tribunal are civil proceedings. There is also hardly any doubt that the intention of the legislature as indicated in the various provisions of the Act is that the procedure that has to be followed by the Tribunal in dealing with the matters arising before it to make rules consistent with the procedure prescribed by the Civil Procedure Code. The power conferred on the Supreme Court to frame rules is to make rules consistent with the Code of Civil Procedure, and the powers conferred on the tribunal to frame regulations has to be exercised subject to the provisions of the Act, and the rules made thereunder by the Supreme Court. It would necessarily follow that the expressions used in the rules or regulations connote the same meaning as the respective expressions used in the Civil Procedure Code connote. Rule 21 has provided that the petition shall be verified by an affidavit. The purpose of the affidavit required to be filed under rule 21 in From No. 3 is nothing but verification of the averments made in the petition. The verification of the contents of a pleading and evidence in proof of allegations made in the pleading are two distinct and separate terms well understood in the Civil Procedure Code. The relevant rule relating to the verification of a pleading is contained in rules 15 (1) and (2) of Order 6, and it provides :ve as otherwise provided by any law for the time being in force, every pleading shall be verified at the foot by the party or by one of the parties pleading or by some other person proved to the satisfaction of the court to be acquainted with the facts of the case. (2)The person verifying shall specify, by reference to the numbered paragraphs of the pleading, what he verifies of his own knowledge and what he verifies upon information received and believed to be true.( 30 ) THESE decisions indicate that the limitation placed in Order 19, rule 3, that the affidavits must be confined to such facts which the deponent is able to prove on his personal knowledge, has application only to those affidavits must have been directed by a court to be filed in proof of the facts of the hearing of matters other than the hearing of interlocutory applications. Other affidavits could be on personal knowledge as well as on the information and the grounds of belief are stated with sufficient particularity. An affidavit which is required to be filed in verification of a petition under section 398 of the Act is not an affidavit directed by court to be filed under order 19 in proof of facts. There is therefore no warrant to hold that it must be confined only to such fact as are within the personal knowledge of the deponent. The object of requiring a pleading or the contents of a petitions to be verified is to ensure that false allegations are not freely and recklessly made therein. As pointed out by Mr. Justice Mody in Consolidated foods Corporations case (1960) 62 Bom. L. R. 799, 801, the basic requirements of verification of a pleading is that the deponent must clearly disclose which of the statements in the affidavit are true to his knowledge and which of the statements are based on information and belief, disclosing the sources of his informations and the grounds of belief with sufficient particularity, so as to enable the court to decided whether is should proceed with the petition is required to enable the court to decide whether it should proceed with the petition or the plaint. All that is required at that stage is to ascertain that the allegations therein are not made recklessly but are made after due inquiry and with due care. That objective is achieved when the deponent clearly states the sources of information on the basis of which allegations in a plaint or a petition have been made. Assuming, therefore, that the provisions of Order 19 have any application to an affidavit in verification of a petition required to be made under rule 21, in our opinion, the3 affidavit filed by Mr. Dang in this case fulfil the general requirements of Order 19, rule 3. In our opinion, however, Order 19, rule 3, had no application in view of the express provision made in rule 21 and in the prescribed form of verification of an affidavit required to be filed under the said rule 21. We have already reproduced the relevant portion of the Form above, and it is apparent that it is open to a deponent of an affidavit in verification of a petition under section 398 to verify it on information received by him and believed to be true. Clause (b) (v) ofn (1) of section 643 of the Act empowers the Supreme Court to make rules generally for all applications to be made to the court under the rules must be consistent with the Code of civil Procedure. Rule 21 and the form prescribed cannot be said to be in any manner inconsistent with the provisions of order 19, Rule 21 is bad in law because it is inconsistent with the provision of the Civil Procedure Code. Having regard to the provisions of section, 643, rule 21 and the Form prescribed, in our opinion, Order 19 has no application to affidavits verifying of the affidavits by Mr. Dang was in accordance with the said rule and the Form prescribedThe arguments has not impressed us. The intention of the legislature disclosed in the provisions of the Act and in particular in section 10c read together with the statutory rules framed by the Supreme Court and the regulations framed by the Tribunal appears to us to be that the procedure prescribed for hearing of applications by the Tribunal is in substance the same as is the procedure prescribed by the Civil Procedure Code for trial of civil suits. A plaint is required to be verified at the foot of a pleading as provided in rule 15 of order 6. A petition is required to be verified by an affidavit, but on the same basis as provided in rule 15. The mode of verification is different, but the quality of verification prescribed for a plaint as well as a petition is the same. After the plaint is received by court, a summons is issued to the other side. There is a similar provisions after admission of a petition. After service of the summons with a copy of the plaint, the defendant is required to file his written statement by way of reply to the allegations in the plaint. Rule 34 requires a persons who intends to oppose the petition to file his grounds in opposition or his affidavit in opposition within a certain time prescribed therein. It is thereafter that a suit or a petition comes up for hearing. Rule 34 relates to the powers as are vested in a court under the Civil Procedure Code when trying a suit. They include the power to summon and examine witnesses on oath, reception of evidence taken on affidavits, and issuing commissions for the examination of witnesses. The powers conferred on the Tribunal for hearing of a petition are thus in substance similar to the powers conferred on the court by the Code of civil Procedure relating to the trial of suits. Whether at the trial evidence should be directed to be led by filing affidavits or not is a matter left to the discretion of the court, and that would depend on the circumstances of each case. It is, therefore, not possible for us to accept that contention( 32 ) THE matter could be looked at from a different aspect. It would be seen that the affidavit verifying a petition has to be filed by the petitioner, or where there are more than one petitioner by one of the petitioners, and in the case of a petition presented by a body corporate, by a director, secretary or other principal officer thereof. Petitions under section 397 and 398 are filed either by members of a company or the Union of India, who complain that they are subjected to oppression by persons in management of a company, or who complain that the affairs of a company are conducted in a manner prejudicial to the public interest, or in a manner prejudicial to the interest of the company. It would necessarily follow that such members or the Union of india are unlikely to know all the material facts from their personal knowledge. Necessarily, the averments in a petition will have to be made by them on information received by them from various sources and believed by them to be true. To accept the argument of Mr. Mody that the affidavit varifying a petition under section 397 and 398 must be on personal knowledge could result in practically taking away the rights conferred by sections 397 and 398 on members in minority and the Union of India to get relief in cases of oppression and mismanagement. Mr. Mody further argued that it may be that a petitioner himself may not be able to verify all the allegations in a petition from his personal knowledge, but he may be able to procure and file along with the petition supporting affidavits of person from whom he had obtained the information. Those persons would certainly be in a position to verify the affidavits on their personal knowledge, and that according to Mr. Mody is the scheme of the Rules framed framed under the Companies Act in general and the import of rule 21 in particular. To accept the argument of Mr. Mody would necessarily involve reading more in rule 21 than it contains. The affidavit in verification had to be made by the petitioner, and , where there are more than one petitioner, by one of them. In the case of a corporate body being the petitioner, the affidavit is to be made either by a director or a secretary or other principal officer. The rule does not provide that in the event a petitioner is not able to verify the petition on personal knowledge, the petitioner should file supporting affidavits of persons having personal knowledge in respect of those facts. Further, the said provisions of section 10c and regulation (1) of Chapter 20, rule 1, empower of the Tribunal to receive evidence either on affidavits or by examination of witnesses on oath before it. There is, therefore, no warrant to hold that the scheme as disclosed by the relevant provisions is that the allegations in a petition under section 397 or section 398 alleging fraud, misconduct, misappropriation, etc. , or, in the event the petitioner is unable to so verify, then by supporting affidavits of other persons having personal knowledge, and that if a petitioner fails to do so he is not entitled to lead oral evidence to prove the allegations( 36 ) PLACING reliance on these observations, Mr. Mody has argued that the affidavit on information, even if the source has been disclosed, is no evidence at all even for the purpose of issuing a summons against theargument overlooks that the learned Chief Justice was not considering the question of maintainability of the petition, but was considering the question as to whether the petitioner had proved his case at the trial after both the parties had tendered their evidence. However, it may be pointed out that the other two learned judges have not gone to the extent the learned Chief Justice has gone. Lord Justice Rigby in his judgment observed:I have pay the slightest attention myself to affidavits of that kind, whether they be used on interlocutory applications or on final ones, because the rule is perfectly general that, when a deponent makes a statement on his information and belief, he must state the ground of that information and belief.( 37 ) LORD Justice Vaughan Williams appears to have concurred with the view of Lord Justice rigby( 40 ) ON these observations Mr. Mody had placed reliance in support of his argument that the petition verified by an affidavit on information is liable to be dismissed inNow, it has to be noticed that the learned judges were not considering the question as to whether the application of the plaintiff was liable to be dismissed in limine. On the other hand, the learned judges were considering the question about the sufficiency of evidence tendered at the trial. It may also be pointed out that since such affidavits have been on the grounds of necessity held to be sufficient evidence to enable a court to grant reliefs, we fail to see such an affidavit then should not be sufficient to enable a court to admit a petition and call upon the respondent to file his reply( 45 ) PLACING reliance on these observations, Mr. Mody contended that when a petition for winding up is supported by such a statutory affidavit it is liable to be dismissed inWe are unable to read in these observations any support to Mr. Modys arguments. The learned judge has only stated as a fact what the company did. The learned judge has not held that had the company applied that the petition should be dismissed in limine, the petition would have been dismissed, because there was no affidavit on personal knowledge filed in support of the winding up petition. On the other hand, the earlier remarks of the learned judgebut it is sufficient to require an answer indicates that if a petition is verified by a statutory affidavit, then that calls for an answer to the petition by the respondent. Mr. Mody argued that that may be so, because the aforesaid rule 30 framed under the English Companies Act says that it is prima facie evidence. Rule 21 of the rules framed by the Supreme Court does not say that the statutory affidavit prescribed by it is prima facie evidence of the allegation verified by the affidavit. Formerly, the rules framed by some of the High Courts were in identical terms as those of rule 30 of the said english rules. The omission of the clausethat it shall be prima facie evidence is significant, and it indicates that no more a statutory affidavit on information only is sufficient to sustain the petition. The argument has little force. It is true that rule 21 framed by the Supreme Court does not say that,such affidavits shall be sufficient prima facie evidence of the statement in the petition.But, if the rules are read as a whole, there is no doubt left that the procedure prescribed by the Supreme Court is that if the court finds that the petition is supported by a statutory affidavit, it has to admit it and issue a summons to the respondent. The summons issued has to be served on the respondent in the manner prescribed in the rules. After the summons is served on the respondent, the respondent has to give notice to the petitioner if he intends to appear at the hearing and oppose the petition. Rule 34 further requires the respondent to furnish a copy of his grounds of opposition to the petitioner within a certain time. The matter then comes up for hearing. There can hardly be any doubt that a petition verified by a statutory affidavit is sufficient to call for an answer by the respondent. Whether the statutory affidavit sworn on information only would at the trial be prime facie evidence in proof of the statements made in petition or not is a matter altogether different( 47 ) THE court observed:That affidavit is always necessary but not always sufficient.Counsel for the petitioner then undertook to file a further affidavit. The case was adjourned. It is on this question that Mr. Mody has placed reliance. With respect, we must confess we fail to appreciate how the question supports the principle contention of Mr. Mody. All that has been stated is that the statutory affidavit is not sufficient evidence to grant the relief claimed on the ground of fraud. The observation itself indicates that even when this defect was notices at the trial, it was within the power of the judge to allow the petitioner to tender further evidence and adjourn the case thereafter( 50 ) THESE observations clearly indicate that in cases where allegations of fraud or other grave charges have been made, if possible, the court should examine witnesses who are acquainted with the facts of the case. These observations have been made in spite of the fact that the general practice upon petitions under the Companies Act was to tender evidence by affidavits. We are no doubt dealing here with a case arising out of the Companies Act, but not with the general practice hitherto followed by courts. We have to deal with the procedure which the Act has now prescribed for the Tribunal to adopt. We have already observed that by the amending Act of 1963, certain radical changes have been introduced. There is a departure from the normal rule of leaving the dispute between members to the domestic forum, the court stepping in only in exceptional circumstances. Under sections 397 and 398, powers have been conferred on courts to grant relief either at the instance of members in minority holding, certain percentage of shares or at the instance of the Union of India where the oppression of the minority was complained of, or where the complaint was that the affairs of the company were conducted or likely to be conducted in such manner as were prejudicial to the pubic interest or to the interest of the company. The Act has been further amended and trail of petitions under section 397 and 398 has now been transferred to the Tribunal. The Tribunal has now also been conferred with further powers under section 388b. Under that section, the Union of India could state a case asking the tribunal to record a finding that a person is not fit to hold the post of a director in a particular company or any other company. Section 10c further confers on the Tribunal certain powers which are exercisable by a civil court. The reading of section 10c, which also has been brought on the statute book by the said amending Act, discloses that the Tribunal is clothed with powers of discovery and investigations of the documents, enforcing the attendance of the witnesses, compelling production, of documents, examining witnesses on oath, reception of evidence taken on affidavits and issuing commissions for examining witnesses. The Tribunal has also been empowered to frame regulations regulating its procedure. The regulations which the Tribunal is empowered to prescribe have to be in conformity with the Code of Civil Procedure and the rules framed by the civil courts. The regulations in Chapter 20 disclose that the Tribunal has been clothed with the powers which a civil court can exercise under Orders 18,19 and 26 of the Code of Civil Procedure. Reading of Order 18, which relates to the recording of oral evidence, shows that it confers a right on a party to apply to the court to issue summons to a witness it wants to examine. The provisions of law and the rules framed thereunder leave no doubt that the intention of the legislature is not that evidence on petition should be confined only to affidavits, but, on the other hand, the intention of the legislature as indicated in the amended provisions appears to be that in appropriate cases oral evidence should be recorded. Whether in a given case a party should be permitted to lead oral evidence or ordered to prove facts by filing affidavits would depend on the circumstances of that case( 52 ) THESE observations also do not fully support the appellant in his contention that in petitions founded on fraud, misappropriation, etc. , all the material evidence has to be tendered in the shape of supporting affidavit of the petitioner or the supporting affidavits of other persons at the time of filing of the petition, and failure on the part of the petitioner to do so, would result in the dismissal of the petition in limine, or the contention of the appellant that the only oral evidence which could be accepted at the hearing of the petition is calling the deponents of the affidavits for. The learned judge was dealing with the question of the sufficiency of evidence tendered before him at the time of the disposal of the application finally. It may also be pointed out that the observations do not rule out the acceptance of oral evidence. The observations of the learned judge:The application is disposed of on the basis of the averments in the pleadings, unless the matter is directed to be tried on evidence indicate that the reception of oral evidence in an appropriate case is not rules out( 54 ) IT is indeed true that the aforesaid observations fully support the contention raised by Mr. Mody on behalf of the appellant. With utmost respect, and for the reasons already recorded, we find considerable difficulty in concurring with these observations or taking a similar view as is taken by the learned judge. None of the English decisions, on which Mr. Mody has placed reliance, has gone to the extent the learned judge has gone( 57 ) IN In re Albert David Ltd. (1964) 68 C. W. N. 163. Mr. Justice Mallick held that :er 19, rule 3, Civil Procedure Code, applies to affidavits simpliciter which can be used as evidence in suit. Unless the averments in the affidavit are true to knowledge, they cannot be treated as evidence being hit by hearsay rule. The position is different in the case of a petition, even if the petition initiates a proceeding. It must be verified as laid down in Order 6, rule 15. If order 19, rule 3, is to be applied to a petition, theninterlocutory matters in order 19, rule 3, must be given a very extended meaning, so as to cover not only what is commonly understood as interlocutory application in a suit but also the original proceedings which are initiated by a petition. Such as original petition is required to be verified under the Code in Order 6, rule 15. To construe it otherwise would lead to impossible results.( 58 ) BOTH these decisions were brought to the notice of the learned judge deciding the Clive Mills case [1964] 34 Comp. Cas. 731 and the Bengal Luxmi Cotton Mills case [1965] 35 comp. Cas. 187, and these decisions have been distinguished by him merely by saying that the decisions have no application where the allegations of fraud, misconduct or misappropriation have been made. The distinction drawn, appears to be that a petition not containing allegations allegation of fraud or other grave charges like misconduct or mismanagement, etc. , can be verified by affidavits on information and belief, but a petition containing allegations of fraud or grave charge like misconduct, mismanagement etc. , is required to be verified by an affidavit on personal knowledge or by supporting affidavits of other persons having personal knowledge. With respect we are unable to concur in this view, because it would involve reading the relevant rule 21 framed by the Supreme Court differently( 59 ) TURNING to the facts of the case, it is not in dispute that the affidavit verifying the petition as well as the affidavit supplying further particulars have been sworn in accordance with the provisions of rule 21 of the Supreme Court Rules and the Form prescribed therein, as well as the regulations and the Form prescribed therein. The source of information and the grounds of belief have been with sufficient particularity stated in the affidavit. The petitioner had thus fulfilled the requirements of law and the petition , therefore, for the reasons already stated, is not liable to be dismissed in limine. similarly, for reasons already stated the petition is not liable to be dismissed on merits also at this stage merely on the ground that the affidavit verifying the petition or the affidavit supplying particular have not been sworn on personal having personal knowledge of the fact alleged in the petition( 60 ) WE have already reproduced paragraph 11 of the affidavit furnishing further particular, and in that affidavit Mr. Dang has stated that at the hearing evidence will be led in proof of the facts alleged in the petition. We have pointed out above the various provisions in the amended Act and the Regulations which empower the Tribunal to enforce the attendance of witnesses, examine witnesses on oath, or make orders relating to reception of evidence taken on affidavits. It would be for the Tribunal, after the reply of the respondents has been filed to decide whether it should record the evidence of these witnesses or order receiving evidence taken on affidavits.Mr. Mody however contended that as the Union of India did not state on affidavit that it was not possible for them to file affidavits of other persons who were acquainted with the facts, the union of India should not now be allowed to lead oral evidence. According to Mr. Mody, the union of India was flouting the provisions of law and deliberately avoiding filling of affidavits of persons acquainted with facts even though it was possible for them to doWe are not impressed by this argument. Mr. Mody has not pointed out any express provisions of law or any decision except Bengal Luxmi Cotton Mills case [1965] 35 Comp. Cas. 187, which says that the failure on the part of the petitioners to file supporting affidavits of persons acquainted with facts disentitles him form leading evidence at the hearing of the petition. With the said decision, with respect we have been unable to concur. Further, there is no material on record form which it could be inferred that though it was possible for the Union of India to file affidavits of persons acquainted with the facts of the case, the Union of India is deliberately avoiding to file their affidavits.Mr. Khambatta on behalf of the petitioner had also argued that the appellant respondent No. 2 was not entitled to contend that the petition should be dismissed in limine inasmuch as respondent No. 2 himself has waived this defect in the affidavit in verification of the petition and has taken part in the proceedings of the petition since after its admission. It was urged that the petition was admitted on 12th October, 1964, and thereafter, respondent No. 2 appeared, filed affidavits for interim orders, and thus having taken part in the proceedings has submitted to the orders in applications for interim reliefs. Respondent No. 2 therefore is not entitled to raise the plea that the petition should be dismissed in limine because the affidavit verifying the petition was defective inasmuch as it was not based on personal knowledge.Mr. Mody on, the other hand, contended that the petitioner is not entitled to argue that respondent no. 2 had waived his right to claim that the petition should be dismissed in limine inasmuch as the plea of waiver had not been raised by the petitioner in any of the affidavits which have been allowed to be taken on record.It appears that the Tribunal has allowed the counsel for the petitioner to argue the point of waiver inasmuch as it was of the opinion that the plea of waiver was raised by the counsel on the basis of the records in the petition. In our opinion, Mr. Mody right in his contention that the plea , it should not be allowed to be raised in arguments. However, it is not necessary to go further in this mater inasmuch as the Tribunal has not decided this point, nor has the application been disposed of on his ground. On the other hand, the tribunal has dismissed respondent No. 2 s application on merits. For the reasons already stated, in our opinion, the Tribunal was right in dismissing respondent No. 2s aforesaid application NO. 37 of 1965.