Case: P. Punnaiah and Ors Vs. Jeypore Sugar Co. Ltd. and Ors

1. An application under Sections 397/398 of the Companies Act, 1956 can be filed inter alia by any member of members holding not less than one-tenth of the issued share capital of the Company - vide Clause (a) of Sub-section (1) of Section 399. Sub-section (3) of Section 399 says that among the members of the Company entitled to make an application by virtue of Sub-section (1) any one or more of them having obtained the consent in writing of the rest may make the application on behalf and for the benefit of all of them.2. The three appellants in this appeal are the share-holders of the first respondent-company, Jeypore Sugar Company Limited. The Respondents are its Directors. The first appellants daughter Smt. V. Rajeshwari also holds certain shares in the first respondent-company. She is married and has been residing in U.S.A. since 1973. Before leaving for the U.S.A., she executed a General Power of Attorney (G.P.A.) in favour of her father, the first appellant herein, on 29th November, 1973.3. On October 25, 1978, the three appellants herein filed an application under Sections 397/398 in the High Court of Orissa. To comply with the requirement of one-tenth share-holding, the first appellant gave consent in writing for and on behalf of Smt. Rajeshwari as her G.P.A. holder. If the share-holding of Rajeshwari is taken into account and she is deemed to have consented to the filing of the said application, the requirements of Section 399 are admittedly satisfied. The precise question in this appeal is whether the consent given by her G.P.A. holder for and on her behalf -and not by her personally - is a valid consent within the meaning of Sub-section (3) of Section 3994. As soon as the application under Sections 397/398 was filed by the appellants, some of the respondents raised a preliminary objection to the maintainability of the application on the ground that it does not comply with the requirement of Section 399 inasmuch as the consent given by the first appellant on behalf of and as the attorney of Smt. Rajeshwari, and not by herself personally, cannot be treated as consent within the meaning of Section 399(3). Both the Company Judge, and on appeal the Division Bench of the Orissa High Court, upheld the said objection and dismissed the application on the said preliminary ground alone.

Court's reasoning:
7. A reading of the several clause of the G.P.A. discloses ex-fade that the powers given thereunder are wide enough to take in the power to grant the consent under Section 399(3). Under the said deed, Smt. Rajeshwari empowered her father to manage and otherwise administer her movable and immovable properties including shares and stock as may be held by her and to take all proceedings before all the authorities and Courts concerning the said properties and shares. The deed also empowered him to sign all necessary papers relevant in that behalf and to file them in courts and generally to do all things as may be necessary to safeguard her interest. It is obvious that in pursuance of the said deed, it would have been perfectly legitimate for the first appellant to institute suits, petitions and other proceedings with respect to the shares or other movable and immovable properties held by Smt. Rajeshwari. Indeed it would well have been within the power of the G.P.A. holder to have himself figured as an applicant, acting in the name of Smt. Rajeshwari, in the said application filed under Sections 397/398. If so, there appears no reason why the consent could not have been given by the Power of Attorney holder which is only a step towards protecting the interest of Rajeshwari. It in effect means joining the tiling of the application under Section 397/398. May be that there are some functions/duties which cannot be performed through a Power of Attorney Agent (e.g., quasi-judicial/judicial functions) but there appears to be no good reason why the consent contemplated by Section 399(3) cannot be given by such Power of Attorney-holder, when indeed he could himself have filed such an application in the name of and on behalf of Smt. Rajeshwari. In this connection we may notice yet another fact. With a view to counter-act the objection taken by the respondents, the appellants filed an affidavit of Smt. Rajeshwari wherein she affirmed that on her recent visit to India she was apprised by her father of the affairs of the first respondent-company and of the proposal to file an application against the first respondent-company and its management alleging oppression and mismanagement. She affirmed that she had authorised her father to act on her behalf as her G.P.A. in that behalf and to take all such steps as he deemed proper to protect her interest.8. The Company Judge and the Division Bench have, however, taken the view that the consent to be granted by a member of the Company under Section 399(3) must be a conscious decision of the member himself/herself. They opined that the member must personally apply his mind to the advisability of granting consent and then grant it. In this view of the matter, they held, the G.P.A.-holder is not competent to grant the consent.9. We are unable to agree with the said reasoning. Section 399 or Sub-section (3) thereof does not either expressly or by necessary implication indicate that the consent to be accorded thereunder should be given by the member personally. As we have emphasised hereinabove, the first appellant could have filed, or joined as an applicant in an application under Sections 397/398 in the name of and for and on behalf of Smt. Rajeshwari as her G.P.A. holder. No question of consent would have and could have arisen in such a case. If so, it is un-understandable as to why and how he could not have given consent on behalf of Smt. Rajeshwari, the member, under Section 399(3). No rule or decision could be brought to our notice saying that the consent under Section 399(3) cannot be given by a G.P.A.-holder (who is empowered by the principal to manage and administer the shares and stocks held by the principal and to take all necessary steps and proceedings in all Courts, Offices and Tribunals in that behalf). In this connection, it is relevant to notice that shares may also be held by a company or other corporate body. Question may arise what does one mean by a personal decision by a company or other juristic person. Be that as it may, we see no warrant for holding that Section 399(3) is an exception to the normal rule of agency. The normal rule is that whatever a person can do himself, he can do it through his agent, except certain functions which may be personal in nature or otherwise do not admit of such delegation. The consent contemplated by Section 399(3) falls under the general rule and not under the exception.11. What the Rule says is that the letters of consent signed by the consenting members shall be annexed to the petition alongwith their names and addresses and other prescribed particulars. The Rule does not in any manner indicate that the consent should be given by the member personally.the Division Bench of the Bombay High Court in Killick Nixon Limited and Ors. v. Bank of India and Ors, (1985) 57 Com Cases 831.In this case it is held that the General Power of Attorney-holder empowered to grant consent under Section 399(3). The General Power of Attorney concerned therein is substantially in the same terms as the one concerned herein. We agree with the said decision.15. The observations to the effect that the right to present an application of winding up and the right to vote for the election of Directors are the personal rights of shareholders must be understood in the context of the question considered therein. The observations cannot be torn from their context to hold that the said right cannot be exercised through an agent. That was not the issue before the Court.Mr. Sibal also brought to our notice the decision of this Court in R. Subba Rao v. Commissioner of income-tax, Madras, [1956]30ITR163(SC) .The matter arose under Section 26(A) of the Indian Income Tax Act, 1922 read with Rules 2 and 6 of the Rule framed in that behalf. The Rules provided that an application for renewal of registration of the firmshall be signed personally by all the partners. It is because of the said requirement that it was held that partners must sign such an application personally. In the absence of any such expression in Section 399(3), the said decision is of no help to the respondents herein.The affidavit, however, does not say that any new directors have come into office or that in their absence the present appeal is not maintainable. We need not, therefore, express any opinion on this contention.