Case: J.P. Srivastava &amp; Sons Pvt. Ltd.  Vs. M/S. Gwalior Sugar Co. Ltd.

rested his concurrence with the view on the affidavit filed by Rajeshwari subsequent to the filing of the petition. He said: "... As Smt. Rajeshwari made her position clear in the affidavit filed in the High Court, I do think she had authorized her father to act on her behalf in the matter at hand, and the application under Section 397/398 of the Companies Act, 1956 as filed in the Court, ought to be taken as one to which she had consented." 43. The finding of the CLB and the High Court to the effect that the petition of the appellant deserved to be rejected only because the letters of consent had not been annexed to the petition was therefore, incorrect. What the CLB and the High Court should have done was to have satisfied themselves that the consent had in fact been given prior to the filing of the petition. There is nothing either in the orders of CLB or the High Court which could even remotely be construed as a rejection of the affidavits, resolution, etc. filed by Nini Srivastava to show that prior consent had in fact been obtained. We may also note the unrebutted specific averment by the petitioners to the effect that V.K. Srivastava was personally present throughout the litigation. 44. Having decided that Nini Srivastava could have been and was authorized to act on behalf of the trust, the next question is, did Nini Srivastava file the petition on behalf of the Trust? The CLB has noted that the cause title to the petition showed that she had filed the petition for herself and as Trustee of the Trust. According to the respondents, this was again an interpolation. But the CLB has given no such finding nor has the High Court. Besides the petitioners had said the petitioners are holding some preference shares also. It is admitted that Nini Srivastava holds 50 preference shares in her personal name. However, the use of the plural is significant. It is not the case of the respondents that any other individual petitioner holds preference shares except for the trust. Then again in paragraph 2, even if one were to ignore the phrase plus 1029 preferential shares, it has been specifically averred that the petitioners form the group headed by J.K. Srivastava. There is no dispute that the group of J.K. Srivastava holds the requisite percentage of shares for maintaining proceedings under Sections 397, 398 and that the Trust falls within that group. Again in paragraph 6.2 of the petition there is a categoric reference to the 1029 redeemable preference shares held by the Trust as being held by the petitioners. This was also how the respondents understood the petition. In an application filed by them on 19th March, 1988 under Reg. 44 they said: "That shareholding of the respondent company is divided mainly between two groups namely, H.K. Srivastava Group in the Management holding about 30% Equity Shares and 1029 Redeemable Cumulative Preference Shares and the J.K. Srivastava group holding about 12% Equity Shares and 1029 Redeemable Cumulative Preference shares."That it is apprehended that J.K. Srivastava group i.e the Petitioners holding about 12% Equity Shares and 1029 Redeemable Cumulative Preference Shares may obstruct the Resolution for enhancement of Authorised Shares Capital.." 45. It appears to us that the intention of the petitioners undoubtedly was to represent the J.K. Group which admittedly has the qualifying number of shares, although the expression of such intention was not as clear as it should have been. 46. All the fora below have not proceeded on the basis that the pleading in the petition did not reflect the petition. They have rested their findings on the law as perceived by them that the Trust could not have been represented by one co-trustee. The perception as we have held was erroneous. 47. The other ground on which the fora dismissed the petition was that the beneficial interest in 551 shares of the 1029 held by the Trust had already vested in the beneficiaries prior to the filing of the petition complaining of mismanagement and oppression. This is again an incorrect legal proposition. An equitable or beneficial interest in shares does not make the owner of the interest a member of the company. (See M/s. Howrah Trading Co. vs. Commissioner of Income Tax AIR 1959 SC 775 : Killick Nixon Ltd. vs. Bank of India 1985 (57) Com. Cases 832) Therefore, even assuming that in terms of the Trust Deed the shares had devolved on the beneficiary of the Trust, this would not mean that the owner of the shares as registered with the company would not be competent to file the petition under Sections 397 and 398. 48. The object of prescribing a qualifying percentage of shares in petitioners and their supporters to file petitions under Sections 397 and 398 is clearly to ensure that frivolous litigation is not indulged in by persons who have no real stake in the company. However it is of interest that the English Companies Act contains no such limitation. What is required in these matters is a broad commonsense approach. If the Court is satisfied that the petitioners represent a body of shareholders holding the requisite percentage, it can assume that the involvement of the company in litigation is not lightly done and that it should pass orders to bring to an end the matters complained of and not reject it on a technical requirement Substance must take precedence over form. Of course, there are some rules which are vital and go to the root of the matter which cannot be broken. There are others where non-compliance may be condoned or dispensed with. In the latter case, the rule is merely directory provided there is substantial compliance with the rules read as a whole and no prejudice is caused. (See Pratap Singh vs. Shri Krishna Gupta (AIR 1956 SC 140 ) in our judgment, Section 399(3) and Regulation 18 have been substantially complied with in this case.

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

Explanation:
0[ds]29. Therefore although as a rule, trustees must execute their duties of their office jointly, this general principle is subject to the following exceptions when one trustee may act for all (1) where the Trust Deed allows the trusts to be executed by one or more or by majority of trustees (2) where there is express sanction or approval of the act by the co-trustees; (3) where the delegation of power is necessary; (4) where the beneficiaries competent to contract consent to the delegation; (5) where the delegation to a co-trustee is in the regular course of the business; (6) where the co-trustee merely gives effect to a decision taken by the trustees jointly.The conclusion is inescapable that the Trustees had expressly authorized Nini Srivastava to file the petition. Additionally, the affidavit of Vijay Srivastava, who is alleged to be the registered owner of the 1029 preference shares, clearly shows that he had expressly consented and authorized Nini Srivastava in his capacity as such trustee to file the proceedings. If the respondents had fairly and squarely raised the issue as to the petition not being consented by by Vijay Srivastava as the registered shareholder of the 1029 shares, it would have been open to the appellants to have relied on this affidavit and if necessary amended the petition. The power to allow such amendments has been expressly granted to the CLB under RegulationIt is true that criminal proceedings have been instituted by the respondents on the allegation that the stamp paper on which the affidavits have been affirmed were purchased subsequently. But we are not prepared to reject the documents as forged ones not only because the executants have hotly contested the allegations but also because there is no finding to that effect by any of the three courts below or by the criminal court. Indeed as matters now stand the criminal proceedings have been stayed by the High Court. Furthermore, Vijay Srivastava and Raj Mohinis continuous support is also apparent from the fact that both of them are parties to the appeal before us albeit in the capacity of heirs of Late J.K. Srivastava.The reasoning in this decision would no longer be apposite having regard to the change in the language in Section 399(3) and the shifting of the requirement from the Act to Regulation 18 of the Company Law Board Regulations 1991 (hereinafter refer to as the Regulation 18 also does not itself contain the requirement for filing the consent letters [(18) Documents to accompany the petition - (1) A petition shall be accompanied by documents as prescribed in Annexure III and shall be accompanied by an Index of Documents.] The requirement has been prescribed in Annexure III, which is referred to in Regulation 18. Serial No. 27 of Annexure III contains a list of several documents required to be annexed to petitions relating to the exercise of powers in connection with prevention of oppression or mismanagement under Sections 397, 398, 399(4), 400, 401, 402, 403, 404 and 405. The documents required to be annexed to such petition include where the petition is prescribed on behalf of members, the letter of consent given by them". Other documents required to be filed include documents or other evidence in support of the statement made in the petition, as are reasonably open to the petitioner (s)", as also "three spare copies of the petition". These requirements can hardly be said to be mandatory in the sense that non-compliance with any of them would ipso facto result in the dismissal of the petition. Apart from this, Regulation 18 itself is subject to the powers of CLB under Regulations 44 and 48.The finding of the CLB and the High Court to the effect that the petition of the appellant deserved to be rejected only because the letters of consent had not been annexed to the petition was therefore, incorrect. What the CLB and the High Court should have done was to have satisfied themselves that the consent had in fact been given prior to the filing of the petition. There is nothing either in the orders of CLB or the High Court which could even remotely be construed as a rejection of the affidavits, resolution, etc. filed by Nini Srivastava to show that prior consent had in fact been obtained. We may also note the unrebutted specific averment by the petitioners to the effect that V.K. Srivastava was personally present throughout the litigation.