Case ID: 1389

Judgment:
Civil Appeals Nos. 201 and 202 of 1961. 404 Appeals from the judgment and decree dated May	 16	 1958 of the Patna High Court in L. P. As. Nos 13 and 14 of 1957. A. V. Viswanatha Sastri	 R. K. Garg	 M. K. Ramamurthi	 D. P. Singh and section C. Agarwala	 for the appellants. M. C. Setalvad	 Attorney General for India. B. P. Rajgarhia and K. K. Sinha	 for the respondents. December 22. The Judgment of the Court was delivered by DAS GUPTA	 J. These appeals raise a question as to the manner in which a creditor company can validly cast its vote at a meeting of the creditors held under the provisions of section 153 of the Indian Companies Act	 1913. The question arises in connection with such a meeting held of the creditors of the Gaya Sugar Mills Ltd. On November 14	 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 October 6	 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 405 Coal Company Ltd.	 cast his votes on behalf of these two companies	 in support of the resolution. No objection was taken 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 obtained. 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 resolution 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 objection. 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 406 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 article 133(1)(a) of the Constitution and is a fit one for appeal to this Court. On this certificate the present appeals have been filed. Three points were raised before us by Mr. Sastri in support of the appeals. The first is that from the decision of the Company Judge	 an appeal lay to this Court and not to the High Court. Secondly	 it was urged that the objection to the validity of the votes not having been taken earlier should not be allowed to be raised for the first time during arguments at the final hearing of the application. Lastly	 it was urged that the votes were valid. As regards the first point it is to be noticed that sub section 7 of section 153	 which was added in 1936 provides that an appeal shall lie from any order made by the court exercising original jurisdiction under the section to the authority authorised to hear appeals from the decisions of the Court. It therefore could not be disputed and was not disputed that an appeal did lie from the order made by the Company Judge on October 6	 1953. The controversy is whether the appeal lay to this Court or the High Court. In other words	 the question is	 which is the authority authorised to hear appeals from the decisions of the Court ? The "Court" here cannot but mean the Court exercising original jurisdiction. When the Company Judge exercises the jurisdiction he does it under the provisions of section 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 407 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 appellant. The next contention that the objection cannot be entertained for the first time at the final hearing of the application appears to us to be equally unsound. It is undoubtedly true that the opposing creditors 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 negligence in not bringing this to the Court 's 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 he three fourth majority requisite under section 153	 sub section 2	 would not be there and so no further action under section 153 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 Chairman 's attention was not drawn to the defect or it was not brought to the Court 's notice earlier ? In 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 objection. This brings us to the main question in controversy	 viz.	 whether the resolutions passed by the 408 two creditor companies	 viz.	 Bhandani Brothers and the Hindustan Coal Company	 authorising Arjun Prasad to attend the meeting on their behalf and to vote there on their behalf made Arjun Prasad 's voting valid voting. Section 153(2) of the Indian Companies Act is in these words : "If a majority in number representing three fourths in value of the creditors or class of creditors	 or members or class of members	 as the case may be	 present either in person	 or by proxy at the meeting	 agree to any compromise or arrangement	 the compromise or arrangement shall	 if sanctioned by the Court be binding on all the creditors or the class of creditors	 or on all members or class of members	 as the case may be	 and also on the company	 or	 in the case of a company in the course of being wound up	 on the liquidator and contributories of the Company. " The agreement has to be of a majority in number representing three fourths in value of those who are present either in person or by proxy at the meeting. The agreement of those who are not present at the meeting either in person or by proxy cannot be taken into consideration. Any creditor whether a corporation or a natural person can be present at a meeting by proxy. A natural person can of course be present at a meeting "in person". Can a corporation be present at a meeting "in person"? It 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 	 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 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 or rules having the force of law. 409 Nor can the appellant derive any assistance from the English Case In re Kelantan Coco	 Limited and Reduced cited by the learned counsel. In that case	 the Court was dealing with a petition for reduction of capital. In deciding whether the special resolution to reduce the capital of the company had been duly passed	 the Court had to consider whether there was a quorum at the confirmatory meeting	 at which one member of the company and one representative appointed under s.68 of the Companies (Consolidation) Act	 1908	 to represent a shareholder of the company	 the Eastern Development Corporation	 Limited	 were present. The articles of Association provided: "two members personally present shall be a quorum. " It was held that a representative appointed under section 68 should be taken into account in considering whether there was a quorum. The provisions of section 68 were similar to those of section 80 of the Indian Companies Act	 1913	 and thereunder a company which is a member of another company may	 act as its representative at any meeting of that other company. The presence of such a representative was taken in the above case to amount to personal presence of a member of the company. The case does not deal with the question of a creditor company. In the 	 a provision has been introduced under which a company which is a creditor of another company may by resolution of its directors	 authorises such person as it thinks fit to act its representative at any meeting of any creditors of the company held in pursuance of the Act and a person authorised in this manner shall be entitled to exercise the same rights and powers (including the right to vote by proxy) on behalf of the company	 (section 187(1)(b) and 2). No such provision however is to be found in the Indian Companies Act	 1913. It is unnecessary for us to 410 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 provision. When the Companies Act was amended in 1936	 an addition was made in section 246 which empowers the High Court to make rules	 concerning the mode of proceedings inter alia "for the holding of meetings of creditors and members in connection with proceedings under section 153 of this Act." Accordingly	 a number of Rules were framed by the Patna High Court in exercise of this additional power. Rule 144 of the Rules states that a creditor or contributor may vote either in person or by proxy. Rules 145 to 153 deal with various questions as regards proxies. Of these Rule 150 lays down how a proxy is to be given where a creditor is a corporation. Admittedly	 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. Sastri 's 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 a "present in person" in law for that company at the meeting. Mr. Sastri 's last argument was that as the business of the company has to be managed by the directors and the directors can delegate any of their powers to any one of themselves	 the attendance of Arjun Prasad at the meeting should reasonably be construed as the attendance of all the directors and so the attendance of the company "in person". As we have already indicated it does not appear to us that in the Act of 1913 their is any provision 411 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 Prasad. 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 in our opinion	 correct. The appeals are accordingly dismissed with costs. One set of hearing fee. Appeals dismissed.

Summary:
Subsequent to an order made for the winding up of a company	 the Company Judge made a direction for action to be taken under provisions of section 153 of the Indian Companies At the meeting of the unsecured creditors of the company a resolution was passed by the creditors present	 either in person or through proxy	 by majority in number as well as three fourths in value. At this meeting the appellant claiming to represent two of the creditor companies cast his votes on behalf of the said companies in support of the resolution. No objection was taken at the meeting to the validity of the votes by any of the creditors who opposed the resolution. When the matter came up for orders before the Company Judge an objection was raised that the votes cast by the appellant on behalf of the two creditor companies were not valid	 inasmuch as section 153(2) of the Act requires that the creditors should be present either in person or by proxy at the meeting and that	 in the present case	 the two creditor companies	 being corporations	 could not be considered to have been present at the meeting "in person". The Company Judge overruled the objection on the grounds that it was raised at a late stage and that	 in any case	 the votes were valid because the appellant 's attendance at the meeting amounted to the attendance of the companies "in person". On appeal	 a Division Bench of the Patna High Court rejected the contention that no appeal lay to the High Court from the order of the Company Judge but only to the Supreme Court and	 on the merits	 set aside his order. ^ Held	 that: (1) the word "Court" in section 153(7) of the Indian Companies Act	 1913	 means the Court exercising original jurisdiction	 and. therefore	 an appeal from the order of the Company Judge lay to the High Court under cl. 10 of the Letters Patent; (2) though under the 	 a company is a "person" so that whenever the word "person" is used in any statute a company would be included thereunder	 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"; and (3) in the present case the votes cast by the appellant were not valid in law and it being admitted that if the votes were invalid the requisite majority of three fourths in value requisite under section 153(2) of the Indian Companies Act	 1913	 would not be obtained and therefore no further action could be taken by the Court in the matter	 the delay in raising the objection would not entitle the Court to ignore the legal defect of the votes.