Skip to content


V.K. Gupta and ors. Vs. Auto Lamps Ltd. and ors. - Court Judgment

LegalCrystal Citation
CourtCompany Law Board CLB
Decided On
Judge
Reported in(1999)96CompCas555
AppellantV.K. Gupta and ors.
RespondentAuto Lamps Ltd. and ors.
Excerpt:
.....yet been taken. only when the company finally sent a communication in writing to him conveying the board's decision to refuse registration of the transfer, he approached the company law board without any loss of time.9. now, the issue for consideration is whether the alleged bona fide belief of the appellant that the board had not taken any final decision and as such he did not approach the company law board within the time prescribed in section 111(3) of the act could be considered to be within "sufficient cause" as enjoined in section 5 of the limitation act.10. neither counsel addressed us on this issue. there are quite a few supreme court judgments as to the import of the expression "sufficient cause". it has been held by the supreme court that the words "sufficient cause" should.....
Judgment:
1. In these two appeals filed under Section 111 of the Companies Act, 1956, in the matter of Auto Lamps Limited (the company), the Bench had passed an order on June 13, 1995, directing the company to register the shares impugned in these two appeals within 30 days from the date of receipt of that order in the names of the petitioners. This order was taken on appeal to the Delhi High Court which, while setting aside the order of the Company Law Board on the ground that the original appeals before the Company Law Board were time barred, remanded the case to the Company Law Board to decide the question as to whether the delay in filing the appeals by the appellants could be condoned and the High Court also gave the liberty to the appellants to file an application for condonation of the delay. Accordingly, the appellants filed an application for condonation of the delay under Section 5 of the Limitation Act, 1963.

2. Before considering the arguments of counsel on the application, it is essential to narrate the facts of these appeals. The appellants purchased 3,050 shares of the company from one Shri R. Raghuraman on March 20, 1980, and 100 shares from one Shri Aggarwal on April 16, 1990. These shares were lodged along with the instruments of transfer with the company. Shri Vimal Gupta, the appellant herein, was at that time the joint managing director of the company. In a board meeting held on June 30, 1990, which was attended by Shri Vimal Gupta, the board passed a resolution refusing registration of transfer on two grounds, viz., the instruments of transfer were not properly stamped and executed and the transfer of the shares was likely to result in disproportionate holding and would, therefore, be prejudicial to the interests of the company and its shareholders. Subsequently, the appellant raised the matter of transfer of these shares in various board meetings and also sent reminders in writing about the registration of transfer and the request was deferred for consideration in subsequent meetings. On March 21, 1992, the appellant gave a notice to the company under Section 113(3) of the Act to comply with the provisions of the said section within ten days failing which action against the company was threatened before the Company Law Board, On receipt of this notice, the company, by a letter dated March 31, 1992, informed the appellant that the matter of registration of transfer of the impugned shares was discussed in his presence in the board meeting and was rejected for reasons already known to the appellant. Then, the appellant filed the impugned appeals under Section 111 before the Company Law Board. While hearing the appeals, since one of the reasons for refusal was that the instruments of transfer were not stamped and executed and since neither the company nor the appellant had in their possession the instruments of transfer/share certificates, the Company Law Board directed the company to issue duplicate share certificates in respect of these shares and the appellant was permitted to re-lodge the shares along with proper instruments of transfer for consideration by the board. Accordingly, duplicate certificates were issued and the appellant lodged the share certificates along with freshly obtained transfer deeds with the company. The board of directors of the company, in a meeting held on October 13, 1993, once again refused to register the transfer on various grounds. After hearing the parties, the Company Law Board passed an order on June 13, 1995, directing the company to register the transfer of the impugned shares in the names of the appellants. This order was taken on an appeal to the High Court of Delhi and the learned judge of the High Court set aside the order of the Company Law Board on the ground that the appeals filed by the appellants before the Company Law Board were time barred in terms of Section 111(3) of the Act and as such the Company Law Board had no jurisdiction to pass any order directing the company to register the transfer in favour of the appellants. However, on a prayer made to that court by counsel for the appellant before us, that the matter should be remanded back to the Company Law Board for examining the question as to whether the delay in filing the appeals could be condoned in the facts and circumstances of the case, after hearing the arguments of the respective counsel on the power of the Company Law Board to condone the delay, the learned judge held, after examining the provisions of the Limitation Act and the Companies Act, that the Company Law Board had the jurisdiction to condone the delay in the filing of the appeals.

Accordingly, the case was remanded to the Company Law Board to decide the question as to whether the delay in filing the appeal before the Company Law Board could be condoned and the appellant was also given the liberty to make a proper application for condonation of delay, if not already made, before the Company Law Board. Accordingly, the appellants have now filed an application for condoning the delay and the respondents have filed their reply.

3. When the application was taken up for consideration, we advised the parties to amicably settle the matter by which the appellants were to sell the impugned shares as well as other shares registered in their names to the respondents' group. While both the sides agreed to this suggestion, yet they could not agree on the price for shares and as such the settlement efforts failed.

4. When the application was heard, B. K. Rao, advocate for the respondents, submitted that the provisions of the Limitation Act are not applicable to the Company Law Board and since there is no provision in the Companies Act to condone the delay of the period within which the appeals are to be filed as provided in Section 111(3) of the Act, the Company Law Board has no jurisdiction to condone the delay; He also submitted that the Company Law Board has held in many cases that the Limitation Act is not applicable to the Company Law Board and, therefore, the Company Law Board should not consider this application just because the High Court has observed that the Company Law Board has the powers to condone the delay. According to him, since the appellant, being a director on the board, was in the knowledge of the decision to refuse registration of the shares in a board meeting held on June 30, 1990, in which he also participated, he should have filed the appeals within two months thereafter, or if his grievance is that no written communication had been given to him of the refusal, then, he should have moved the Company Law Board within four months from the date of lodgment of the transfer instruments with the company. He further submitted that in the subsequent board meetings, the board was only considering the request of the appellant to review the decision already taken to refuse the registration of transfer and the board never took a decision to accede to his request for registration of transfer.

Therefore, he submitted that just because the appellant was requesting for review of the earlier decision, it does not mean that the same would provide ground for condonation of delay. Since he filed the appeals only in April, 1992, the appeals were grossly delayed and, therefore, should not be entertained.

5. R. D. Makheeja, advocate for the appellants, submitted that the question as to whether the Company Law Board has the power to condone the delay or not is purely academic in view of the categorical decision by the learned judge of the Delhi High Court that the Company Law Board has the power to condone the delay. He further submitted that the only issue that is to be considered by the Company Law Board at this juncture is whether the grounds adduced by the appellants for the delay would he within "sufficient cause" as provided in Section 5 of the Limitation Act. He further submitted that even though the appellant was present in the board meeting held on June 30, 1993, yet, with a view to resolve the dispute amicably, he raised the matter of transfer of shares in various board meetings of the company held on March 31, 1990, April 21, 1990, June 30, 1990, August 30, 1990, November 25, 1990, February 15, 1991, April 17, 1991, May 15, 1991, and June 28, 1991. In addition he has also sent reminders to the company in this regard on February 15, 1991, May 15, 1991, and June 20, 1991. In other words, according to him, the question of moving the Company Law Board never arose as he was trying to get the registration of transfer done in an amicable manner. Only when he found that there was no response from the company, he issued a notice to the company on March 21, 1992, ' in terms of Section 113{3) of the Act and in response to this notice, the company by a letter dated March 31, 1992, formally informed the appellants that the registration of transfer had been rejected. Even though the registration of transfer was refused in a meeting held on June 30, 1990, in subsequent meetings the matter was being reviewed by the board and even the last board meetings attended by him on June 28, 1991, the matter was again deferred. Thereafter, the appellant ceased to be a director of the company and, therefore, he believed that no final decision had been taken by the board in this matter till he received the formal letter of refusal. Therefore, learned counsel submitted that there was justifiable reason in the appellants not filing the appeals in time and as such the delay should be condoned.

6. We have considered the pleadings and arguments of counsel. At the out set we would like to make it very clear that this case has been remanded to the Company Law Board by the learned judge of the High Court of Delhi, after holding that the Company Law Board has the power to condone the delay in terms of the Limitation Act and has also given the liberty to the appellants to file an application of condonation with the direction to the Company Law Board to decide the question as to whether delay in filing the appeals by the appellant could, in the facts and circumstances of the case, be condoned. Even though counsel for the respondents submitted that the observations of the High Court in regard to the limitation are not in consonance with the decided cases on the subject, we would like to reject the same for the reason that it is not the observations of the High Court but a decision given by the learned judge on an issue raised by counsel for the respondents as to whether the Company Law Board had the power to condone the delay or not and the High Court has given a decision in the affirmative. It has been held by the Madras High Court in Konappa Mudaliar v. Kusalaru, AIR 1970 Mad 328, that "it is not open to the lower court when an appellate court remands the case to it, to do anything but to carry out the terms of the remand even if it considers that the order of remand was not in accordance with law. It cannot apply what it might consider the correct position of the law". This being the settled legal position, we cannot, in the present proceedings, consider the issue whether we have powers to condone the delay or not. We are bound to carry out the direction given by the High Court while remanding the case back to us. In other words, what we have to examine now is as to whether the grounds adduced by the appellant for filing the appeals belatedly could be condoned or not.

7. It is an admitted position, not controverted by the appellant, that in a board meeting held on June 30, 1990, the board refused the registration of transfer, in his presence. Even though, in the order dated June 13, 1995, the Bench had taken the view that till the appellant was informed in writing about the refusal of transfer, he had no cause of action to file an appeal, the learned judge of the High Court has rejected this view. Therefore, the appellant was bound to have filed the appeals either within two months from June 30, 1990, or within four months from the date of lodgment of the transfer instruments with the company. However, he filed the appeals only in the month of April, 1992. In other words, there has been a delay of nearly two years in filing these appeals. Since this application for condonation is under Section 5 of the Limita tion Act, we have to examine the question of condonation in terms of this section. This section reads : "Extension of prescribed period in certain cases.--Any appeal or any application, other than an application under any of the provisions of Order XXI of the Code of Civil Procedure, 1908 (5 of 1908) , may be admitted after the prescribed period, if the appellant or the applicant satisfies the court that he had sufficient cause for not preferring the appeal or making the application within such period" 8. In view of the above provision, we have to examine whether the appellants have satisfied us that they had sufficient cause for not preferring the appeals in time. The main reason advanced by the appellants for the delay is that, the first appellant was pursuing the matter with the company so as to settle the matter amicably and that the board was also considering his request in many subsequent meetings and that he was under the bona fide belief that the matter was still under consideration of the board and that no final decision had yet been taken. Only when the company finally sent a communication in writing to him conveying the board's decision to refuse registration of the transfer, he approached the Company Law Board without any loss of time.

9. Now, the issue for consideration is whether the alleged bona fide belief of the appellant that the board had not taken any final decision and as such he did not approach the Company Law Board within the time prescribed in Section 111(3) of the Act could be considered to be within "sufficient cause" as enjoined in Section 5 of the Limitation Act.

10. Neither counsel addressed us on this issue. There are quite a few Supreme Court judgments as to the import of the expression "sufficient cause". It has been held by the Supreme Court that the words "sufficient cause" should receive liberal construction in Dina Bandhu v. Jadumani, AIR 1954 SC 411, and this has been repeated by the Supreme Court in several of its decisions. In Collector, Land Acquisition v.Katiji (Mst.) [1987] 62 Comp Cas 370 ; AIR 1987 SC 1353, the Supreme Court observed : "when substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred for the other side cannot claim to have a vested right in injustice being done because of non-deliberate delay.

Ordinarily, a litigant does not stand to benefit by resorting to delay and refusing to condone the d'elay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated and that as against this when delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties". In Rame Gowda v. Land Acquisition Officer the apex court court stated as follows "each case will have to be considered on the peculiarities of its own special facts. However, the impression "sufficient cause" in Section 5 must receive a liberal construction so as to advance substantial justice and generally, delays in bringing the appeals are required to be condoned in the interest of justice where no gross negligence or deliberate inaction or lack of bona fides is imputable to the parties seeking condonation of delay".

There are very many other decisions of the Supreme Court reiterating the principle that in condonation of delay, the courts should lean towards a justice-oriented approach and that this doctrine should be applied in a rational, common sense and pragmatic manner.

11. From the above, it is abundantly clear that in case of condonation of delay the facts of each case should be kept in mind and as long as there is no gross negligence or deliberate inaction or lack of bona fides imputable to the party seeking condonation, the court should take a pragmatic view in considering the prayer for condonation of the delay. Applying this principle, if we examine the application before us, it is apparent that even though the appellant was present in the meeting on June 30, 1990, when the board took a decision to refuse registration of transfer of shares, yet, as already particularised, the board was considering review of its decision in a number of subsequent meetings without any finality. The very fact that the request of the appellant was considered by the board in various subsequent meetings, leads us to take the view that the alleged bona fide belief of the appellant that the board had not taken a final decision to refuse the registration is an acceptable reason for the delay. Further, we note that even in the minutes of the board meeting held on June 28, 1991, it is recorded that "letter from Shri Vimal K. Gupta regarding transfer of shares (letter dated June 20, 1991) was placed by Shri Vimal K. Gupta.

Shri Vimal K. Gupta, could not produce any material regarding transfer and as such it was decided to defer this matter". Thus, it is evident that the request of the appellant to review the earlier decision to refuse registration was deferred as late as on June 28, 1991. We do not have any records placed before us to examine whether in any subsequent board meeting the deferred matter was considered and any final decision taken on the same. The narration of facts show that the appellant was continuously trying to get the issue resolved in the domestic forum and approached the Company Law Board as a last resort on receipt of a formal written communication, without loss of time. Thus, we find that there has been no gross negligence or deliberate inaction or want of bona fides that could be imputable to the appellant in approaching the Company Law Board belatedly and as such we are of the firm view that the delay in filing the appeals deserves to be condoned and accordingly, we condone the delay.

12. The Bench had, after considering the merits of the appeals, passed an order on June 30, 1995, directing the company to register the impugned shares in the name of the appellants within 30 days from the receipt of the order. Since, now we have condoned the delay in filing the appeals, the company will implement the directions given in the order dated June 30, 1995, within 30 days from the date of receipt of this order.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //