Case: Assambrook Limited Vs. Krishen Kumar Kapoor and Others

conceived in the interest of other corporate bodies in whom the majority shareholders of this company are interested. It is submitted that the purchase of four tea estates was not a prudent measure inasmuch as the title of the vendors to all the four estates is under a cloud and litigation is pending in that behalf. Fraud is attributed to the board of directors of the appellant-company. It is pointed out that the financial institutions stand to lose by subscribing to the said offer. It is emphasised that even a single shareholder of the company is entitled to challenge any action of the company which is ultra vires the company (i.e., contrary to the memorandum and articles of association of the company) or is contrary to law or is vitiated by fraud. Learned counsel submitted that the several orders impugned in these appeals are only interlocutory orders subject to further and final orders of the Calcutta High Court and at this stage this court ought not to interfere under article 136 of the Constitution but must relegate the parties to the Calcutta High Court to seek appropriate orders according to law. In reply, counsel for the appellant-company submitted that the appellant-company is one of best managed companies and that for the last few years it has been declaring a dividend at 40 per cent. and more every year and that its shares are being quoted on the stock exchange at more than Rs. 100 per share even during the months of September and October, 1992 (i.e., even after the recent crash following revelation of certain irregularities in the matter of Government securities). It is argued that the offer is highly advantageous to the shareholders and it is for this reason that even financial institutions like the Life Insurance Corporation of India have already accepted the offer and remitted the appropriate amount.In view of the fact that the suits and writs are pending in the Calcutta High Court and the Alipore District Court, which have to be tried and finally disposed of by those courts, we desist from expressing any opinion on the rival contentions urged by the appellant-company and the respondents. At the same time, we are of the opinion that appropriate orders ought to be passed in the interest of the company, its shareholders and in the interest of justice. On a consideration of the several aspects of the matter, we are of the opinion that the order passed by A. N. Ray J. on December 6, 1992, was a proper order to make in the circumstances. Accordingly, we affirm and restore the said order. We set aside the order dated December 21, 1992, passed by the Division Bench in appeal against the said order. We further make absolute the order passed by S.C. Agrawal J. on December 25, 1992, in S.L.P. No. 17415 of 1992 subject to the following modification : The appellant-company is permitted to pay off the debts due to the banks and public financial institutions only from out of the monies raised by the said offer. So far as the repayment of the debts allegedly raised from certain other corporate bodies (referred to by the appellant as unsecured loans) are concerned, the question whether the money raised by the offer should be utilised for payment to the said corporate bodies or not shall be decided by the Calcutta High Court in the suit filed by Sri Krishen Kumar Kapoor. Since the appellant is complaining that it is being obliged to pay a substantial amount by way of interest on the amounts borrowed by it for acquiring the said estates, we think that it would be appropriate if the Calcutta High Court passes orders in this behalf as expeditiously as possible preferably within three weeks from today. For a period of three weeks, the direction made by S.C. Agrawal J. (on December 25, 1992) to the effect that the appellant-company shall not utilise the funds collected as a result of the issue of convertible debentures---shall remain operative subject to the above modification. All parties to file their affidavits within one week from today before the High Court.So far as the request of learned counsel for the appellant regarding extension of the date of closure of the offer is concerned, we are not inclined to pass any orders at this stage. Counsel for the appellant relies upon the guidelines issued by the Securities and Exchange Board of India which say that such offer cannot be extended beyond 60 days from the date of issue and that any violation of the said guidelines would expose the company to prosecution and other sanctions. The argument of the appellants counsel is that inasmuch as the court had interdicted the operation of the said offer, the court itself, including this court, should rectify the same on the principle that " an act of court should prejudice no one ". May be there is some justification in the said argument but that is a matter for the appropriate authorities, who are competent to extend the said date or who are empowered to take action for violation of the said guidelines, to consider. It may also be a matter for the High Court to consider in the matter pending before it in this behalf. Suffice it to say that at this juncture we do not wish to pass any orders on the said request. The appellants are free to move the court or other competent authority in this behalf.Learned counsel for the Life Insurance Corporation has brought to our notice that the Life Insurance Corporation decided to accept the offer made by the appellant-company and has accordingly remitted the appropriate amount on December 26, 1992, itself.Before parting with this matter, we must refer to a grievance made by Sri Govinda Mukhoty, learned counsel for Sri Ashok Singh. He complained that this court should not pass orders even before his client had an opportunity of filing a counter to S.L.P. No. 148 of 1993.

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

Explanation:
1[ds]In view of the fact that the suits and writs are pending in the Calcutta High Court and the Alipore District Court, which have to be tried and finally disposed of by those courts, we desist from expressing any opinion on the rival contentions urged by theand the respondents. At the same time, we are of the opinion that appropriate orders ought to be passed in the interest of the company, its shareholders and in the interest of justice. On a consideration of the several aspects of the matter, we are of the opinion that the order passed by A. N. Ray J. on December 6, 1992, was a proper order to make in the circumstances. Accordingly, we affirm and restore the said order. We set aside the order dated December 21, 1992, passed by the Division Bench in appeal against the said order. We further make absolute the order passed by S.C. Agrawal J. on December 25, 1992, in S.L.P. No. 17415 of 1992 subject to the following modification : Theis permitted to pay off the debts due to the banks and public financial institutions only from out of the monies raised by the said offer. So far as the repayment of the debts allegedly raised from certain other corporate bodies (referred to by the appellant as unsecured loans) are concerned, the question whether the money raised by the offer should be utilised for payment to the said corporate bodies or not shall be decided by the Calcutta High Court in the suit filed by Sri Krishen Kumar Kapoor. Since the appellant is complaining that it is being obliged to pay a substantial amount by way of interest on the amounts borrowed by it for acquiring the said estates, we think that it would be appropriate if the Calcutta High Court passes orders in this behalf as expeditiously as possible preferably within three weeks from today. For a period of three weeks, the direction made by S.C. Agrawal J. (on December 25, 1992) to the effect that theshall not utilise the funds collected as a result of the issue of convertibleremain operative subject to the above modification. All parties to file their affidavits within one week from today before the High Court.So far as the request of learned counsel for the appellant regarding extension of the date of closure of the offer is concerned, we are not inclined to pass any orders at this stage. Counsel for the appellant relies upon the guidelines issued by the Securities and Exchange Board of India which say that such offer cannot be extended beyond 60 days from the date of issue and that any violation of the said guidelines would expose the company to prosecution and other sanctions. The argument of the appellants counsel is that inasmuch as the court had interdicted the operation of the said offer, the court itself, including this court, should rectify the same on the principle that " an act of court should prejudice no one ". May be there is some justification in the said argument but that is a matter for the appropriate authorities, who are competent to extend the said date or who are empowered to take action for violation of the said guidelines, to consider. It may also be a matter for the High Court to consider in the matter pending before it in this behalf. Suffice it to say that at this juncture we do not wish to pass any orders on the said request. The appellants are free to move the court or other competent authority in this behalf.Learned counsel for the Life Insurance Corporation has brought to our notice that the Life Insurance Corporation decided to accept the offer made by theand has accordingly remitted the appropriate amount on December 26, 1992, itself.Before parting with this matter, we must refer to a grievance made by Sri Govinda Mukhoty, learned counsel for Sri Ashok Singh. He complained that this court should not pass orders even before his client had an opportunity of filing a counter to S.L.P. No. 148 of 1993.