Case: Tnd.Mercantile Bank Sharehold.Wel.Asso Vs. S.C.Sekar

2. Tamilnad Mercantile Bank Ltd. (for short, "the Company") was established by the Nadar Community. It is incorporated and registered under the Indian Companies Act, 1956. It carries on banking business inter alia in the State of Tamil Nadu. Members of the Appellant-Association hold a large number of shares in the company. For one reason or the other its Annual General Meetings could not be held for a number of years. By reason of an order dated 14th October, 2003, the Company Law Board directed that Annual General Meetings for the years 1996 to 2003 be held. Pursuant thereto meetings were held and some Directors were elected.3. 24th December, 2004 was the date fixed for holding of 82nd Annual General Meeting. Appellant, however, filed a suit which was registered as C.S. No.981 of 2004 in the High Court of Judicature at Madras in its ordinary original civil jurisdiction. Indisputably proceedings in contempt in respect of an order relating to the said suit came up for consideration before this Court in Civil Appeal No.3034 of 2006 and by an order dated 12th July, 2006 the matter was remitted to the High Court for consideration thereof afresh,this view of the matter, we are of the opinion that the High Court cannot be said to have committed an error in holding that if a proceeding for contempt was not maintainable, no direction could have been issued therein. We are, however, of the opinion that in view of the order passed by the Division Bench and also for the views we have taken, it is necessary to pass a consequential order, namely, directing the learned Single Judge to consider the matter afresh. Learned Single Judge of the High Court is, therefore, requested to consider the application for grant of injunction filed by the appellants afresh on merits. All the contentions raised by the parties shall remain open. We may place on record the statement made before us by Mr. Salve, learned senior counsel appearing on behalf of the appellants that the Bank and its Directors shall be impleaded as parties in the Suit. We may further notice that learned counsel for the Bank and learned counsel for some of its Directors have been appearing in the matter throughout. It may also be stated that some of the Directors have also preferred appeals before the Division Bench. Learned counsel appearing on behalf of the Bank states that the Bank shall enter formal appearance in the Suit and file written statement within two weeks.Learned Single Judge is also requested to consider the desirability of disposing of the Suit as expeditiously as possible. It would be open to the learned Single Judge to issue such direction(s) as may be found to be necessary as regards holding of 83rd Annual General Meeting for the said purpose extend the time therefor. We may further place on record that by our order dated 11.5.2006 the time for holding 83rd Annual General Meeting was extended upto 30.7.2006.In view of the order aforementioned, the said order need not be complied with.A notice convening 83rd Annual General Meeting on 27th July, 2006 was issued on 14th June, 2006.5. Before the High Court applications being OA Nos. 597 to 599 of 2006, praying for grant of injunction were filed in the said suit and by an order dated 26th July, 2006 a learned Single Judge of the High Court passed an order of injunction,such time, without postponing the meeting, there can be a better arrangement to conduct the Annual General Meeting as scheduled on 27.7.2006 so far as the subject matters 1, 2 and 6 found in the agenda (by show of hands) are concerned and regarding the other subject matter Nos.3 to 5 found in the agenda, the General Body Meeting may be adjourned until further orders of the Court and to which meeting, fresh proxies may be allowed in accordance with the result of the enquiry to be made in these applications. Suppose, the proxies of GPA holders were not allowed to participate in the election, then no fresh proxies need be made. There is also no serious objection by anyone concerned (counsel).Pursuant to or in furtherance of the said direction a meeting was held on 27th July, 2006. However, three items of Agenda, being item Nos.3, 4 and 5 stood adjourned. Indisputably the said items of the Agenda read asTo appoint a director in the place of Thiru P.H. Arvindh Pandian who retires by rotation and being eligible offers himself for reappointment.4. To appoint a director in the place of Thiru A. Rajagopalan who retires by rotation.5. To appoint a director in the place of Thiru P. Prem Vetty who retires by rotation.Standard Chartered Bank, Mumbai, acting as an agent of some of their clients/investors filed applications for transfer of 95,418 (Ninety five thousand four hundred and eighteen) shares. A letter dated 30th March, 2007 issued by the Reserve Bank of India relating thereto was also placed in the meeting. A Resolution was passed by the Board of Directors on 13th May, 2007 resolving to transfer the said shares.8. In the meantime 85th Annual General Meeting also fell due.9. The Bank filed OA No.23 of 2007 seeking suitable directions as regards holding of the 84th Annual General Meeting. It was inter alia averred that 84th Annual General Meeting cannot be convened unless the 83rd Annual General Meeting is held in accordance with law. Referring to Sections 166 and 210 of the Companies Act it was contended that 84th Annual General Meeting of the Bank for the year 2006 should have been held on or before 20th September, 2006. The application (OA No.23 /2007) came up for consideration before a learned Single of the High Court and by an order dated 27th March, 2008, it was directedThat the Honble Mr. Justice R. Balasubramaniam, Judge (Retd) High Court, Madras residing at No.157/17, Greenways Road, Chennai - 600 028 be and is hereby appointed to chair the 83rd, 84th and 85th Annual General Meetings of Tamilnad Merchantile Bank Ltd., Tuticorin.2. That the time for convening 83rd, 84th and 85th Annual General meeting shall stand extended upto 6th June, 2008.In the meantime another suit, marked as C.S. No. 481 of 2008 was filed by the appellant questioning the transfer of aforementioned shares. One of the reliefs prayed for therein reads aspermanent injunction restraining the 10th-31st Defendants, their men, agents, servants and the nominees from exercising any right as a shareholders of the 2nd Defendant in relation to the above said shares.The question as to whether the said meeting could be postponed or not came up for consideration before the learned Single Judge on 29th April, 2008, when it was directed:In the meantime, it is submitted that the Annual General Meeting is scheduled to be held on 5.6.2008. Taking into account the past history of the litigation, I do not propose to stall the meeting. Therefore, the Annual General Meeting shall go on. However, any resolution passed in the Annual General Meeting shall not be implemented until further orders of this Court.3. Registry is directed to list the applications along with C.S. No.981 of 2004 on 9.6.2008 immediately after motion list.4. It is made clear that any matter relating to the dispute pertaining to the convening of the Annual General Meeting of the Bank, shall be dealt with only by this Court and not by ay other court. The applicants shall take private notice to all the other respondents returnable by 9.6.Indisputably a meeting was held under the Chairmanship of Justice R. Balasubramaniam on 5th June, 2008. Thereto before, he met all the shareholders who desired to make representations on the mode and manner for conducting the Annual General Meeting on 1st June, 2008. Appellant did not submit any petition on that date. It did so, however, at a later stage.13. Appellant filed an O.A. No.621 of 2008 in C.S.No.481 of 2008 seeking for an order of injunction restraining holding of election of the Directors alone. The matter was placed before the Court on 3rd June, 2008 when an adjournment was taken and the application was posted for 9th June, 2008. In the meantime Annual General Meeting was held on 5th June, 2008.14. Appellant preferred an intra court appeal against the order dated 29th April, 2008. The Division Bench while observing that the order dated 29th April, 2009 sufficiently protected the interest of the appellant, dismissed the same.15. Some other proceedings were also initiated with which we are not concerned.16. On or about 10th June, 2008 Contempt Petition, being C.P.No.508 of 2008 was filed. Managing Director of the Bank, Shri G. Narayanamurthy, was alone made a party-contemnor. The petition was filed for alleged disobedience of the order of the learned Single Judge dated 26th July, 2006 passed in O.A. No. 597 to 599 of 2006. In the said petition the following prayer waspunish the respondent for the disobeying the orders of this Honble Court dated 26.7.2006 in O.A. No. 597 to 599 of 2006 in C.S. No.981 ofinterim injunction was also prayed for therein, which reads asdeclare the election of directors held at the 83rd, 84th and 85th Annual General Meeting as null and void as the same is contrary to the orders of this Honble Court dated 26th July, 2006 in O.A. No.597 of 2005 in C.S. No.981 ofThe contempt matter came up before another learned Single Judge of the High Court. As would be noticed hereinafter no disclosure was made in the said proceeding as regards the orders passed by the learned Single Judge in the applications filed from time to time as also other proceedings taken by the parties. However, the learned Single Judge passed an ad interim ex parte injunction on 12th June, 2008 restraining the Managing Director of the Company Shri G. Narayanamurthy from implementing the resolution or item of business in relation to the election of Directors passed at the Annual General Meetings held on 5th June, 2008 till the disposal of contempt petition. The matter was directed to be posted on 21st July, 2008.18. What is the nature of that order would be considered a little later as there exists a dispute as to whether such an order can be said to be a final order satisfying the definition of a ‘judgment or not.19. Several proceedings were initiated by the respondents herein. On or about 24th June, 2008, the 1st respondent Shri T. Rajakumar filed an application in Civil Appeal arising out of SLP (C) No. 19379 of 2008 for impleading himself as a party and for vacating the ex-parte interim order dated 12th June, 2008 passed in the said contempt proceedings before the learned Single Judge. Shri G. Narayanamurthy, Managing Director of the Bank, also filed an affidavit praying for vacation of ex-parte interim order. On or about 26th June, 2008, Judges Summons in terms of Order XIV Rule 8 of the Original Side Rules of the High Court were also taken out by him for vacating the ex-parte ad interim order dated 20th June, 2008.20. It is stated that the matter was fixed for hearing on 21st July, 2008.21. However, Shri T. Rajakumar withdrew the said application and preferred an intra court appeal. Shri S.C. Sekhar, who is also said to have been elected in the said Annual General Meetings dated 5th June, 2008 also preferred an intra court appeal. Both the appeals were preferred under Section 19(1) of the Contempt of Courts Act, 1971. A question as regards maintainability of said appeal was raised. A Division Bench of the High Court by reason of the impugned order answered the same in the affirmative,have gone through the said provision. Prima facie we are of the considered view that only when some orders adversely affecting any person, who makes a claim that he is intending to prefer an appeal, this court in exercise of the power under the provisions to sub section (3) of Section 19 of the CC Act, 1971 may suspend such an order. We have found that the contempt appellants are the persons aggrieved by the order of the learned Single Judge of this court and this court has only on prima facie consideration held that the contempt appeals are maintainable and the rights of the respondents to canvas their arguments either in the contempt petition or in the contempt appeals are still open. We therefore find that the order holding that the contempt appeals are maintainable does not in any way adversely affect the right of the second respondent. Accordingly, the submission made by the ld. Counsel for the second respondent is not acceptable and the permission sought for is consequentlyis this order which is in question before us.

Court's reasoning:
If this Court while deciding a matter of this nature may, in exercise of its special jurisdiction under Article 142 of the Constitution of India, not only quash the order appealed against but also in the event it is found that quashing of an illegal order gives rise to another illegality, it may also refuse to exercise its jurisdiction or quash both the orders. Apart from the fact that the order passed by the learned Single Judge dated 20th June, 2008 is found to be illegal and without jurisdiction having been passed without any application of mind and furthermore as the same was obtained by the appellant by suppressing material facts and the proceedings between the parties, it is eminently a fit case where this Court should refuse to interfere with the impugned order of the High Court.The superior courts of this country must discourage the forum shopping. A person seeking equity must do equity. A party cannot take recourse to a machination which amounts to abuse of the process of the court.