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CASE NO.: Appeal (civil)  3471 of 2006

PETITIONER: Kamal Kumar Dutta & Anr.

RESPONDENT: Ruby General Hospital Ltd. & Ors.

DATE OF JUDGMENT: 11/08/2006

BENCH: H.K.SEMA & A.K.MATHUR

JUDGMENT: J U D G M E N T  [Arising out of S.L.P.(c) Nos.11017-11018 of 2005]

A.K. MATHUR, J.

                Leave granted.  

       These appeals are directed against the order dated  31.3.2005  passed by learned Company Judge, Calcutta High Court   in APO No.746 of 1999 and APO  No.759 of 1999 whereby learned  Single Judge has disposed of the appeal and the cross-appeal arising  out of the order dated 29.10.1999 passed by the Company  Law  Board (hereinafter to be referred to  as CLB ).

       Brief facts which are necessary for disposal of these  appeals are that an application under Sections 397 & 398 of the  Companies Act, 1956 (hereinafter to be referred to as the Act ) was  filed by Dr.Kamal Kumar Dutta and  Dr. Binod Prasad Sinha alleging  various acts and oppression and mis-management in the affairs of  the company before the CLB. Ruby General Hospital Limited, a  company was incorporated in the year 1991 by two non-resident  Indian Doctors i.e. Dr.Kamal Kumar Dutta and Dr.Binod Prasad Sinha  along with Indian enterprenuor, Shri Sajal Kumar Dutta, who is the  younger brother of Dr.Kamal Kumar Dutta. The Company took up the  project to establish a Hospital-cum-Advance Diagnostic facility at  Calcutta. The cost of the project was about Rs.11 crore out of which  the share capital would be Rs.9 crore and Rs.8 crore out of the said  share capital would be by way of NRI participation.  Therefore,  88.88% of the project was NRI  shares and the balance by resident  Indians.  In the year 1991,  the Department of Industrial  Development, Government of India,  Secretariat of Industrial  Approval, ( for short SIA) approved the NRI investments in the said  company.   

       Dr.Kamal Kumar Dutta was one of the first  Directors of  the said company and with Dr.Binod Prasad Sinha  held 52.74 % of  the equity shares in the said company.  Apart from  that Dr. Kumar  Kumar Dutta contributed Rs.3 crore for the purpose of importing  second-hand medical equipments  and the shares towards the said  investments, being the value of the equipments, should be allotted to  Dr.Dutta. A loan was granted for a sum of Rs.4.6 crore by the  Industrial Development Bank of India for the said project.  

       The Hospital was inaugurated by the Chief Minister of  West Bengal on 25.4.1995.  Dr.Kamal Kumar Dutta contributed  Rs.4.26 crore out of which equipments worth Rs.3.5 crore  were  brought from USA and Rs.1.23 crore was contributed by  Sajal Kumar

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Dutta. The grievance of Dr.Kamal Kumar Dutta was that he was  denied shares of the company for the equipments brought by him by   his younger brother Sajal Kumar Dutta. Though the Reserve Bank of  India granted permission to allot shares in favour of Dr.Dutta on  22.3.1997 but the same was withdrawn on 20.5.1998 at the instance  of the company. The company filed a writ petition challenging the said  approval by the Reserve Bank of India before the High Court of  Calcutta. The High Court  directed to give personal hearing to the  parties and the Reserve Bank of India once again granted approval  for allotment of shares in favour of Dr.Kamal Kumar Dutta. The said  approval was again challenged by the company by filing a writ  petition before the High Court.  Then again some directions were not  properly followed and another writ petition was filed by the company.   In compliance to the directions issued by the High Court, the Reserve  Bank of India after hearing the parties passed an order granting  permission to allot shares to  Dr.Dutta against supply of second hand  medical equipment as capital contribution.  Subsequently, a writ  petition was filed by the company  in 2004 before the High Court of  Calcutta  and the same is said to be still pending.

In fact, this Ruby General Hospital Limited was established in  memory of late wife of Dr.Kamal Kumar Dutta. Since Dr.Dutta and  Dr.Binod Prasad Sinha were both NRIs, the  company was being  looked after by Sajal Kumar Dutta.  No problem arose for some time  till the hospital was in a struggling stage.  But it appears that soon  after the  hospital started showing the sign of prosperity, the chord of  discord grew between the brothers  and attempt  was made by the  younger brother to oust the elder brother by denying him his shares  for the medical equipment worth Rs.3.5 crore supplied  by him from  USA. Thus, ultimately the appellants filed a petition under Sections  397 & 398 of the Act before the CLB.   The stand of the company was  that Dr.Kamal Kumar Dutta and Dr.Binod Prasad Sinha who alleged  to have had 88.88% shares in the company discontinued themselves  as Directors and refusal of the company to allot shares to them worth  the value of second hand equipments was justified. The CLB heard  the parties at length and passed a detailed order  giving certain  directions which will be referred to hereinafter. Aggrieved against that  direction issued by the CLB on 29.10.1999 both the parties  approached the High Court of Calcutta. The appeal filed by   Sajal  Dutta and the cross-appeal filed by  Dr.K.K.Dutta were clubbed  together and taken together by learned Company Judge for disposal.

       The main grievance of Dr.Dutta was denial of his shares  for supply of medical equipments worth Rs.3.5 crore and  consequential ousting from the chairman and directorship of the  company which led to filing of a petition before the CLB in 1997.The  appellants prayed before the CLB that necessary directions may be  given to relieve the company from the mis-management of the  respondents and to relieve the oppressive, harsh and unreasonable  conduct of the respondents on the appellants and other members of  the company and to stop such acts or conducts of the respondents  which are prejudicial to the interest of the shareholders of the  company and the public at large; to direct the respondents to comply  with the statutory provisions of the Act to serve the notice of the  Board of Directors meetings of the company and the meetings of the  shareholders of the company on the appellants and other  shareholders;  the appellants should be involved in the effective  management of the affairs of the company; to remove the Managing  Director ( Sajal Dutta) from the company  and to prohibit him from  interfering with the effective management of the company;  to quash  the allotment and issue of the shares of the value of Rs.42,10,000/-  allotted illegally and unlawfully by the respondents to corporate  shareholders,  to direct the respondents to restore the shares of the  appellants which are shown as share application money by illegal and  unlawful entries to direct the respondents for allotment of shares for

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the sum of Rs.3,05,53,290/- to the appellant No.1 being the value of  the goods already supplied  as the proposal has been duly approved  by the Reserve Bank of India and to appoint an independent observer  to attend the meetings of the Board of Directors and the meetings of  the shareholders of the company.   This was contested by the  respondents by  filing counter affidavit and the allegations were  denied.   It was alleged that all the notices of the meetings were given  to the Board of Directors and the meetings were conducted whenever  required according to law. It was alleged that in the meeting dated  19.4.1995 the appellant No.1 was present when the resolution was  passed to raise the funds as he declined to  give any fresh funds.  This was denied by the appellant No.1 in the rejoinder filed before the  CLB and it was pointed out that  the minutes of the meeting dated  19.4.1995 were fabricated and manipulated to the advantage of the  respondent for being appointed as Managing Director of the company  so that he can succeed in his design of usurping the company. It was  also alleged that the allotment of shares was bad. It was also pointed  out that the resolution dated 19.4.1995  in which  the appellant No.1  was alleged to be present,  would indicate that  the decision to  convene the extraordinary general meeting and to pass a  resolution  under Section 81(1A) was considered and approved. But no details  were furnished of such a decision. It was also alleged that the  respondent No.2 using the old minutes to gain illegal and unlawful  majority by hiding the contents of the resolution tried to justify his  action.  It was alleged that the answering respondent deliberately and  knowingly did not annex the copies of such minutes of resolutions. It  was specifically asserted that the respondents have withheld the  copies of the resolutions passed on 12.3.1996, 17.2.1996, 19.4.1995,  9.2.1996 and 16.2.1996.  In fact from  the records it transpires that  the main issue is with regard to the resolution passed on 19.4.1995,  though according to Dr. Kamal Kumar Dutta, copies of the resolution  were not supplied  along with the counter affidavit.  It was only the  records were placed before the CLB during the  course of  proceedings.  The main crux of the problem arose on account of the  resolution passed by the Board of Directors on 19.4.1995.  That  resolution is crucial because in that resolution it was passed to raise  funds and to issue and allot  not exceeding 40 lacs    equity share for  Rs.10/- each at par to such persons or corporate bodies, banks,  mutual funds or other financial institutions whether or not they are the  existing shareholders of the company, and in such manner as may be  decided by the Board.  This resolution, according to the appellants,   was totally fabricated though no such allegation was made before the  CLB.  But the core issue is  whether this resolution was at all passed  in that meeting or not because the whole trouble seems to have  started from this and thereafter further resolutions  have been passed  in order to reduce the shareholding of the appellants and the whole  design was to reduce the appellant No.1 to minority. In fact, the  Reserve Bank of India has already granted permission to allot share  to the appellant No.1 for the equipments supplied by  him to the  extent of Rs.3.5 crore and that permission was challenged by one  way or the other so that the permission is not granted and the share  to the extent of Rs.3.5 crore is denied to the appellant Dr.Kamal  Kumar Dutta  and he looses the majority  thereby the younger brother  Sajal Dutta who has made total investment of Rs.1.3 crore will get  majority and oust the appellant No.1 from the chairmanship and  reduce him to nothing. This was the core issue.  The CLB after  considering the matter found various omissions and commissions in  conduct of the Board meetings and in a detailed order discussed the  whole issue.  The CLB discussed the memorandum and articles of  association of the company to which the appellants and                                                                                                                                                                                        Sajal Kumar Dutta are the signatories.  This document is of 1991.    It  was resolved that  the hospital was to be established with the  participation of the appellants and that imported equipments worth

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Rs.420 lakhs would be purchased from the foreign exchange  provided by the NRI doctor. The cost of the project was indicated as  Rs.1100 lakhs with Rs.900 lakhs as the authorized capital out of  which Rs.800 lakhs would  be by NRI  participation.  Under the  heading ’foreign investment- financial collaborator’, the name of the  appellant is mentioned.  It was mentioned that the appellant was the  principal promoter and the other promoter being the respondent No.2-  a resident Indian.  Under ’Means of Finance’  it is mentioned that NRI  investment would be Rs.800 lakhs comprising of Rs.400 lakhs as  equity and Rs.400 lakhs as preference shares.   It was mentioned  that from various records of the company and approval given by the  SIA,  it is apparently clear that the appellant is the chief principal  promoter of the company. In this connection CLB discussed the  notices of the Board of Directors  meetings because all the issues  arose from the resolutions passed  by the Board of Directors.  The  CLB recorded that the notices issued at the local address in India  cannot be considered to meet with the provisions of Article 121(b)  of  the Memorandum and Articles of Association.  It was also observed   that the notices in respect of appellant No.2 the address shown was  "P.O.Hirapur, District Dhanbad, Bihar"  and in respect of most of the  meetings, the time gap of alleged date of posting and the meeting did  not exceed 3 days excluding the dates of posting and the dates of the  meetings.  In respect of the appellant No.1  the notices were  addressed to a local address notwithstanding the fact that the  company itself has attached various documents  indicating that the  appellant No.1 used to stay  in some hotel  or  guest house during his  visit to Calcutta.  It was observed that adequate time was not given  and notices were not sent at the correct address. The CLB observed  that   the action of the company to have posted notices for the  meetings to the local addresses of the NRI directors lacked in probity  and fair play as the appellants being not only the first directors of the  company but also substantial holders of the shares, they should have  been given notices to their address in the USA.  Accordingly, the CLB  held that  notices for the Board meetings cannot be deemed to have  been given to the appellants.  Ultimately the CLB held as follows :

               " In view of our finding that no notices  should be deemed to have been served on the  petitioner directors for the Board Meetings, the  decisions taken in these Board Meetings, granting  that they had taken place, should be declared to be  null and void,  as the general proposition of law is  that proceedings of Board meetings without notices  

With regard to the letter received by Dr.Dutta that the matter has  been amicably settled, the CLB recorded as follows:

"Even assuming that  the  petitioner had authorized   this advocate to send that letter (which is disputed by  the petitioner), the circumstances have been  changed afterwards.  Further additional shares were  issued, the petitioner directors were declared to have  vacated their offices and allotment of shares against  the cost of imported equipments denied. In the  changed circumstances, by which the petitioners  have been completely ousted from the company,  which was not the position when the letter from the  advocate of the petitioner was written, we do not  think that it would be right to bind the petitioner to the  terms of the said letter."

Similarly, with regard to  the second appellant,  Dr.Binod  Prasad  Sinha, it was also held that   no  proper notices were  given.

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Therefore,  he cannot be deemed to have vacated the Office of  Director.  The notice for the AGM convened on 30.12.1996 was  issued wherein re-election of this appellant was an item in the  agenda, wherein it was stated " to appoint directors in place of  Dr.Binod Sinha and Dr.S.K.Ghosal who retire by rotation and being  eligible  offer themselves for re-appointment. The resolution passed  in that meeting was that Dr.Binod Sinha retired  by rotation is not  being reappointed because of lack of active interest and the CLB  recorded that  such resolution was very doubtful  and whether such a  resolution was at all passed. The CLB also pointed out certain  impropriety  in recording the minutes.  

       So far as the vacation of the office by the appellant No.1 is  concerned,  it is mentioned that the appellant No.1 vacated the office  on 24.2.1997. For that purpose, the provisions of Section 283 (1) (g)  were invoked. The CLB after going through  the records observed  that the convening of the Board meeting on 3.3.1997 at 11 A.M. is  very doubtful. It was on 3.3.1997 a letter was issued indicating that  the appellant No.1 has vacated  his office. The CLB after appreciating  the evidence  observed that  the resolution dated 3.3.1997 cannot be  sustained.  

            So far as the allotment of shares was concerned, the CLB  after assessing all the materials on record came to the conclusion  that the allotment of shares was not completely bona fide  and thus  deserved to be set aside.  Instead of setting aside  the same, the CLB  issued certain directions to which we would advert hereinafter.  

             The next question was with regard to the allotment of shares  against the value of imported equipments. It was alleged on behalf of  the respondents  that this was not approved by the SIA nor the RBI  covered the allotment of shares against the imported equipments and  it was also pointed out that the company had no knowledge that  those were second hand equipments.  This aspect was also  examined by the CLB at length but  the CLB did not make any  observation since the matter was pending before the Calcutta High  Court.

              After examining the evidence led by both the sides the CLB  recorded that they were not in a position to convince themselves that  all the equipments should have become non-functional. It appears  that the whole controversy originated somewhere in March, 1997.  Prior to that all the equipments were functioning properly. However,  no finding was given because the matter was already pending before  the Calcutta High Court. The CLB also adversely observed with  regard to the Board meeting dated 7.2.1996 and far reaching  decisions were taken by the company when the appellant No.1 was  not present in the said meeting and especially the respondent No.2  as Managing Director indirectly outstripping   the appellant No.1  of all  his powers. This meeting was held a week before the appellant No.1  was scheduled to arrive from USA on 14.2.1996.  In fact, such a final  decision was taken in the absence of  the main promoter of the  company and therefore, the CLB concluded that this reflects   complete lack of probity on the part of the Directors in passing such a  resolution.

            So far as the meeting of 16.2.1996, the minutes were not  properly recorded and it was pointed out by the IDBI nominee that   draft minutes of the meeting  dated 7.2.1996 placed before the  meeting should correctly reflect  the appointment of respondent No.2   as the Managing Director but such an important item was not  included in the draft minutes and whether this item was at all  discussed in the meeting dated 7.2.1996 becomes highly doubtful.  It  was also pointed out that the minutes of the meeting dated 16.2.1996  was signed by the respondent No.2 though  it was presided over by

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the appellant No.1 and such minutes are required to be signed by the  chairman as required under section 193 of the Act. Therefore, the  recording of  both the minutes cannot be accepted as correct one.  Consequently, the CLB also adversely commented on another  meeting dated 13.4.1996.  It also held that after receipt of the letter  dated 4.4.1996 from the IDBI that  it cannot fund the second hand  equipments and the Board decided not to import any second hand  equipment for allotment of shares to the appellants, a resolution was  passed despite the fact that the company had earlier applied to the  Reserve Bank of India for allotment of shares. In the meeting dated  3.3.1997 there was a complete chaos. The finding is that the meeting  was not properly conducted.  The letter from the IDBI was not brought  to the notice of the appellant.                       Thereafter the following relief was granted by the CLB which  can be summed up as follows. That vacation of Office by the  Directors cannot be sustained. It was directed that in future the issue  of notices for the Board meetings should be made by registered post  before 21 days to the addressees of the NRI Directors at their usual  address in USA.  It was further stipulated that NRI directors will have  the right to appoint alternative Directors and if the right is exercised,  then the alternative directors will also be given notices as stipulated.  The shares allotted in the Board Meetings on 12.3.1996 and  24.7.1996 will not have any voting rights  till the outcome of the  proceedings before the Calcutta High Court. No further shares will be  allotted against the share application money with the company either  in the names of the NRI investors or in the names of the respondents.  Both the parties were permitted to make further investments but the  same will be kept as share application money till the disposal of the  proceedings before the Calcutta High Court. It was further directed  that status quo shall be maintained till the matter is disposed of by the  Calcutta High Court. There will be no change in the composition of  the Board other than that the appellants directors will function as  Directors in addition to the Executive Directors.              This order was challenged by filing appeal before learned  Single Judge of the Calcutta High Court. Learned Single Judge  instead of going into minute details, examined the question with  regard to the maintainability  of the petition under Sections 397 & 398  of the Act before the CLB.  Learned Single Judge after examining all  aspects came to the conclusion that the appellants have failed to  make out a case under Section 397 of the Act for winding up of the  company on the ground of just and equitable.  But the learned Single  Judge recorded that Dr.Dutta acted prejudicial to the interest of the  company  and further held that the preconditions  to have an order  under Section 397/398 of the Act have not been made out and this  aspect was not dealt with by the CLB at all. Therefore, learned Single  Judge set aside the order of the CLB  relying on a decision in the  case of Hanuman Prasad Bagri & Ors vs. Bagree Cereals Pvt. Ltd. &  Ors. reported in 115 Company Cases 493 and left the appellants to  any appropriate remedy by way of company suit which can give the  terminated director every relief.  It was also observed that he can file  a suit for injunction and declaration and get himself reinstated as a  director or if he has been removed from a directorship, he could have  filed a suit for declaration.  Learned Single Judge accordingly set  aside the order of the CLB.

         Aggrieved against this  order passed by the learned Single  Judge  on 31.3.2005 the present Special Leave Petitions were filed  by the appellants. We have given all necessary details about the  whole affairs of the company from the order of the CLB to which we  shall hereinafter refer to.

       At the outset  learned senior counsel, Mr.F.S.Nariman,  appearing for the respondents has raised a preliminary  objection that   the appellants have alternative remedy of approaching the Division

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Bench of the Calcutta High Court  under Clause 15 of the Letters  Patent. Therefore, this Court should not entertain these appeals and  the same should be dismissed as the appellants have alternative  remedy under clause 15 of the Letters Patent before the Calcutta  High Court.  We shall first dispose of the preliminary objection raised  by Mr. Nariman with regard to the maintainability of the appeal  against the order  passed by learned Single Judge of the High Court  of Calcutta.  

               Appeal lies under Letters Patent  from the judgment of the  learned Single Judge of the High Court to the  Division Bench. In this  connection, learned counsel placed reliance on a decision of this  Court in the case of Garikapatti Veeraya vs. N.Subbiah Choudhury  reported in 1957 SCR 488 and submitted that the appeal is  vested  right  and it cannot be taken away.  Alternative submission was if  clause 15 does not apply, appeal lies under Section 483 of the Act.   In this connection reliance was placed on  decisions of this Court in  the case of  Arati Dutta vs. M/s. Eastern Tea Estate (P) Ltd. reported  in (1988) 1 SCC 523 and in the case of Maharashtra Power  Development Corporation Limited vs. Dabhol Power Company & Ors.  reported in [2003] 117 Company Cases 651.  As against this,  learned senior counsel for the appellants submitted that Section 10F  of the Act came into being with effect from 31.5.1991. Prior to that  application under Sections 397 & 398 of the Act was being filed with  the Company Judge in the High Court. But after the amendment  of  the Act by Act 31 of 1988, this power under Sections 397 & 398 of the  Act has been given to the CLB. Under Section 10E of the Act,  the  Company Law Board was created. It deals with applications under  Sections 397 & 398 of the Act. Therefore, learned Single Judge has  not exercised original jurisdiction and as such  the appeal  contemplated under clause 15 of the Letters Patent is not  maintainable. Learned senior counsel invited our attention to Section  100A of the Code of Civil Procedure which came into being with  effect from 1.7.2002.  This section starts with non-obstante clause  that notwithstanding  anything contained in any Letters Patent  for  any High Court or in any other instrument having the  force of law or  in any other law for the time being in force, where any appeal from an  original or appellate decree or order is heard and decided by a single  Judge of a High Court, no further appeal shall lie from the judgment  and decree of such single Judge. Therefore, it was pointed out that in  view of the latest amendment  in the Code of Civil Procedure,  Letters  Patent or intra court appeal will not  lie when the learned Single  Judge has exercised appellate jurisdiction.  In fact, this amendment  seems to have been brought about on the recommendations of the  Malimath Committee report that right to appeal should be curtailed  and only one  appellate forum should be available. Therefore, in view  of this recommendations, this amendment was brought about. In  support of this contention learned senior counsel invited our attention  to the following decisions.

               (i)   (2004)11 SCC 672 [P.S.Sathappan (dead) by LRs. Vs. Andhra Bank  Ltd. & Ors.]

               (ii)     (2003) 10 SCC 361                         [Subal Paul vs. Malina Paul & Anr.]

               (iii)     AIR 2003 AP 458                         [ Gandla Pannala Bhulaxmi vs. Managing                          Director, APSRTC & Anr.]

               (iv)    (1987) 62 Company Cases 504.                         [Rev. C.S.Joseph & Ors. Vs. T.J.Thomas & Ors.]

               (v)     AIR 2004 Ker. 111

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                       [ Kesava Pillai Sreedharan Pillai & etc. vs.                          State of Kerala & Ors.]

               We have considered the rival submissions of the parties.  The first question that we have to examine is whether the appeal  against the order of the learned Single Judge lies before the Division  Bench under Letters  Patent  or not.  It may be relevant to mention  here  that prior to the amendment of the Act, the power under  Sections 397 & 398  used to be exercised by the Company Judge of  the High Court. Appeal against that order of the learned Single Judge  lies under Section 483 of the Act before the Division Bench of the  High Court.  Section 483 of the Act reads as under :

                " 483. Appeals from orders.- Appeals from  any order made or decision given before the  commencement of the Companies(Second  Amendment) Act, 2002,  in the matter of the winding  up of a company by the Court shall lie to the same  Court to which, in the same manner in which, and  subject to the same conditions under which, appeals  lie from any order or decision of the Court in cases  within its ordinary jurisdiction.

But after the amendment the power which was being exercised under  Sections 397 & 398 of the Act by learned Single Judge of the High  Court is being exercised by the CLB under Section 10E of the Act.  Appeal against the order passed by the CLB, lies to the High Court  under Section 10F of the Act.  Therefore, the position which was  obtaining prior to the amendment in 1991 was  that any order passed  by the Single Judge exercising the power under Sections 397 & 398  of the Act, the appeal used to lie before the Division Bench of the   High Court. But after the amendment the power has been given to the  CLB and   appeal has been provided under Section 10F of the Act.   Thus, Part 1A was inserted by the amendment  with effect from  1.1.1964.  But the constitution of the Company Law Board and the  power to decide application under Sections 397 & 398 of the Act was  given to the CLB with effect from 31.5.1991 and appeal was provided  under Section 10F of the Act with effect from 31.5.1991.  Therefore,   on reading of Sections 10E, 10F , 397 & 398 of the Act, it becomes  clear that it is  a complete code that applications under sections 397  & 398 of the Act shall be dealt with by the CLB and the order of the  CLB is appealable  under Section 10F  of the Act before the High  Court. No further appeal has been provided against the order of the  learned Single Judge.  Mr.Nariman, learned senior counsel for the  respondents submitted that an appeal is a vested right and therefore,  under clause 15 of the Letters Patent of the Calcutta High Court, the  appellants have a statutory right to prefer appeal irrespective of the  fact that no appeal has been provided  against the order of the  learned Single Judge under the Act. In this connection, learned  counsel invited our attention to a decision  of this Court in the case of   Garikapatti Veeraya vs. N.Subbiah Choudhury reported in [1957]  SCR 488 and in that it has been pointed out that the appeal is a  vested right.   The majority took the view that the appeal is a vested  right. It was held as follows :

               "\005 that the contention of the applicant was  well-founded, that he had a vested right of appeal to  the Federal Court on and from the date of the suit  and the application for special leave should be  allowed.                   The vested right of appeal was a  substantive right and, although it could be exercised  only in case of an adverse decision, it was governed  by the law prevailing at the time of commencement of

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the suit and comprised all successive rights of appeal  from court to court, which really constituted one  proceeding. Such a right could be taken away only  by a subsequent enactment either expressly or by  necessary intendment."

So far as the general proposition of law is concerned that the appeal  is a vested right  there is no quarrel with the proposition but it is  clarified that such right can be taken away by a subsequent  enactment either expressly or by necessary intendment. The  Parliament while amending section 100A of the Code of Civil  Procedure,  by amending Act 22 of 2002 with effect from 1.7.2002,  took away the Letters Patent power of the High Court in the matter of  appeal against an order of learned single Judge  to the Division  Bench. Section 100A  of the Code of Civil Procedure reads as  follows:                 " 100A. No further appeal in certain cases.-  Notwithstanding  anything contained in any Letters  Patent for any High Court or in any other instrument  having the force of law or in any other law for the  time being in force, where any appeal from an  original or appellate decree or order is heard and  decided by a single Judge of a High Court, no further  appeal shall lie from the judgment and decree  of  such single Judge."

Therefore,  where appeal has been decided from an original order by  a single Judge, no further appeal has been provided and that power  which used to be there under the Letters Patent of the High Court has  been subsequently withdrawn. The present order which has been  passed by the CLB and against that appeal has been provided before  the High Court under Section 10F of the Act, that is an appeal  from  the original order. Then in that case no further Letters patent appeal  shall lie to the Division Bench of the same High Court. This  amendment has taken away the power of the Letters Patent in the  matter where  learned single Judge hears an appeal from the original  order.  Original order in the present case was passed by the CLB  exercising the power under Sections 397 and 398 of the Act and  appeal has been preferred under section 10F of the Act before the  High Court. Learned single Judge having passed an order, no further  appeal  will lie  as the Parliament in its wisdom has taken away its  power.  Learned counsel for the respondents invited our attention to a  letter from the  then Law Minister. That letter cannot override the  statutory provision. When the statute is very clear, whatever  statement by the Law Minister made  in the floor of the House, cannot  change the words and intendment which is borne out from the words.   The letter of the Law Minister cannot be read to interpret the  provisions of Section 100A. The intendment of the Legislature is more  than clear in the words and the same has to be given its natural  meaning and cannot be subject to any statement made by the Law  Minister in any communication. The words speak for itself.  It does  not require any further interpretation  by any statement made in any  manner.  Therefore,  the power of the High Court in exercising Letters  patent in a matter where a single Judge has decided the appeal from  original order,  has been taken away and it cannot be invoked in the  present context.  There is no two opinion in the matter  that when the  CLB  exercises its power under Section 397 & 398 of the Act,  it  exercised   its quasi-judicial  power as original authority.  It may not  be a court but it has all the trapping of a court. Therefore, the CLB  while  exercising its original jurisdiction under Sections 397 & 398 of  the Act passed the  order and against that order appeal lies to the  learned single Judge of the High Court and thereafter no further   appeal  could be filed.

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               In this connection, our attention was invited to a decision  in the case of Arati Dutta vs. M/s. Eastern Tea Estate (P) Ltd.  reported in (1988) 1 SCC 523. This was a case in which the power  was exercised by learned single Judge under  Sections 397 & 398 of  the Act and against that order appeal  lay  to the Division Bench of  the High Court under Section 483 of the Act. In that context, their  Lordships observed that mere absence of procedural rules would not  deprive  the litigant’s of substantive right conferred by the statute. We  have already explained above that  earlier the power under Sections  397 & 398  of the Act was being exercised by learned Company  Judge in the High Court and therefore, appeal lay to the Division  Bench under Section 483 of the Act.   If the power has been  exercised by the Company Judge in the High Court, then one appeal  shall lie before the Division Bench of the High Court under Section  483 of the Act. But that is not the situation in the present case.  Therefore, this decision cannot be of any help to respondents.                             In this connection, our attention was invited  to a decision  of the Bombay High Court in the case of Maharashtra Power  Development Corporation Limited  vs. Dabhol Power Company &  Ors. reported in  [2003] 117 Company Cases 651.  In that case,  the  High Court took the view that despite the amendment in Section 100A  of the Code of Civil Procedure, order passed by the single Judge  in  appeal arising out of the order passed by the  CLB under Sections  397 & 398 of the Act, appeal lay to the Division Bench and in that  connection,  the Division Bench invoked Section 4(1) of the Code of  Civil Procedure which says that  in the absence of any specific  provision to the contrary, nothing in this Code shall be deemed to limit  or otherwise affect any special or local law now in force or any special  jurisdiction or power conferred, or any special form of procedure  prescribed, by or under any other law for the time being in force and  therefore,  the Division Bench concluded that the Letters Patent  appeal is a statutory appeal and  special enactment.  Therefore,  appeal shall lie to the Division Bench.  We regret to say that this is  not the correct position of law. We have already explained the facts  above and we have explained Section 100A  of the Code of Civil  Procedure to indicate that the power was specifically taken away by  the Legislature. Therefore, the view taken by the Bombay High Court  in the case of Maharashtra Power Development Corporation (supra)  cannot be said to be the correct proposition of law.

               In this connection, our attention was invited to  a  Constitution Bench decision in the case of P.S.Sathappan (Dead) By  LRs. Vs. Andhra Bank Ltd. & Ors. reported in (2004) 11 SCC 672.  In  this case, the Constitution Bench observed as follows :

               "  From Section 100-A CPC, as inserted in  1976, it can be seen that when the legislature wanted  to exclude a letters patent appeal it specifically did  so. Again from Section 100-A , as amended in 2002,  it can be seen that the legislature has provided for a  specific exclusion. It must be stated that now by  virtue of Section 100-A, no letters patent appeal  would be maintainable in the facts of the present  case. However, it is an admitted position that the law  which would prevail would be the law at the relevant  time. At the relevant time neither Section 100-A nor  Section 104(2) barred a letters patent appeal. The  words used in Section 100-A are not by way of  abundant caution. By the Amendment Acts of 1976  and 2002 a specific exclusion is provided as the  legislature knew that in the absence of such words a  letters patent appeal would not be barred. The  legislature was aware that it had incorporated the

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saving clause in Section 104(1) and incorporated  Section 4 CPC. Thus now a specific exclusion was  provided."

Similarly in the case of  Subal Paul vs. Malina Paul & Anr. reported in  (2003) 10 SCC 361, their Lordships observed as follows :

               " Whenever the statute provides such a bar,  it is so expressly stated, as would appear from  Section 100-A of the Code of Civil Procedure."

In the case of Gandla Pannala Bhulaxmi vs. Managing Director,  APSRTC & Anr. reported in AIR 2003 AP 458, the Full Bench of the  Andhra Pradesh High Court has taken a similar view in the matter.  Same is the view taken by the Full Bench of the Kerala High Court in  the case of  Kesava Pillai Sreedharan Pillai and etc. vs. State of  Kerala & Ors. reported in AIR 2004 Kerala 111. Therefore, in this  view of the matter, we are of opinion that the preliminary objection  raised by Mr.Nariman cannot be sustained and the same is overruled.

       Now, coming to the merits of the case, learned counsel for the  appellants submitted that  learned Single Judge of the High Court has  gone wrong in holding that no case is made out under Sections 397 &  398 of the Act as necessary ingredients of  the said sections are not  present in this case.  In order to appreciate the contention of learned  counsel for the appellants, we have to first examine the scope of  Sections 397 & 398 of the Act. Sections 397 & 398 of the Act read as  under :

               " 397. Application to Tribunal for relief in  cases of oppression.- (1)  Any member of a company  who complain that the affairs of the company are  being conducted in a manner prejudicial to public  interest or in a manner oppressive to any member or  members (including any one  or more of themselves)  may apply to the Tribunal for an order under this  section, provided such members have a right so to  apply in virtue of section 399.                 (2) If, on any application under sub-section  (1), the Court is of opinion-                          (a) that the company’s affairs are  being conducted in a manner prejudicial to  public interest or in a manner oppressive to any  member or members; and                          (b)  that to wind up the company  would unfairly prejudice such member or  members, but that otherwise the facts would  justify the making of a winding-up order on the  ground that it was just and equitable that the  company should be wound up,

the Tribunal may, with a view to bringing to an end  the matters complained of, make such order as it  thinks fit.                                  398. Application to Tribunal for relief in  cases of mismanagement.- (1) Any members of a  company who complain \026                 (a) that the affairs of the company are  being conducted in a manner prejudicial to  public interest or in a manner prejudicial to the  interests of the company; or                 (b) that a material change not being a  change brought about by, or in the interests of,  any creditors including debenture holders, or

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any class of shareholders, of the company has  taken place in the management or control of the  company, whether by an alteration in its Board  of directors, or manager, or in the ownership of  the company’s shares, or if  it has no share  capital, in its membership, or in any other  manner whatsoever, and that by reason of such  change, it is likely that the affairs of the company  will be conducted in a manner prejudicial to  public interest  or in a manner prejudicial to the  interests of the company,

may apply to the Tribunal for an order under this  section, provided such members have a right so to  apply in virtue of section 399. (2) If, on any application under sub-section (1),  the  Tribunal is of opinion that the affairs of the company  are being conducted as aforesaid or that by reason  of any material change as aforesaid in the  management or control of the company, it is likely  that the affairs of the company will be conducted as  aforesaid, the Tribunal may, with a view to bringing to  an end or preventing the matters complained of or  apprehended, make such order as it thinks fit."

As per Section 397, any person who is eligible to apply under Section  399, can apply before the CLB that the affairs of the company are  being conducted in a manner prejudicial to public interest  or in a  manner oppressive to any member or members  and that to wind up  the company would unfairly prejudice  such member or members,   but that otherwise  the facts would justify the making of a winding-up  order on the ground that it was just and equitable that the company  should be wound up.  If the Tribunal is satisfied that there exists a  situation where the business  of the company is being conducted in a  manner prejudicial to the interest or in a manner  oppressive to any  member or members and that winding up  of the company would  unfairly prejudice such member or members but that otherwise the  facts would justify the making of a winding-up order on the ground  that it was just and equitable that the company should be wound up,   it may with a view to bringing to an end the matters complained of,   make such order  as it deems fit. Therefore, what it transpires in the  present  context is, we have to examine whether the acts of the  company were oppressive to any member or members  justifying the  winding up as just and equitable. It is not necessary  that in every  case, the relief of winding-up should be made.  It is an option  with  the Tribunal if it considers that in order to bring  to an end the matters  complained of,  it can pass orders for winding-up if it is just and  equitable or  it can pass such order as it thinks fit.  It does not  necessarily mean that in every case such winding-up order need be  passed.  Similarly, under section 398 also, if the affairs of the  company  are being conducted  in a manner prejudicial to public  interest or in a manner prejudicial to  the interests of the company or  that a material change not being a change brought about by, or in the  interests of any creditors including debenture holders, or any class of  shareholders,  of the company has taken place in the management or  control of the company whether by an alteration in its Board of  directors, or manager  or in the ownership of the company’s shares,   or if it has no share capital, in its membership, or in any other manner  whatsoever and that by reason of such change, it is likely that  the  affairs of the company will be conducted in a manner prejudicial to  public interest or in a manner prejudicial to the interests of the  company,  the Tribunal  can order winding-up  of the company in  order to bring to an end of all these mismanagement  or make such  order as it thinks fit.  The condition of section 399  of the Act is also

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equally applicable in the present case. In fact, section 398 talks much  about the mismanagement,  or apprehension of mismanagement in  the affairs of the company. As against this, section 397 deals with  oppression of the members.  Therefore,  both sections 397 & 398  to  some extent have commonality  for the purpose like, prejudicial to   public interest and application for winding-up can be made by  members as per Section 399. Apart from this commonality,  for the  purpose of Section 397, if the company acts in a manner  oppressive  to  any member or members and if it otherwise justifies  on the  ground of just and equitable,  then  Tribunal can wind up   the  company or pass such order as it thinks fit. Whereas in Section 398  the basic features are that the management is working in a manner  prejudicial to the interest of the company by bringing about the  material changes in the management or by alteration in its Board of  Directors, then in that case, if it is found by the Tribunal that in order  to bring to an end  or preventing  further mismanagement,  it can  pass such order as it deems fit including that of winding-up.    Therefore, the parameters in both the Sections  i.e. Sections 397  &  398 are very clear. It will depend upon  case to case. No hard and  fast rule can be laid down.  In the case of oppression to the interest of  member or members, if the Tribunal is satisfied  that  the winding-up  is just and equitable then it can do so or pass any order as it thinks fit.  Likewise in Section 398 if the management wants to bring any  material change in the management and control of the company  prejudicial to the interest of the company, then in that case,  appropriate order can be passed by the Tribunal. The acts which  would amount to oppression to the members or mismanagement or  material alteration in the control of the company or prejudice to the  interest of the company would  depend upon facts of each case.

                In this connection, our attention was invited to a decision  of this Court in the case of  S.P.Jain vs. Kalinga Tubes Ltd. reported  in (1965) 2 SCR 720.  In this case, their Lordships after examining  the scope of Section 397 vis-‘-vis Section 210 of the English Act vis- ‘-vis the English procedure on the subject  observed as under :

               " It gives a right to members of a company  who comply with the conditions of s.399 to apply to  the court for relief under s.402 of the Act or such  other reliefs as may be suitable in the circumstances  of the case, if the affairs of a company are being  conducted in a manner oppressive to any member or  members including any one or more of those  applying. The court then has power to make such  orders under s. 397 read with s.402  as it thinks fit,  if  it comes to the conclusion that the affairs of the  company are being conducted in a manner  oppressive to any member or members and that wind  up the company would unfairly prejudice such  member or members, but that otherwise the facts  might justify the making of a winding up order on the  ground that it was just and equitable that the  company should  be wound up. The law however has  not defined what is oppression for purposes of this  section, and it is left to courts to decide on the facts  of each case whether there is such oppression as  calls for action under this section."

Following the English cases referred to in Kalinga Tubes Ltd. (supra),  similarly in the case of  Needle Industries (India) Ltd. & Ors. Vs.  Needle Industries Newey (India) Holding Ltd. & Ors. reported in   (1981) 3 SCC 333,  their Lordships concluded as follows :

               " The utmost good faith is due from every  member of a partnership  towards every other

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member; and if any dispute arises between partners  touching any transaction by which one seeks to  benefit himself at the expense of the firm, he will be  required to show, not only that he has the law on his  side, but that  his conduct will bear to be tried by the  highest standard of honour."

In the case of Kilpest Pvt. Ltd & Ors. vs. Shekhar Mehra reported  in  (1996) 10 SCC 696,  it was held as follows :

               "   The promoters of a company, whether or  not they were hitherto partners, elect to avail of the  advantages of forming a limited company. They  voluntarily and knowingly bind themselves by  the  provisions of the Companies Act. The submission  that a limited company should be treated as a quasi- partnership should, therefore,  not be easily  accepted. Having regard to the wide powers under  Section 402,  very rarely  would  it be necessary to  wind up any company in a petition filed under  Sections 397 and 398."

In the case of Hanuman Prasad  Bagri & Ors. vs. Bagress Cereals  Pvt. Ltd. & Ors. reported in (2001) 4 SCC 420, their Lordships  held  that in order to grant relief under section 397, the petitioner should  make out a case for winding up of the company on just and equitable  ground  and in that case, their Lordships held  that illegal termination  of the directorship of the petitioner was not such a ground to justify  winding up of the company.

       In the case of  M/s. Madhusoodhanan & Anr. vs. Kerala  Kaumudi (P) Ltd . & Ors. reported in (2004) 9 SCC 204, it was found  that notice not less than 21 days was not given by personal service or  service by post and on facts it was found that requirement of Section  189 of the Act was not complied with. Under Section 53 of the Act,  service of notice of the Board’s meeting by post and by certificate of  posting were not found to be reliable when the relationship between  the parties was already bitter.  In this case, on evidence it was found  that the entries in the register were not sufficient to establish the  service of notice on the Director.  So far as service by certificate of  posting, it raises a rebuttable presumption and  the onus is on the  addressee to show that the document under certificate of posting was  not received by him,

               In the case of  Dale & Carrington Investment (P) Ltd. vs.  P.K.Parthapan & Ors. reported in (2005) 1 SCC 212, their Lordships  with regard to oppression held  if a member who holds the majority of  shares in a company is being reduced to the position of minority  shareholder in the company by mala fide  act of the company or by its  Board of Directors, such act must ordinarily be considered to be an  act of oppression against the said shareholder and what relief should  be granted  would depend on the facts of the case. The  facts  of the  present case at hand are  almost akin  to the case  referred to above.   Allotment of additional shares to the Managing Director was found to  be sole objective to gain control by becoming majority shareholder.  That allotment was found to be mala fide and not in the interest of the  company and no legal procedure prescribed in Articles of Association  was followed and it was found to be a clear case of an act of  oppression on the part of R towards P, the majority shareholder.

               In the case of Sangramsinh P.Gaekwad & Ors. vs.  Shantadevi P.Gaekwad (Dead) through LRs & Ors. reported in (2005)  11 SCC 314 their Lordships approved the decision in the case of  Dale & Carrington Investment (P) Ltd (supra) and  observed that  the  director if acts in oppressive, capricious or corrupt manner or in a

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mala fide way then such act would be construed to be oppressive but  if the director acts bonafidely in the interest of the company then such  act cannot be said to be oppressive. It was observed that the Director  acts in a fiduciary capacity vis-‘-vis the company.  It was also  observed that the court is bound to  look  at the  business realities of  the situation and not to confine to a narrow legalistic view. The  interest of the company should be paramount and isolated incident  may not be enough  but it should be continuous oppressive conduct.

               It was  also observed as follows :

                "  The jurisdiction of the court to grant  appropriate relief under Section 397 of the  Companies Act indisputably is of wide amplitude.  The court while exercising  its discretion is not   bound by the terms contained in Section 402 of the  Companies Act if in a particular fact situation a  further relief or reliefs, as the court may deem fit and  proper, are warranted. Moreover, in a given case the  court despite holding that no case of oppression has  been made out may grant  such relief so as to do  substantial justice between the parties."

Our attention was invited to a decision In the case of Tea Brokers (P)  Ltd. & Ors. v. Hemendra Prosad Barooah reported in (1998) 5 Comp.  LJ 463( Cal.).  In this case, after examination of facts, the winding up  order was found to be justified, though the effect of such order meant  loss to  the respondent as one of his concern which was otherwise  flourishing one  and advantageous to him. However,  the net result  was that  allotting additional shares to minority shareholders on the  facts of the case was set aside.

               In the light of the cases bearing on the subject we have to  examine whether  the petition filed by Dr.Kamal Kumar Dutta  would  justify the order passed by the CLB or not. Therefore, in order to find  out whether a case of oppression in the interest of the members is  made out or not.  As already pointed out, oppression depends on the  facts of each case.                   In  Halsbury’s Laws of England, 4th Edn., Vol.7, para  1011, it is stated :                 " 1011. Conduct amounting to oppression.-  In this context, ’oppressive’ means burdensome,  harsh and wrongful. It does not include conduct   which is merely inefficient or careless. Nor does it  include an isolated incident; there must be a  continuing course of oppressive conduct, which must  be continuing at the date of the hearing of the  petition. Further, the conduct must be such as to be  oppressive to the petitioner in his capacity as a  member; whatever remedies he may have in respect  of exclusion from the company’s business by being  dismissed as an employee or a director, he will have  none under the provisions relating to oppression.

               On the other hand, these provisions are not  confined merely to conduct designed to secure  pecuniary advantage to the oppressors; they cover  the case of wrongful usurpation of authority, even  though the affairs of the company prosper in  consequence."                         (Emphasis added)

In Palmer’s Company Law, 23rd Edn.,p.848 it is stated :

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               " 64-02. Relationship is with company: the  fiduciary relationship of a Director exists with the  company; the Director is not usually a trustee for  individual shareholders. Thus, a Director may accept  a shareholder’s offer to sell shares in the company  although he may have information which is not  available to that other, and the contract cannot be  upset even if the Director knew of some fact which  made the offer an attractive proposition. So in  Percival v. Wright a person who had approached a  Director and sold him shares in the company,  afterwards, upon discovering that the Director had  known at the time of the contract that negotiations  were on foot for the purchase by an outsider of all the  shares in the company at a higher figure, could not  impeach the contract.  In his judgment Swinfen- Eady,J. said’ there is no question of unfair dealing in  this case. The Directors did not approach the  shareholders with the view of obtaining their shares.  The shareholders approached the Directors and  named the price at which they were desirous of  selling’."          In Pennington’s Company Law, 6th Edn. At pp.608-09, it is  stated "                 " Directors owe no fiduciary or other duties   to individual members of their company in directing  and managing  the company’s affairs, acquiring  or  disposing of assets on the company’s behalf,  entering  into  transactions on its behalf, or in  recommending the adoption by members of  proposals made to them collectively. If the Directors  mismanage the company’s affairs, they incur liability  to pay damages or compensation to the company or  to make restitution to it, but individual members  cannot recover compensation for the loss they have  respectively suffered by the consequential fall in  value of their shares, and they cannot achieve  this  indirectly by suing the Directors for conspiracy to  breach the duties which they owed the company.  However, there may be certain situations where  Directors do owe a fiduciary duty and a duty to  exercise reasonable skill and care in advising  members in connection with a transaction or situation  which involves the company or its business  undertaking and also the individual holdings of its  members." Therefore,  the upshot of the above discussions is that the Directors  are in a position of a trust. They must confirm to the probity and their  conduct should be above suspicion.  

       Now, adverting to the facts of the present case, we will examine  whether  there was any case of oppression of the member or attempt  to materially change in the management or control over the company  to the detriment of the company.  We may recapitulate that this  hospital was floated by Dr.Kamal Kumar Dutta with his brother, Sajal  Kumar Dutta  and a total investment of Dr.K.K.Dutta was Rs.4.26  crore which includes  Rs.3.5 crore of equipment and Sajal Dutta  made a contribution of Rs.1.23 crore and there was another  investment of Dr.Binod Prasad Sinha also.  If the share of equipment  i.e. Rs.3.5 crore is not taken into consideration, then  the share  of  Dr.K.K.Dutta  is 46.378 % and the share of Dr.B.P.Sinha being  6.365% the total share of both of them comes to 52.74% and the  share of Sajal Dutta is 46.26%. Thus, the company was floated by  Dr.K.K.Dutta along with his brother  for establishing a hospital in the  name of his wife, Ruby Dutta. Dr.Dutta and Dr.Sinha both are NRIs.

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All the equipments worth Rs.3.5 crore were supplied by Dr.Dutta  which were installed in the said hospital, though the equipments were  second hand and this is how  the hospital started functioning in 1995.  It seems that it started running well  but when it turned the leaf  and  showing some profitability then the trouble started brewing which led  Dr.Dutta and Dr.Sinha to file  the petition before the CLB under  Sections 397 & 398 of the Act, in 1997. The seed of discord started  with the resolution dated 19.4.1995 when a resolution was passed for  infusing some more money in the company and it appears that the  said resolution was passed in which Dr.K.K.Dutta, Mr.Sajal Dutta,  Wing Cdr.(Retd.) T.Chaudhuri as Director were present along with  special invitee, Dr.Ashok K.Maulik as Director and Mr.M.K.Datta  was  the Financial Controller and Secretary.  Dr.Kamal Kumar Dutta  took  the chair as the chairman  of the meeting.  Other resolutions were  passed for inauguration of the Hospital on 25.4.1995 at 11.0 A.M. by  the Chief Minister of West Bengal, maintenance of books of accounts  at a place other than the registered office,  progress of project  accounts and date of holding the annual general meeting etc.  But the  crucial resolution which was passed that gave rise to strained  relationship between two brothers was  to issue and allot not  exceeding 40,00,000 (forty lacs ) equity shares of Rs.10/-  each at  par to such persons, corporate bodies, banks, mutual funds or other  financial institutions whether or not they are  the existing  shareholders of the company and in such manner as may be decided  by the  Board. This resolution was  alleged to have been fabricated  and not passed on the date  though it is alleged that Dr.K.K.Dutta  was present.  According to Dr.K.K.Dutta  this resolution was  subsequently inserted and he was not made known about such  resolution and he came to know about it only on a later date when he  was said to be thrown out from the Managing Directorship.  Though  this aspect according to Mr.Nariman was not specifically challenged  before the CLB but the answer of learned counsel for the appellants  was that in fact these resolutions were not made known to the  appellants and they only came to know about it at a late stage when  all these resolutions were placed by Respondent No.2, Sajal Dutta. It  is alleged that objection to this was taken in a rejoinder filed by the  appellants before the CLB. Though specific challenge was not made   but in the rejoinder it was only mentioned  as follows:

               "   It is evident from the fact that 81(1A)  resolution by Company shareholders was passed  pursuant to some authorization purportedly obtained  at the meeting held on 19th April 1995 in which  petitioner No.1 was present and the decision to  convene the Extra Ordinary General Meeting and to  pass a  resolution under section 81(1A) was  considered and approved. However no details are  furnished of such a decision and the petitioners are  more than confident that the old minutes and the  resolution was used by the answering respondent to  gain illegal and unlawful   majority and the action is  being justified  by hiding the contents of these  resolutions. The answering respondent   has  deliberately and knowingly not annexed  the copies  of such minutes whereas the answering respondent  has given all other resolutions, he has purposely and  intentionally not given the copies of the resolution  passed on 12.3.1996, 17.2.1996, 19th April 1995,  9.2.1996 and 16.2.1996."

Though this omnibus objection was taken in a rejoinder but  specifically not challenged before the CLB except the argument that  the appellant No.1 had no copies of these resolutions and therefore  he came to know at a later stage and he has seriously doubted such  resolution was ever passed. Mr.Nariman is right to this extent that the

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allegation of fabrication of the resolution was not specifically raised  before the CLB.  In fact the ill-feeling started by this resolution   because this facilitated further bad blood  between the two brothers.  This aspect was noticed by the CLB and it was observed that the  appellant No.1 had refuted that he ever agreed to the passing of the  resolution  under section 81(1A) on 19.4.1995. According to him the  minutes were fabricated since the appellant was the chief promoter of  the company having 88.88% shares in the company. But there is no  specific finding with regarding to the fabrication of the resolution by  the CLB.  Be that as it may, but the fact remains that on the basis of  this resolution an attempt was made to oust the person who held the  majority of  shares to be reduced to minority.

       The CLB has in minute detail discussed with regard to all the  resolutions which we have already adverted to.   No proper notice  was served on the appellant No.1 who is a major shareholder of the  company or to  appellant No.2.  If the Board meeting  had been  convened without proper service of notice on the appellants by the  respondent No.2 then such Board meeting cannot be said to be valid.  Mr.Nariman however tried to explain various meetings and their  subsequent confirmation by next board meeting to show that once the  resolution of the subsequent meeting  has confirmed the resolution of  earlier meetings then those minutes stand confirmed irrespective of  the fact that  the appellants had been served or not.  We shall  highlight some of the instances.  We would show that how subtle  attempt was made to show that several notices were given to the  major shareholders of the company at their local address in India  knowing fully well that both the appellants are NRIs.   The  outstanding feature is that the appellant No.2 ,Dr.Binod Prasad Sinha  has been shown as an NRI but notice to him was sent at the address  P.O. Hirapur, District. Dhanbad, Bihar and those notices have even  been sent with very short interval.  The meeting was convened on  13.4.1996 and the notice was sent on 8.4.1996. Likewise,  another  meeting was  scheduled to be held on 5.9.1996  and the notice was  sent on the very same day i.e. 5.9.1996,  the date of meeting was  2.12.1996 and the notice was sent on 28.11.1996; the date of  meeting was 12.3.1996 and the notice was sent on 8.3.1996. The  meeting was to be held on 27.3.1996  but the notice was sent on  22.3.1996.   Apart from this, it was known to the respondent- Sajal  Dutta  who is the brother of appellant No.1 that whenever his brother  comes to Calcutta he does not stay in his house  yet the notices were   sent to Jodhpur Park, Calcutta. This shows lack of probity on the part  of Respondent No.2  to somehow or the other oust his brother from  the majority shareholding. Similarly, on the basis  of such resolution,  Dr.Binod Prasad Sinha, the appellant No.2 was ousted from the  directorship under section 283 (1) (g) of the Act  on the ground that   he has not attended the meeting  and he has no interest whatsoever.   Similarly,  the appellant No.1 was also ousted  in the meeting which  was held on 7.2.1996 when another meeting scheduled to be held on  16.2.1996  and it was within the knowledge of Sajal Dutta that his  brother was likely to  attend the meeting to be  held on 16.2.1996. But  suddenly the meeting was held on 7.2.1996  and the appellant No.1  was stripped off his chair as the Managing Director of the company.   Hence, Sajal Dutta became the Managing Director in place of  Dr.Kamal Kumar Dutta and the  minutes of the said meeting dated  7.2.1996 were not  brought forward  in the meeting of 16.2.1996 in  which Dr.K.K.Dutta was present. The IDBI nominee reported  to have  advised that the draft minutes of the meeting dated 7.2.1996  to be  placed  before the meeting  dated 16.2.1996 which would   correctly  reflect Sajal Dutta as the Managing Director but it was not included in  the meeting of 16.2.1996. However, Mr.Nariman tried to persuade us  to show that there was some defect in drafting of  minutes of the  resolution  and  therefore, it was not reflected in the meeting dated  16.2.1996. It does not appeal to us. Be that as it may,  when such an  important decision was taken in the absence of the main promoter of

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the company to oust him from the Managing Directorship and to  install Sajal Dutta  in  his place, it is the grossest act of oppression by  the Board of Directors.   Sometime after dispatching Dr.Dutta from  the Managing Directorship most of the shares were cornered by the  subsidiary companies of Sajal Dutta so as to acquire the  management of the  company and to alter material change in the  management of the company.  What can be more unfortunate than  this ?  When a material change is brought about in the management  to the detriment of the interest of the main promoter  it is squarely  covered under section 398 (1)(b)  of the Act. The company which is  floated by the elder brother and  which has been run by the younger  brother in  the absence of the elder brother  the younger brother  manages the whole company and that the Managing Director is  totally ousted and  shares are being cornered  substantially  so as to  have full control of the company, is  oppression  being squarely  covered by section 397 (1) (b) of the Act.   

       Apart from this, one of the most important features which has  weighed with us  is that Dr.Kamal Kumar Dutta brought second hand  equipments, those were cleared by the Customs  and permission was  granted by the RBI. The hospital started with those second hand  equipments  and for almost one year  no grievance was made and  the hospital  was running successfully with these equipments.  On  22.3.1997  the RBI granted permission for allotment of 30,55,329  equity shares of Rs.10/- each to the appellant  No.1 against supply of  second hand medical equipments on repatriation basis.  But  Respondent No.2  without permission  of the Board of Directors filed  an application with the RBI seeking withdrawal of the permission  granted for allotment of 30,55,329 equity shares to appellant  No.1.   The RBI on 2.6.1997 withdrew the permission granted for allotment of  30,55,329 equity shares to the appellant No.1.  The respondent No.2  presented Directors report in the Annual General Meeting along with  audited balance sheet for the year ended 31.3.1997 wherein  capitalization of second hand medical equipments supplied by  the  appellant No.1 was reversed.  Then the appellants filed application  under sections 397 & 398 of the Act before the CLB.  The CLB   directed the respondent company to amend audited balance sheet as  at 31.3.1998 and  restore  capitalization of second hand medical  equipments supplied by the appellant No.1  which was reversed by  the respondent No.2.  The RBI restored the approval for allotment of  30,55,329 equity shares  to the appellant No.1 on 6.3.1999 and  directed the company to issue  30,55,329 equity shares of Rs.10/-  each under section 19 (1) (d)  of FERA, 1973 on non-repatriation  basis against import of second hand medical equipments.  This was  not enough. This matter was taken up by the respondent No.1/2 by  filing a writ petition  being W.P.No.525 of 1999 challenging the order  of the RBI dated 6.3.1999 in Calcutta High Court.  The Calcutta High  Court directed the General Manager, RBI to hear the parties afresh  and pass appropriate order. In compliance with that order, the  Executive Director, RBI, Mumbai heard the matter and passed an  order on 10.8.1999 confirming their earlier order. Then too  the  respondent No.1/2 did not feel satisfied and again respondent  company filed a second writ petition being WP No.1977  of 1999 on  30.8.1999 before the Calcutta High Court. Pursuant to the direction  given by the High Court in the aforesaid writ petition,  the General   Manager, RBI Calcutta heard  both the parties and passed an order  reaffirming  the earlier order of the RBI. Then too   the respondents  did not feel satisfied and filed a third writ petition on 7.5.2004. No stay  order was passed by the High Court. The subtle attempt on the part  of the respondent No.2 was only to somehow oust the appellant No.1  of his majority by nullifying the order passed by the RBI so that   the  shareholding of the appellant  is reduced otherwise  against the  equipments supplied by the appellant No.1 to the tune of Rs.3.5  crore, he will have the majority   in the shareholding of the company.   Therefore, this persistent effort was made by the respondents by

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filing one after another writ petition before the High Court to somehow  reduce the shareholding of the appellant No.1. These attempts speak  volumes in the subtle design on the part of the respondent No.2 to  somehow see that the holding of the appellant No.1 is reduced and  the management is passed on to his hands by outstripping  the  appellant No.1  from the office of the Managing Director by  purchasing majority of shareholding pursuant to the resolution   passed on 19.4.1995 , he wanted to control the entire company.  The  filing of repeated writ petitions in Calcutta High Court at the expense  of the company adversely affected the interest of the company.  If this  is not the oppression of the member under section 397 and bringing   material change  in the management under section 398 then what   could be the better case than this. We fail to understand the view  taken by the learned Single Judge of the High Court directing the  appellants to file suit  for redressal of  all grievances, we cannot  sustain this order. We are of opinion that the view taken by the  Calcutta High Court cannot be sustained. We are satisfied that  this is  the case of oppression of the member as well as would amount to  bringing about material change in the management of the company.  

               Since the issue of granting of equity shares against the  medical equipments supplied by the appellant No.1 to the tune of  Rs.3.5 crore is pending before the Calcutta High Court in a writ  petition, therefore the CLB  has not passed any final order but passed  a limited order as mentioned above. However, we have examined the  matter in detail and we are satisfied that there is full proof case of  oppression. But at the same time we do not feel inclined to pass an  order for winding up of the company because it will not be in the  interest of the company  nor to the interest  of the parties. Therefore,  we allow the appeals and set aside the impugned order dated  31.3.2005 passed by the learned Single Judge of the High Court and   pass limited direction that all the resolutions which have been passed  by the Board of Directors,  or in the Annual General Meeting or  Extraordinary General Meeting with regard to the raising of funds of  Rs.40 lakhs  in the meeting of 19.4.1995 and  the meeting dated  16.2.1996 whereby the appellant No.1 was stripped off of his powers  as Managing Director,  the resolution by which Dr.Binod Prasad  Sinha was removed from the office of  Director  and other resolutions  by which the shares were allotted to the subsidiary company of Sajal  Dutta or other persons are bad and we restore the position ante  19.4.1995 and direct that let a fresh meeting be convened and proper  decision be taken in the matter in the interest of the company. We  confirm the order and direction  of the CLB.                  Let a Board meeting be convened with 21 days notice to all the  Directors by registered post  at their NRI address in India as well as  USA. The meeting shall be chaired by Dr. Kamal Kumar Dutta,   Managing Director. In case any of the NRI Directors is unable to  attend the meeting, he will have a right to  make nomination. We  again make it clear that all the resolutions are set aside with regard to  raising of funds dated 19.4.1995,  removal of  Dr. Binod Prasad Sinha  from Board of Director, outstripping of Dr.Kamal Kumar Dutta from  the Managing Directorship, allotment of shares to  Sajal  Dutta’s  companies & to others and all other resolutions which adversely  affect  Dr.Kamal Kumar Dutta and Dr. Binod Prasad Sinha.  Let a  fresh meeting  of the Board of Directors be convened with Dr. K.K.  Dutta as Managing Director  and proper resolution be passed in  the  interest of the company in accordance with law.  No order as to costs.