Case: Ramesh Narang Vs. Rama Narang &amp; Others

This appeal filed by the original plaintiff challenges the order passed by the learned single Judge on May 5, 1997 approving the reports dated 10th April 1997 and 22nd April 1997 filed by the Administrator appointed by the Court and rejecting the application dated 22nd April 1997 filed by the plaintiff seeking certain reliefs.2.The dispute between the sons from the first wife on the one hand and the father and sons from the second wife on the other has taken a very bitter turn and several proceedings between the parties right upto the apex Court have been pending.3.Ramesh Narang, the plaintiff in Suit No.3535 of 1994 filed the suit for specific performance of agreement of family settlement dated 12th July 1990, supplementary family settlement dated 3.7.1991 and family settlement dated 30.1.1992. In particular, the plaintiff has sought specific performance of supplemental family settlement dated 3rd July 1991 read with the family settlement dated 12th July 1990 and the family settlement dated 30th January 1992. The case of the plaintiff is that though in view of the family settlement dated 3.7.1991 he gave up so many of his rights and contentions, the defendants are wrongfully not implementing the settlement dated 3 7.1991 which has resulted into gross injustice.4.In the suit, the plaintiff took out Notice of Motion No.2646 of 1994 for several reliefs. We will have occasion to refer to the reliefs claimed and granted by the learned Judge in the said Notice of Motion at appropriate stage. It may be noticed at this juncture that, ultimately, apart from other reliefs, the learned Judge by his judgment and order dated 15th February 1995 and further order dated 28th February 1995 appointed an Administrator for looking after, managing and controlling the affairs of the defendant no.6 company. The learned Judge appointed Mr.P.S.Shah, a retired Judge of this Court as the Administrator. By order dated 28.2.1995, the learned Judge gave certain further directions.5.Being aggrieved by the said judgment and order passed by the learned Judge disposing of Notice of Motion No.2646 of 1994, Rama Narang (defendant no.1) filed Appeal No.226 of 1995 which was disposed of by judgment and order dated 31st October and 1st November 1996 by a Division Bench presided over by the learned Chief Justice of this Court. The original plaintiff had also filedThe appeal as well as thewere dismissed by the Division Bench by the aforesaid order.6.Being aggrieved by the judgment and order of the Division Bench, Rama Narang preferred Petition for Special Leave to Appeal (Civil) No.25069 of 1995 before the apex Court. By order dated 27th January 1997, the apex Court dismissed the said Special Leave Petition.7.In pursuance to the order passed by the learned single Judge which was confirmed upto the apex Court, the learned Administrator assumed charge on 29th January 1997. Thereafter, the Administrator has been giving periodical reports to the Court from time to time. The Administrator has, accordingly, given several reports. However, so far as this matter is concerned, we are mainly concerned with the reports dated 10.4.1997 and 22.4.1997. Earlier to these reports, the Administrator had also made a report dated 12.2.1997 and the learned Judge had passed an order dated 4.3.1997 on the basis of the said report. In the reports dated 10.4.1997 and 22.4.1997, the Administrator suggested a particular agenda for holding 16th and 17th Annual General Meetings and sought approval of the Court. The plaintiff by his application dated 22nd April 1997 made to the Court sought certain reliefs regarding the resolutions which he had suggested as also directions regarding holding of the 16th and 17th Annual General Meetings.8.By the impugned order dated 5.5.1997, the learned Judge rejected the application filed by the plaintiffdated 22nd April 1997 and approved and endorsed the reports dated 10.4.1997 and 22.4.1997 filed by the Administrator.

Court's reasoning:
66.We also cannot part with this matter without expressing our views on another aspect. Dhanuka, J. directed that the Administrator shall be assisted by an Advisory Committee of the plaintiff; the defendant No.3; the Prothonotary and Senior Master or a senior officer of the High Court on the Original Side recommended by the ProthonotarySenior Master or a senior officer of the High Court on the Original Side recommended by the ProthonotarySenior Master whose name is approved by the Court; the Court Receiver, High Court, or any other senior officer assisting the Court Receiver, in the office of the Court Receiver, whose name is recommended by the Court Receiver and approved by the Court. Dhanuka, J. has expressly stated in his order that two officials of the Court are included in the Advisory Committee in order to enable the Administrator to avail of the official machinery of the Court for getting his decisions implemented. Dhanuka, J. has also stated in his order that the meetings and the working of the Advisory Committee may be organised, as far as practicable, in a way so as not to hamper performance of normal duties by the above referred to Court officials. On the basis of the material on record, we are of the view that it would be in the general interest of this Court if the two senior Officers who are working on the Committee of Advisors are spared. One of the officers has been recommended and is being paid remuneration of Rs.5,000/per month. We have also found that the said member was asked to visit hotel at Aurangabad to make a report of the Civil work of renovation of rooms to be carried out. She had also gone to Delhi to attend the proceedings before the Company Law Board. Even during the hearing before us, she remained present in this Court for a number of days and she mentioned that she is representing the Administrator. Taking into consideration that both the Court officials are very senior Officers of this Court and taking into consideration the bitter and contentious litigation between the parties, we are of the view that unless impossible, the senior Officers of the Court or for that matter any officer of the Court should not be unnecessarily exposed to possible allegations and made to work in a private organization, may be under the Administrator. The reasons for avoiding such situation, in our opinion, are too obvious. We make it absolutely clear that we have found absolutely nothing objectionable in the conduct of the said officials. We are not suggesting even remotely anything against the said officers. Our only anxiety is to avoid the involvement of the Court officials in any private and personal disputes of the parties. We are also of the view that the time and energy of such senior officers should not be allowed to be spent except for their official duties. In the administration and management of a hotel business, we do not find any necessity for any Court official being involved in any manner. Any other professional or expert could more fruitfully and usefully be appointed. However, we feel that this aspect pertains to the discipline and administration of this Court which is best left to the learned Chief Justice of this Court and, accordingly, we direct the registry to place the matter for appropriate orders in that behalf before the learned Chief Justice.67.We are also of the opinion that taking into consideration the fact that litigation between these parties have exercised several forums, in several proceedings even on interim orders, it is necessary that the suit is decided as expeditiously as possible. However, for obvious reasons, we decline to fix a peremptory date of hearing of the suit which must be left to the learned Judge dealing with suits. Therefore, we grant liberty to the parties to approach the appropriate Court for expeditious disposal of the suit.68.At the time of the admission of the appeal on 16.6.1997, the Division Bench presided over by the learned Chief Justice had directed that holding of the Annual General Meeting which was held on that day and the Resolutions passed therein would be subject to the final decision which may bepassed by this Court in this appeal. If the appeal is ultimately allowed, this Court would pass appropriate orders for calling Annual General Meeting to consider the Resolutions which are moved by the Shareholders. In view of the discussion in the earlier part of this judgment, we hold that the learned Administrator was not authorized to determine and settle the resolutions and the agenda of the 16th and 17th Annual General Meetings of the respondent no.6 company. The normal result would be that the entire proceedings of the 16th and 17th Annual General Meetings will have to be quashed and set aside. However, with a view to avoiding any inconvenience as also in view of the submissions made by Mr.Kapil Sibal as recorded in para 60, we do not think it necessary to quash the proceedings and the resolutions so far as item no.1 i.e. to receive, consider and adopt the audited Balance Sheet as at 31st March, 1995 and the profit and loss account for the year ended on that date together with reports of the Directors and Auditors thereon, and item no.2 i.e. to confirm the appointment of M/s. J.G. VermaCo., as Auditors for the financial year ended 31.3.1996 for which the Auditors Report dated 26th November 1996 has been submitted and to approve the remuneration of Rs.65,000/paid to them, held to have been passed in the 16th Annual General Meeting held on 16.6.1997 are concerned. For the very reason, we are also not quashing the resolutions passed in terms of item no.1 i.e. to receive, consider and adopt the audited Balance Sheet as at 31st March, 1996 and the profit and loss account for the year ended on that date together with Reports of the Directors and Auditors thereon, item no.2 i.e. to confirm and treat the interim dividend declared and paid as the final dividend, and item no.3 i.e. to appoint and fix the remuneration of the Auditors M/s.J.G.VermaCo., Chartered Accountants who retire at the conclusion of the Annual General Meeting and being eligible offer themselves for reappointment in the 17th Annual General Meeting of the respondent no.6 held on 16th June, 1997. However, resolutions no.3 and 4 held to have been passed in the 16th Annual General Meeting of the Respondent No.6 on 16th June, 1997 are hereby quashed. We direct that the 16th Annual General Meeting shall be held in accordance with the provisions of the Companies Act and in accordance with law and the observations made in thisto the Notice of Motion No.2156 of 1997, we find it impossible to grant prayer (a) that the suit filed by the plaintiff be dismissed. We are not impressed by the submission that the plaintiff has obtained orders from the Court and is obstructing the implementation thereof. Freezing of various shares, including those of Fashion Wears Pvt. Ltd., is done under the orders of the competent Court which were passed on the basis of the facts and circumstances and requirement of particular proceedings before different Courts. The refusal of Ramesh to agree to particular arrangements cannot be treated as unwillingness or obstruction in the implementation of the orders of the Court. In that view of the matter, we are not inclined to grant any prayers made in Notice of Motion No.2156 of 1997 and the said Notice of Motion is, accordinglyare also of the opinion that the learned Judge in the impugned order was not right to decline to grant any relief to the plaintiff on the ground that it is not open to the plaintiff who has not cared to participate in the management and to assist the Administrator, though he is a member of the Advisory Committee to contend that the appointment of the 1st defendant as the Managing Director of the defendant No.6 company is illegal. Even if the conduct of the plaintiff is objectionable, the legal submissions made on behalf of the plaintiff or his rights as a shareholder under the provisions of the Companies Act cannot be denied.62.Assuming that the Administrator was competent to determine the agenda, in our opinion, the entire tenor and spirit of the order of Dhanuka, J. ought to have been taken into consideration before proposing Rama to be the Managing Director and Rohit to be the Joint Managing Director as has been done by the learned Administrator. It is extremely relevant to notice that the travesty of justice was management by the defendant nos. 1 to 5 to the exclusion of the plaintiff and redressal of that injustice was the theme of the judgment of Dhanuka, J. which is evident from various passages which we have quoted from Dhanuka, J.s judgment in the earlier part of this judgment. The justification that Rama is ready to undertake the liability, in our opinion, is no good reason. It does not depend on the volition of the Managing Director or the other Directors of the company to accept the liability or the statutory obligations. It is by force of law that any person who is a Managing Director or Director is obliged to comply with the statutory requirements and upon failure is exposed to statutory liabilities. Anyone holding the post of Managing Director or Director is exposed to statutory obligations and is automatically responsible by force of the provisions of the Companies Act. Under the circumstances, even if the Administrator wanted to settle the agenda, he ought to have seen that to the extent practicable, the spirit and intention of the order of Dhanuka, J. is implemented. We are also not impressed by the observations of the learned Administrator as well as the learned Judge that Rama is appointed a nominal Managing Director in the executive capacity. Indeed the post gives substantial monthly payments and several perquisites as indicated in the explanatory note to the resolution. As such, in any event, the Administrator could have suggested Managing Directorship to Rama and Joint Managing Directorship toour opinion, this was beyond the competence of the Administrator in his capacity as an Administrator under the orders of Dhanuka, J. The learned Judge, in our opinion, was not right in approving that part of the report of the Administrator and, consequently, the learned Judge was also not right in rejecting prayer (a) of the application made by plaintiff which ought to have been allowed. We make it clear, however, that whatever is the result of the Annual General Meeting held in accordance with the provisions of the Companies Act and whosoever may be the Managing Director or Joint Managing Director or Director, obviously, will be bound to obey the order of Dhanuka, J. so far as it restrains the Board of Directors from interfering with themanagement of the business of the defendant no.6 by thefar as these authorities cited by Mr.Dave are concerned, we are in complete agreement with the submission made by Mr.Seervai, learned counsel appearing for the defendant no.1, that the observations relied upon will have to be appreciated on the basis and in the context of the facts and circumstances and in the context of submissions and issues raised in each particular case.