Case: Arjun Prasad Vs. Shantilal Shankarlal Shah And Others(And Connected Appeal)

The question arises in connection with such a meeting held of the creditors of the Gaya Sugar Mills Ltd. on 14th November 1951, an order was made by the Company Judge in the Patna High Court for the winding up of the Gaya Sugar Mills Ltd. on 6th October 1953, an order was made by the learned Judge for action to be taken under section 153 of the Indian Companies Act. Mr. G. C, Banerjee, who was appointed Chairman to hold the meeting of the creditors held separate meetings of the debenture-holders, secured creditors and of the unsecured creditors. In his Report he stated as regards the meeting of the unsecured creditors that "thirty unsecured creditors either in person or through proxy attended and took part in the meeting," and that ultimately a resolution proposed by one of the creditors, the Standard vacuum Oil Company and seconded by another creditor Shri K. C. Agarwal was passed by the creditors present by majority in number as well as three-fourth in value." It appears that at this meeting one Arjun Prasad claiming to represent two creditor companies, viz., Bhandani Bros., and the Hindustan Coal Company Ltd., cast his votes on behalf of these two companies, in support of the resolution. No objection was take at the meeting to the validity of these votes by any of the creditors who opposed the resolution and the Chairman proceeded on the basis that these votes were validly cast. It is not disputed that if these votes were not validly cast the requisite majority of three-fourths in value would not be obtained2. When the application came up for final hearing before the Court an objection was taken on behalf of creditors who opposed the scheme that the votes cast by Arjun Prasad on behalf of the two creditor companies, viz., Bhandani Brothers and the Hindustan Coal Company were not valid votes and so the requisite majority of three-fourths in value of the creditors had not been obtained. The Company Judge was of the opinion that there was no sufficient explanation as to why the objection as to the validity of the votes was not taken earlier and so the objection raised at the late stage could not be entertained. On the merits also he held that the resolutions passed by the creditor companies authorising Arjun Prasad to attend the meeting of the unsecured creditors of the Gaya Sugar Mills Ltd., and vote on behalf of the companies, were sufficient in law to make his attendance at the meeting the attendance of the companies "in person" and his voting on behalf of the companies valid voting of the companies. Accordingly, he rejected this objection3. On appeal a Division Bench of the Patna High Court has allowed the objection, being of opinion that the delay in raising the objection would not entitle the Court to ignore the legal defect of the votes and that in law the votes cast by Arjun Prasad were not valid votes of these two creditor companies, viz., Bhandani Brothers and the Hindustan Coal Company. A contention that no appeal lay to the High Court from the order of the Company Judge was rejected. Therefore, the learned Judges set aside the order of the Company Judge as to this part of the case. They, however, gave a certificate that as regards the value and nature of the case, it fulfils the requirements of Art. 133 (l) (a) of the Constitution and is a fit one for appeal to this Court. On this certificate the present appeals have been filed.

Court's reasoning:
It therefore could not be disputed and was not disputed that an appeal did lie from the order made by the Company Judge on 6th October 1953The "Court" here cannot but mean the Court exercising original jurisdiction. When the Company Judge exercises the jurisdiction he does it under the provisions of S. 3 of the Companies Act, which says that the Court having jurisdiction under this Act shall be the High Court having jurisdiction in the place at which the registered office of the company is situate. The authority authorised to hear appeals from appealable decisions of a Single Judge of the Patna High Court when exercising original jurisdiction lie to the High Court and not to this Court. (Vide Clause 10 of the Letters Patent). It necessarily follows that the appeal from the order of the Company Judge lay to the High Court and not to this Court. There is, therefore, no substance in the first point raised on behalf of the appellantIt is undoubtedly true that the opposing creditor were guilty of negligence in not drawing the attention of the Chairman to what they considered to be a defect in the voting on behalf of the two creditor companies, viz., Bhandani Brothers and the Hindustan Coal Co. and no less negligent in not bringing this to the Courts notice at the earliest opportunity. Laches on the part of some creditors cannot however justify the Chairman or the Court in disobeying the requirements of the Act. If in law the two votes cast by Arjun Prasad for these two creditor companies were not validly cast the three-fourths majority requisite under S.153, sub-s. (2) would not be there and so no further action under S. l53 could be taken by the Court in the matter. How can the Court turn a blind eye to the fact, if proved, that on the basis of valid votes at the meeting the requisite majority was not obtained, merely because the Chairmans attention was not drawn to the defect or it was not brought to the Courts notice earlierIn our opinion, the learned Judges who heard the appeal were right in thinking that however deplorable the delay by opposing creditors in raising the objection might be, that would not be a sufficient reason for refusing to entertain the objectionIt appears to us that unless there is some special provision by a law, a company which is not a physical person cannot "be present" at any place "in person". It is true that under the General Clauses Act, 1897, a company is a "person", so that whenever the word "person" is used in any statute a company would be included thereunder. The definition, in the General Clauses Act can however be of no assistance in interpreting the words "to be present in person", and the difficulty in the way of a company being present in person can be obviated only by statutory provisions of rules having the force of lawIt is unnecessary for us to consider whether under this new provision the attendance of a person authorised in this manner at a meeting of the creditors will amount to attendance of the creditor company "in person." For, the present case is governed by the provisions of the Indian companies Act, 1913 and not by this new provisionsAdmittedly, no proxy in accordance with Rule 150 was given by the two creditor companies, Bhandani Brothers and the Hindustan Coal Company, in the present case. There is nothing in these rules which can assist Mr. Sastris argument that a resolution by the directors of the company authorising a director or some other person to represent the company at the creditors meeting makes him "present in person" in law for that company at the meeting,As we have already indicated it does not appear to us that in the Act of 1913 there is any provision for attendance of the company "in person", but apart from that we wish to point out that the resolution made by the two companies do not appear to us to delegate the powers of the directors to Arjun Prasad13. The conclusion of the High Court that the votes cast by Arjun Prasad on behalf of the two companies, viz. Bhandani Brothers and the Hindustan Coal Company, were not valid votes is, in our opinion, correct.