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Kirpa Ram Vs. Bharat Bank Ltd. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtPunjab and Haryana High Court
Decided On
Case NumberCivil Original Case No. 17 of 1951
Judge
Reported inAIR1952P& H132; [1952]22CompCas279(P& H)
ActsCompanies Act, 1913 - Sections 162 and 246; ;Companies Rules - Rule 11
AppellantKirpa Ram
RespondentBharat Bank Ltd.
Appellant Advocate J.L. Bhatia, Adv. for; Kirpa Ram, Adv.,; K.L. Gosain
Respondent Advocate Partap Singh and; Ved Vyas, Advs.
DispositionPetition dismissed
Cases ReferredKirpa Ram v. Shriyans Prosad
Excerpt:
.....filed under articles 226 and 227 of constitution, if any order/judgment/decree is passed in exercise of jurisdiction under article 226, a writ appeal will lie. but, no writ appeal will lie against a judgment/order/decree passed by a single judge in exercising powers of superintendence under article 227 of the constitution. - 6. shri kirpa ram has failed to deposit the charges for the publication of notices and process fee. ' 9. clearly, if the original petition for the winding up of the bank is validly presented and the case is one in which the petitioner does not proceed with due diligence on his petition, it is open to the court to substitute as petitioner another person who, in the opinion of the court, has a right to present a petition for winding up and who is desirous..........referred to as the bank.3. on the 16th of march, 1951, the court ordered:'notice to the bharat bank limited and the punjab national bank limited. citations in the government gazette, the tribune of ambala and the hindustan times of delhi.'4. on the 27th of march 1951, the bank applied under section 151 of the code of civil procedure that the petition under section 162 of the act may not be advertised in the government gazette, the tribune of ambala and the hindustan times of delhi.5. on the 28th of march, 1951, shri harish chandra applied 'inter alia' that to case the petition for winding up of the bank is withdrawn or not pressed, the court may substitute him for shri kirpa ram. in that petition shri harish chandra stated that he has a right to present the petition for the winding.....
Judgment:
ORDER

Harnam Singh, J.

1. This order disposes of Civil Original No 17 of 1951, Civil Miscellaneous No. 15 of 1951 and Civil Original No. 40 of 1951 in Civil Original No. 17 of 1951.

2. Briefly summarised, the facts so tar as material, are these. On the 9th of March, 1951, Shri Kirpa Bam applied under Clause (vi) of Section 162 of the Indian Companies Act, 1913, hereinafter referred to as the Act, for the winding up of the Bharat Bank. Limited, Delhi, hereinafter referred to as the Bank.

3. On the 16th of March, 1951, the Court ordered:

'Notice to the Bharat Bank Limited and the Punjab National Bank Limited. Citations in the Government Gazette, the Tribune of Ambala and the Hindustan Times of Delhi.'

4. On the 27th of March 1951, the Bank applied under Section 151 of the Code of Civil Procedure that the petition under Section 162 of the Act may not be advertised in the Government Gazette, the Tribune of Ambala and the Hindustan Times of Delhi.

5. On the 28th of March, 1951, Shri Harish Chandra applied 'inter alia' that to case the petition for winding up of the Bank is withdrawn or not pressed, the Court may substitute him for Shri Kirpa Ram. In that petition Shri Harish Chandra stated that he has a right to present the petition for the winding up of the Bank and is desirous of prosecuting tne petition filed by Shri Kirpa Ram.

6. Shri Kirpa Ram has failed to deposit the charges for the publication of notices and process fee. Indeed, Mr. Bhatia, learned Counsel for Shri Kirpa Ram, states that Shri Kirpa Ram ts not desirous of prosecuting the petition for the winding up of the Bank.

7. In the circumstances set out above the question that arises for decision is whether it would be Just to substitute Shri Harlsh Chandra for Shrl Kirpa Ram in Civil Original No. 17 of 1951.

8. In these proceedings it is common ground that Shri Harish Chandra has a right to present the petition for the winding up of the Bank and the Court possesses power to make an order of substitution. Rule 11 (1) of the Rules made by the High Court under Section 246 of the Act provides:

'11 (i) Where a petitioner consents to withdraw his petition or to allow it to be dismissed, or fails to appear in support of his petition when it is called on in the Court on the day originally fixed for the hearing thereof or on any day to which the hearing has been adjourned or, if appearing, does not apply for an order in the term of the prayer of his petition, the Court may, upon such terms as it may think just, substitute as petitioner any other person who, in the opinion of the Court, has a right to present & petition for winding up and who is desirous of prosecuting the petition.'

9. Clearly, if the original petition for the winding up of the Bank is validly presented and the case is one in which the petitioner does not proceed with due diligence on his petition, it is open to the Court to substitute as petitioner another person who, in the opinion of the Court, has a right to present a petition for winding up and who is desirous of prosecuting the petition. The effect of such substitution is that the person who has been substituted takes the place of the first petitioner and is entitled to prosecute the petition as if it were his own. For corresponding provisions in the Insolvency Jurisdiction, Section 16 of the Provincial Insolvency Act, 1920, Section 92 of the Presidency Towns Insolvency Act, 1909, and Section 111 of the Bankruptcy (English) Act, 1914, may be seen.

10. Mr. Amar Nath Khanna, learned Counsel for Shri Harish Chandra, urges that in the circumstances of the case Shri Harish Chandra may be substituted as petitioner in Civil Original No. 17 of 1951.

11. Mr. K. C. Jain, learned Counsel for the Bank, opposes the petition for substitution alleging that the petition for the winding up of the Bank is 'mala fide' and that in the circumstances of the case the winding up of the Bank would be in-jurious to the interests of the depositors and shareholders of the Bank.

12. On the 20th of April 1951, Mr. K. C. Jain tendered in evidence documents. Exhibits A to K, when I informed Mr. Amar Nath Khanna that if Shri Harish Chandra wished to challenge the facts set out in the documents. Exhibits A to K, he could do so on the 27th of April 1951. On the last mentioned date Mr. Khanna stated:

'I have seen Exhibits A to D showing the holdings of shares by Shri Ram Nath Goenka, Shri Shriyanas Prasad Jain, Shri Madan Mohan Tyal and Shri Vishnu Hari Dalmia. I do not dispute the correctness of Exhibits A to D.

I have then perused Exhibits E and F showing the Directors of the Bharat Bank Limited on the 1st of March 1951, and the 16th of April 1951, and their share-holdings in the Bank. I do not dispute the correctness of the facts stated in Exhibit E. Exhibit P is a copy of the proceedings of the extraordinary general meeting of the shareholders of the Punjab National Bank, Limited. I do not dispute the correctness of the copy of the proceedings.

The balance-sheet and the Articles of Association of the Bharat Bank, Limited (Exhibits G and J) may be read as evidence in the case. I then admit that Exhibit K is a true copy of the articles of agreement between the Bharat Bank Limited and the Punjab National Bank Limited. I, however, dispute the validity of the agreement, copy whereof is Exhibit K.

The Bharat Bank Limited has placed on record a copy of the proceedings of the extraordinary general meeting of the shareholders of the Bharat Bank Limited held on the 30th day of March, 1951. I do not dispute that an extraordinary general meeting of the shareholders of the Bharat Bank; Limited was held on Friday the 30th day of March 1951.

I then admit that the resolutions as set out in the copy of the proceedings were passed in that meeting. Mr. Harfsh Chandra, however, objects that (1) on the eve of the meeting a number of shares were transferred in favour of the employees or the Bank to obtain majority by show of hands and (2) no roll was taken in this meeting although the copy of the proceedings shows the number of shareholders who voted for the resolutions and the number of shareholders against the resolutions. The procedure adopted at the meeting was not regular. I have seen the affidavit of 'Lala1 Yodh Raj sworn by him on the 16th of April 1951. Mr. Harish Chandra does not wish to put in a counter-affidavit on the points covered by that affidavit, but I pray that 'Lala' Yodh Raj may be summoned in Court and cross-examined.'

13. From what I have said above, it follows that the decision on the question arising under Rule 11 (i) has to be given on the affidavits placed on the record and the documents, Exhibits A to K.

14. In the present case there is no obligation on the Court to substitute 'Shri' Harish Chandra as petitioner merely because he is desirous of prosecuting the original petition. Rule 11 (i) leaves the matter to the discretion of the Court for otherwise the door would be laid open to unlimited opportunities for blackmail, especially in times of financial panic.

15. As stated above, Shri Kirpa Ram applied for the winding up of the Bank under Clause (vi) of Section 162 of the Act. Clearly, the power given by Clause (vi) to the Court should not be exercised unless there is very strong ground for acting upon it because Companies are governed by majority of their own members and where there is a domestictribunal which has powers to decide upon a question, it should, if possible, be left to the domestictribunal. In the present case an extraordinarygeneral meeting of the shareholders of the Bankwas held on the 30th Marsh 1951, at 6, Daryaganj,Delhi. In that meeting the shareholders passedthe resolutions set out hereunder:

'(1) Resolved that the agreement executed on10th day of March, 1951, between the BharatBank Ltd., and the Punjab National Bank, Ltd.,regarding transfer of liabilities to depositors andassets of equivalent value in India of the BharatBank, Ltd., to the Punjab National Bank, Limitedon the terms and conditions mentioned in thesaid agreement be and is hereby confirmed andratified.

(2) Resolved that the Company do continue and carry on such business for one or the other of its objects as mentioned in the Memorandum of Association, of the Company as may be decided upon by the Board of Directors from time to time.'

16. Resolution No. (1) set out above, was passed in that meeting, 11 shareholders with 51622 votes voting against and 69 persons with 30, 44, 709 votes voting for the resolution. Then two shareholders with 480 votes voted against and seventy-eight shareholders with 30, 95, 751 votes voted for the second resolution. On this point copy of the proceedings of the extraordinary general meeting held on the 30th of March 1951, Exhibit L, may. be seen. That being so, this Court will not permit substitution under Rule 11 (i) unless it is shown that the majority of the shareholders who have the voting power have used that power for their own commercial interests outside the Bank in disregard of the interests of the minority.

17. Mr. Amar Nath Khanna urges that the majority of the shareholders have, in adopting the resolutions set out above, acted in disregard of the interests of the minority.

18-20. Giving the matter my anxious consideration, I think that in adopting Resolutions Nos. (1) and (2) set out in an earlier part of this order, the shareholders of the Bank have acted in the interests of the Bank.

21. But it is said that inasmuch as it has become difficult for the Bank to run as an economic unit, the continuation of the petition would be just. In my judgment however the mere fact that it has become difficult for the Bank to run as an economic unit and that urgent steps are necessary to avoid recurring losses does not show that the agreement, Exhibit K, is injurious to the interests of the shareholders and depositors of the Bank and that the winding up of the Bank would be for the benefit of the depositors and shareholders of the Bank.

22. Mr. Amar Nath Khanna then urges that the agreement. Exhibit K, contravenes the provisions of Sections 153 and 153-A of the Indian Companies Act and Section 44A of the Banking Companies Act, 1949.

23. Now, the objection set out in the preceding paragraph proceeds upon the assumption that the agreement, Exhibit K, is an amalgamation of the Bank with the Punjab National Bank Limited in the formal sense. No amalgamation of the Bank has been decided upon and the Bank has entered into agreement, Exhibit K, under Clause 3 (q) of the Memorandum of Association of the Bank and Article 135 (19) of the Articles of Association of the Bank.

24. Clause 3 (q) mentions that one of the objects for which the Bank is established is to sell, improve, manage, develop, exchange, lease, mort-gage, dispose of or turn to account or otherwise deal with all or any part of the property and rights of the Bank.

25. Article 135 (19) then empowers the Directors of the Bank with the consent of the Company in general meeting to sell or dispose of the undertakings of the Company. The Directors of the Company entered into the agreement. Exhibit K, Without obtaining prior consent of the Company in general meeting, but that consent has now been given by the Company by adopting and ratifying the resolutions mentioned above.

26. That being the situation, the case does not come within Section 44-A of the Banking Companies Act, 1949, or Sections 153 and 153-A of the Act. Before making the agreement. Exhibit K, the Bank appears to have consulted the Reserve Bank of India and it is now open to the Reserve Bank under Section 36 of the Banking Companies Act, 1949, to object to the agreement, Exhibit K, if they think fit.

27. In considering the question whether Shri Harish Chandra should be allowed to prosecute the petition for the winding up of the Bank, it is to be borne in mind that the share-holders of the Punjab National Bank Limited have in an extraordinary general meeting held on the 14th of April, 1951, unanimously approved the scheme of assumption of liabilities and assets of the Bank by the Punjab National Bank, Limited on the terms and conditions contained in the agreement, Exhibit K. Indeed, the agreement. Exhibit K, has been given effect to by the two Banks and I have no doubt that the continuation of the petition for the winding up of the Bank would be injurious to the Interests of the depositors and shareholders of the Bank, In any case, I have no doubt that the petition of Shri Kirpa Ram for the winding up of the Bank is 'mala fide' and that being so it would not be just to permit the continuation of that petition by Shri Harish Chandra. In 'Kirpa Ram v. Shriyans Prosad'. Civil Miscellaneous No. 89 of 1951, decided on the 9th of March, 1951, Kapur, J., said:

'The litigation which the plaintiff is carrying on is not a 'bona fide' one........................'

28. For the foregoing reasons, I refuse to substitute Shri Harish Chandra in place of Shri Kirpa Ram in Civil Original No. 17 of 1951, and dismiss the petition of Shri Kirpa Bam for non-prosecution.

29. On the findings set out above. Civil Miscellaneous No. 15 of 1951 also fails and is dismissed.

30. In the circumstances of the case, I make no order as to costs in these proceedings.


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