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East Indian Produce Ltd. Vs. Naresh Acharya Bhaduri and ors. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtKolkata High Court
Decided On
Case NumberAppeal No. 525 of 1984
Judge
Reported in[1988]64CompCas259(Cal)
ActsCompanies Act, 1956 - Sections 255, 256, 284, 372, 372(1) and 372(4); ;Securities Contracts (Regulation) Act, 1956 - Sections 2, 13 and 16
AppellantEast Indian Produce Ltd.
RespondentNaresh Acharya Bhaduri and ors.
Appellant AdvocateS.K. Gupta, ;B.L. Jain and ;Pratap Chatterjee, Advs.
Respondent AdvocateBimal Chatterjee, Adv. for respondent No 1, ;S.B. Mukherjee and ;Anindya Mitra, Advs. for respondent Nos. 2, 4 and 7, ;P.C. Sen and ;Jayanta Mitra, Advs. for respondent No. 6
DispositionApplication dismissed
Cases ReferredLakshmiratan Cotton Mills Co. Ltd. v. Aluminium Corporation of India Ltd.
Excerpt:
- r.n. pyne, j. 1. the appellant, east indian produce ltd., has made this application in an appeal filed by it against an ad interim order dated december 5, 1984, of c. k. banerjee j. whereby his lordship varied the ad interim order made ex parte on november 30, 1984, in an application made by the appellant in suit no. 810 of 1984 (east indian produce ltd. v. naresh acharya bhaduri).2. the present case relates to and/or arises out of an agreement in writing dated september 11, 1984, made between respondents nbs. 1 to 6 on the one part and the appellant on the other, relating to sale of shares of ambari tea co. ltd., respondent no. 7 herein.3. the appellant's case, as will appear from its plaint and the petition of application made before the trial court which is annexed to the petition of.....
Judgment:

R.N. Pyne, J.

1. The appellant, East Indian Produce Ltd., has made this application in an appeal filed by it against an ad interim order dated December 5, 1984, of C. K. Banerjee J. whereby his Lordship varied the ad interim order made ex parte on November 30, 1984, in an application made by the appellant in Suit No. 810 of 1984 (East Indian Produce Ltd. v. Naresh Acharya Bhaduri).

2. The present case relates to and/or arises out of an agreement in writing dated September 11, 1984, made between respondents Nbs. 1 to 6 on the one part and the appellant on the other, relating to sale of shares of Ambari Tea Co. Ltd., respondent No. 7 herein.

3. The appellant's case, as will appear from its plaint and the petition of application made before the trial court which is annexed to the petition of this application, may briefly be stated.

4. According to the appellant, respondents Nos. 1 to 6 are and/or, as was represented by them, were the owners of 8, 100 shares of Ambari Tea Co. Ltd., respondent No. 7 herein. It is alleged that the shares of the said company owned and/or held by respondents Nos. 1, 3 and 5 out of the said 8,100 shares the same were held and are still held in their names as also in the names of their respective benamidars. So far as the shares of the said company owned and/or held by respondents Nos. 2 to 6 out of the said 8,100 shares are concerned, most of them were represented to the appellant to have stood in the name of their respective benamidars ; but, according to the appellant, it subsequently transpired that the same stood in their respective names. According to the appellant, respondents Nos. 1 to 6 held themselves out and/or represented to the appellant to be the owners of and in total charge and/or control of the aforesaid shares out of the controlling block of the shares of the said company. It is alleged that at all material times, respondents Nos. 1, 2, 3 and 4 were and still are the directors of respondent No. 7 and were and/or are in charge of the assets thereof by virtue of their being directors as also by virtue of their being persons in control of the said 8,100 shares.

5. It is further alleged by the appellant that by and under an agreement in writing dated September 11, 1984, entered into at Siliguri outside the original side jurisdiction of this court between respondents Nos. 1 to 6 as sellers and the appellant as the purchaser, the said respondents agreed to sell and/or transfer to the appellant and/or its nominee or nominees the entire shareholding of the respective respondents of the said company being the total 8,100 fully paid-up equity shares of respondent No. 7 on various terms and conditions as contained in the said agreement. It is also alleged by the appellant that the said agreement was entered into on the basis of the various representations made and assurance given by respondents Nos. 1 to 6 to the appellant as will appear from the said agreement.

6. We will refer to the representations contained in the said agreement and its terms and conditions so far as relevant to this application hereinafter.

7. The appellant has in its plaint stated about the various express or implied agreements on the part of respondents Nos. 1 to 6. It is not necessary to set out those implied agreements in any detail. In short, such implied agreements on the part of respondents Nos. 1 to 6 were that they would not sell or dispose of the said 8,100 fully paid-up equity shares to anybody other than the appellant and/or its nominee or nominees and also not to alter the net worth of the said company except as provided in the said agreement. Further, respondents Nos. 1 to 6 would take all suitable steps to maintain and preserve their controlling power and position of both majority as group of directors and as controlling group of shareholders until the sale of the said shares was completed and until the nominees of the appellant were appointed as majority group of directors so as to put the appellant and its nominees in the same controlling position as the said respondents were at the time of the said agreement. Further, respondents Nos. 1 to 6 would follow all lawful directions and/or suggestions of the appellant in so far as the preservation and maintenance of their control and position as directors or shareholders of respondent No, 7 and would put the appellant and its nominee or nominees in the same position of majority in the board of directors and as shareholders as the said respondents were at or about the time of the said agreement.

8. The appellant's further case is that pursuant to the said arrangement and in terms thereof, the appellant on or about September 14, 1984, duly deposited a sum of Rs. 4,00,000 with M/s. Leslie and Khettry, Calcutta. It is further alleged by the appellant that it came to learn that respondent Nos. 1 to 6 in pursuance of the said agreement duly deposited 4,457 fully paid-up equity shares of respondent No. 7 with M/s. Leslie and Khettry as stipulated in the said agreement, but failed and neglected to deposit the balance quantity of shares as was agreed to by and between the parties.

9. It is further stated by the appellant that it had performed and has also been ready and willing to fulfil the essential terms and conditions of the said agreement and there exists no standard for ascertaining the actual damage caused or likely to be caused by non-performance of the said agreement or acts agreed to be done by respondents Nos. 1 to 6 under the said agreement. According to the appellant, the subject-matter of the said agreement is not an ordinary article of commerce and is not easily available in the market and is of special value and interest to the appellant and consists of goods which cannot be easily had or obtained. It is stated that the 8,100 shares of respondent No. 7 constitute the controlling block of shares of the company, i.e., respondent No. 7. It is alleged that the said agreement was in essence intended to transfer the controlling interest and power of respondents Nos. 1 to 6 in the said company, i.e., respondent No. 7, to the appellant and/or its nominee.

10. According to the appellant, respondents Nos. 1 to 6 deliberately failed and neglected to comply with the various terms and conditions of the said agreement. Further, they were threatening to commit breaches of the said agreement and their obligations thereunder including, inter alia, their obligation to maintain the net worth of the said company in the manner as provided in the said agreement till the completion of the sale of the said shares as agreed upon. The appellant in its plaint has mentioned breaches of various obligations by respondents Nos. 1 to 6 under the said agreement. It is not necessary to set out the same in detail. Put shortly, those breaches are that respondents Nos. 1 to 6 failed to deposit all the shares agreed to be sold and a criminal case was instituted at the instance of the appellant through its secretary and by an order of the learned Metropolitan Magistrate, VII, Calcutta, share scrips in respect of 2,223 shares standing in the name of respondent No. 6 and share scrips of 135 shares standing in the name of respondent No. 2 were seized by the police in execution o( the search warrant on October 29, 30, 1984, and the same are lying with the police. According to the appellant, the balance share scrips in respect of 1,326 shares still remain untraceable.

11. It is further alleged that respondents Nos. 2 and 4 are threatening to exercise their voting rights as directors of respondent No. 7 in such a manner as to co-opt and induct persons other than the appellant's nominee as directors and thus to prejudice and impair the appellant's rights to get its own nominees to be appointed as directors. Further, respondents Nos. 1 to 6 are trying to change the constitution of the board of directors materially so as to impair their existence and majority in the board of directors of respondent No. 7 and to induct and appoint persons other than the nominees of the appellant as directors of respondent No. 7. The respondents are also threatening to act in such a way which was likely to cause the said 8,100 shares which form the controlling block of shares in respondent No. 7 to lose their character and be reduced to minority and the entire value of the said controlling block of shares will be lost.

12. It is further alleged that as the reliefs asked for in the suit relate to management, control and regulation of the assets and affairs of respondent No. 7, it is necessary to make it a party to the said suit, although no specific relief is claimed against it.

13. On the basis of the above allegations, the appellant, on or about November 30, 1984, filed the above Suit No, 810 of 1984 (East Indian Produce Ltd. v. Naresh Acharya Bhaduri), inter alia, for a decree for specific performance of the said agreement dated September 11, 1984, and for various directions and injunctions, both preventive and mandatory, in nature.

14. On November 30, 1984, after filing the above suit, the appellant as petitioner made an application ex parte in the court of the first instance and obtained an ad interim order in terms of prayers (b) and (c) of the petitioner. The prayers (b) and (c) of the petition are as follows :

'(6) Injunction restraining defendants Nos. 1 to 6, their servants, agents and/or nominees from doing any act with regard to the constitution and/or management of the said company which may be contrary to and/or in violation of the said agreement dated September 11, 1984, in any manner whatsoever ;

(c) Injunction restraining respondents Nos. 1 to 6, their nominees and/or agents and/or benamidars from selling, transferring, encumbering disposing of and/or in any manner dealing with the said 8,100 shares of the defendant company held in the names of defendants Nos. 1 to 6 or in the names of their nominees and/or agents and/or benamidars. '

15. In the said petition, the appellant has alleged that respondents Nos. 2, 4 and 6 refuse to abide by the said agreement and/or various terms thereof. It is further alleged that respondents Nos. 2 and 4 have joined hands with other directors and in particular with one Himangshu Dutta, another director of respondent No. 7, and they are threatening to appoint directors of respondent No. 7 by utilising their position as directors in utter breach of the said agreement and/or intents and purposes thereof. It was further alleged that respondents Nos. 2 and 4 in violation of the spirit and intent of the said agreement have joined hands after the date of the said agreement with some other directors and have recognised and registered some of the purported transfers which were not registered and/or recognised by them until the said agreement was entered into; it is alleged that if respondents Nos. 1 to 6 succeed in doing so, the same will operate to prejudice the voting power and strength of 8,100 shares agreed to be sold and transferred to the appellant and/or its business.

16. It appears that from the said order dated November 30, 1984, an appeal was preferred by respondent No. 3, who also moved an application, inter alia, praying for stay of operation of the said order dated November 30, 1984. The appeal court did not pass any order of stay of operation of the said order dated November 30, 1984. It appears that the said appeal has been withdrawn by respondent No. 3 on the returnable date, i.e., December 17, 1984.

17. On December 5, 1984, the appellant's said application appeared in the daily list of C. K. Banerjee J. as new motion. On that day, the appellant prayed for further interim protection until disposal of the application. Respondents Nos. 2, 4, 6 and 7 appeared and opposed the passing of any further interim order and also for vacating the interim order already made. After hearing the parties, C. K. Banerjee J., by an order dated December 5, 1984, directed that the ad interim order in terms of prayer (b) of the petition would stand vacated and the order in terms of prayer (c) of the petition would continue. Directions were given for filing of affidavits by the parties and the said application was adjourned till December 21, 1984. The said application is still pending.

18. Being aggrieved by the said order dated December 5, 1984, the appellant has preferred the above appeal against the same and has moved the instant application in the appeal.

19. In the petition of the instant application, the appellant has annexed a copy of the petition filed by it in the trial court. The appellant has further stated that the learned trial judge vacated the interim order in terms of prayer (b) of the said petition in view of the contention of the respondents that because of an order of the appeal court in another proceeding directing that status quo to be maintained regarding the constitution of the board, management by the board and holding of shares of respondent No. 7, no further order was necessary. This is, however, disputed by respondents Nos. 2, 4 and 6 in this application. According to them, after hearing the respondents, the learned trial judge vacated the order in terms of prayer (b) of the petition.

20. Only respondents No. 2 (Mrs, Juthika Saha) and No. 6 (Shyamanand Saha) are opposing this application and have filed affidavits herein.

21. In the affidavit filed by Juthika Saha, affirmed on January 9, 1985, in opposition to this application, she has relied on her affidavit-in-opposition filed in the trial court, a copy whereof has been annexed to her affidavit filed in this application. She has also relied on an affidavit of respondent No. 4, Santosh Kumar Saha, affirmed on January 9, 1985, filed in the appellant's application made before the trial court. A copy of the said affidavit is annexed to her affidavit filed herein.

22. Respondent No. 6, Shayamanda Saha, has filed an affidavit in this application affirmed by him on January 11, 1985. In the said affidavit, he has relied on his affidavit-in-opposition filed before the trial court, a copy whereof has been annexed to the affidavit filed herein.

23. We may mention here that learned advocates appearing on behalf of the petitioner and respondents Nos. 2 and 6 advanced their arguments mainly on the basis of the petition and the affidavits-in-opposition of the parties filed in the trial court.

24. The respective cases of respondents Nos. 2 and 6 as made out in their affidavits may briefly be stated.

25. Respondent No. 2, who, at the date of the said agreement was, and still is, a director of respondent No. 7, has filed an affidavit for herself as also for and on behalf of the company, i.e., respondent No. 7, and respondent No, 4, Santosh Kumar Saha. Her case is that respondent No. 7 is being run on the basis of the orders of this court passed from time to time and in view of the appointment of the chairman of the board of directors of respondent No. 7, the existing state of affairs of the company should not be disturbed. Respondent No. 2 has denied that respondent No. 6 has signed the said agreement. According to respondent No. 2, she, at the instance of respondents Nos. 1 and 3, was made to sign the said agreement. Respondents Nos. 1 and 3 did not allow her to look into the agreement before she signed the same. According to respondent No. 2, she never had any opportunity to look into the said agreement or to have any legal advice on the same at any point of time. She has denied that she signed the said agreement at Siliguri on September 11, 1984. According to her, on the said date, she was in Calcutta. Respondent No. 2 has alleged that the said agreement is hit by the provisions of Section 372 of the Companies Act, 1956, and the provisions of the Securities Contracts (Regulation) Act, 1956. She has further stated that the sellers did not and do not hold the total number of 8,100 shares in the company, i.e., respondent No. 7. It is also stated that it was and is beyond the power of respondents Nos. 1 to 6 to cause four directors of the company, i.e., respondent No. 7, to resign or to cause 8,100 shares to be transferred in favour of the appellant.

26. In para 9 of her affidavit filed in the trial court, she has stated that on the representations of respondents Nos. 1 and 3 as fully set out in the said paragraph and relying thereon and being induced by the said respondents, she has signed the said agreement. For the purpose of this application, it is not necessary to set out these representations. She reposed implicit trust and confidence upon respondent No. 3 who is a close relation of hers. It is further stated that when she put her signature for the second time in the said agreement, there was no writing under the same. Respondent No. 3 told her that respondent No. 6 had agreed to sign and would do so on coming back from Benaras. Respondent No. 2 has denied that she deposited any share with M/s. Leslie and Khettry. In para 17 of her affidavit, respondent No. 2 has mentioned the shareholding of each one of respondents Nos. 1 to 6 in the company, i.e., respondent No. 7. The total number of such shareholding is 3,652 shares (respondent No. 1--249 shares, respondent No. 2--136 shares, respondent No. 3--114 shares, respondent No. 4--84 shares, respondent No. 5--69 shares and respondent No. 6--2,480 shares). According to her, besides respondents Nos. 1, 2, 3 and 4, there were three other directors of respondent No. 7, namely, Himangshu Dutt, who held 1,326 shares, Krishna Gopal Kundu Saha, who held 96 shares and Nandalal Saha, who held 100 shares on the date when the said agreement was signed.

27. Respondent No. 2 has further stated that at the relevant time she held and still holds only 136 shares of the company, i.e., respondent No. 7, which have been seized by the police pursuant to a search and seizure warrant issued in a criminal case wrongfully started at the instance of the appellant'.

28. In the affidavit of respondent No. 4, Santosh Kumar Saha, filed in the trial court, a copy of which is annexed to the affidavit-in-opposition of respondent No. 2 filed herein, respondent No. 4 has stated that he signed the said agreement upon the representations made to him by respondents Nos. 1 and 2. It is stated that respondent No. 3 specifically represented that Himangshu Dutt and respondent No. 6, Shyamananda Saha, agreed to sell their respective shareholding in the said company. i.e., respondent No. 7, to the appellant. It is alleged that respondent No. 4 was further told by respondent No. 3 that a separate agreement for sale had been entered into with Himangshu Dutt and Shyamananda Saha and that they would subsequently sign the said agreement. According to respondent No. 4, he, relying on such representations of respondent No. 3 who is a close relation of respondent No. 4 and upon whom respondent No. 4 reposed implicit trust and confidence, signed the said agreement.

29. We may now refer to the affidavit filed by respondent No. 6, Shyamananda Saha, in this application and the affidavit filed by him in the application pending before the trial court, a copy of which is annexed to his affidavit filed herein.

30. Respondent No. 6 has categorically denied that he made the representation as alleged by the appellant in the petition. According to him, all his shares in respondent No. 7 are recorded in his name and he made no representation to the contrary. He has categorically denied that he has authorised anybody to sign the said agreement on his behalf. ,

31. In para 10 of his affidavit filed before the trial court, respondent No. 6 has stated that the agreement is hit by Section 372(1) of the Companies Act and the provisions of the Securities Contracts (Regulation) Act, 1956, and the reasons why the said agreement is hit by the said Acts. According to respondent No. 6, the sellers mentioned in the said agreement never held jointly or individually 8,100 shares in the company, i.e., respondent No. 7. He has further stated that he never deposited 73 shares of the company, i.e., respondent No. 7, belonging to him with M/s. Leslie and Khettry. According to him, those shares were lying with respondent No. 7 since the same were lodged with it for mutation of his name in the share register of respondent No. 7 and the same must have been illegally made over by A. K. Prodhan, the secretary of respondent No. 7, who, according to respondent No. 6, had all along been conspiring and colluding with respondents Nos. 1 and 3 against M/s. Leslie and Khettry.

32. He has also stated that a criminal case was wrongfully and with ulterior motive filed by Ramesh Chandra Roy, the secretary of the appellant, and pursuant to a search warrant issued in the said case, the police seized 2,222 shares from him. According to respondent No. 6, in the board of directors of respondent No. 7, respondents Nos. 1 and 3 form a minority group, the majority group consisting of respondents Nos. 2 and 4 and one Himangshu Kumar Dutt.

33. Before we proceed any further, it would be convenient at this stage to set out the representations stated in the said agreement and the terms and conditions thereof which are relevant for the purpose of the present application.

' Whereas the sellers had approached the purchasers with an offer for the sale of 8,100 fully paid-up equity shares of Ambari Tea Co. Ltd., having its registered office at 188A, Rash Behari Avenue, Calcutta (hereinafter referred to as the said ' company '), of Rs. 100 each (hereinafter collectively referred to as the ' said shares ') at or for the price of Rs. 1,071 per share.

And, whereas, the sellers have represented to the purchasers that the issued and subscribed fully paid-up share capital of the company is 20,000 fully paid-up equity shares of Rs. 100 each ;

And, whereas, the sellers have represented to the purchaser that the said 8,100 fully paid-up equity shares in the said company offered for sale as aforesaid includes all the shareholdings of the sellers in the said company and are free from all encumbrances, attachments, lien, lis pen-dens and/or trusts and there is no impediment against the sellers in selling the said shares by the sellers to the purchasers as hereinstated ;

And, whereas, the sellers have further represented to the purchasers that the said company is the owner of the Tea Estate, namely, Ambari Tea Estate, situated at P. 0. Banarhat, District Jalpaiguri (hereinafter referred to as the said ' Tea Estate ') and the said company is carrying on business of plantations and of manufacturing of tea at the said Tea Estate and in its own factory therein and the said Tea Estate save and except business current debts and liabilities is free from all encumbrances, attachments, lis pendens and/or trust except encumbrance in favour of any scheduled bank ;

Now, this Indenture witnesseth that on the basis of the aforesaid representations, it had been agreed by and between the parties as follows:

(a) The sellers will sell and the purchasers will purchase the 'said shares' being 8,100 fully paid-up equity shares (which includes all the shareholdings of the sellers in the said company) in the capital of the said company at Rs. 1,071 per share and the said sale would be completed by the method of spot delivery contract as per the rules and regulations and bye-laws of the Calcutta Stock Exchange Association Ltd., and the sellers would also make over to the purchasers or their nominee or nominees the share scrips of the said shares together with the relative usual transfer deeds in respect thereof in favour of the purchasers and/or their nominee or nominees duly signed by the respective sellers in whose name or names the respective shares out of the ' said shares ' stand ;

(b) Simultaneously with completion of the sale of the 'said shares' to the purchasers as aforesaid--the purchasers would be entitled to get the said shares registered in their names or in the name or names of their nominee or nominees as holders of the said shares in the share register and other records of the said company and the sellers will simultaneously with the completion of sale of the said shares as aforesaid get such shares registered in the name of the purchasers their nominee or nominees as holders of the said shares in the share register and records of the said company. Provided that notwithstanding anything to the contrary herein contained in case the sellers being unable to get the said shares registered in the name of the purchasers or their nominee or nominees in the share register and other records of the said company simultaneously with the completion of the sale of the said shares, the purchasers shall, without prejudice to any of their other rights and contentions, be entitled to treat the sale of the said shares as void and to get back the consideration money in respect thereof.

(c) The sale and purchase of the said shares will be completed within November 30, 1984, or before any general meeting and/or extraordinary general meeting of the said company is held, whichever is earlier, the time in this respect being the essence of the contract...

It has further been agreed by and between the parties hereto that the sellers shall not till the completion of the sale of the said shares in terms of this agreement in any way transfer and/or encumber and/or dispose of any of the said shares :

(d) As assured by the sellers to the purchasers, it has further been agreed by and between the parties that at the time of completion of sale and purchase of the said shares as mentioned in Sub-Clause (a) and at the time of the registration of the said shares, the name of the purchasers and/or their nominee or nominees in the share register and other records of the said company the issued and the subscribed share capital of the said company shall not be in excess of 20,000 fully paid-up equity shares.

(e) The sellers shall simultaneously with the date of completion of the sale and purchase of the said shares cause at least four of the existing directors of the said company who are parties to this agreement to resign from the board of directors of the said company if they be directors as on that date and to get the nominees of the purchasers to be appointed as directors of the said company. Provided that in case the sellers are unable to get all the four nominees of the purchasers to be appointed as directors of the said company on account of any restrictions by reason of any order of court then in such event the sale and purchase of the 'said shares' as also of other shares if offered by the sellers to the purchasers in terms of Clause (c) hereof are to be completed notwithstanding such failure of the sellers. Notwithstanding anything to the contrary herein contained, in case of the failure of the sellers to get any nominee of the purchasers to be appointed as director of the said company as hereinbefore stated, then in such an event, such of the sellers as the purchasers may desire shall continue to act as nominee director or directors of the purchasers in the board of directors of the said company ;

(f) As have been represented to by the sellers to the purchasers, it has also been agreed by and between the parties hereto that on the date of completion of sale of the said shares as hereinbefore stated, the said Tea Estate and all fixed assets of the company shall continue to belong to the said company exclusively and the said company shall continue to hold the same title in respect of the said Tea Estate and also in respect of all fixed assets of the said company as it has on the date of these presents and the said Tea Estate and all its fixed assets shall be free from all mortgages, charges, attachments, lis pendens and/or trusts excepting the existing charge in favour of any scheduled bank and all the fixed assets of the said company (movables and immovables which are there on the date of these presents shall also be there ;

(g) The purchasers shall keep with its solicitors, M/s. Leslie and Khettry at Calcutta, a sum of Rs. 4,00,000 within 5 days from the date hereof as and by way of security money and the said sum of Rs. 4,00,000 would be paid to the vendors at Calcutta at the time of completion of sale of the said shares as hereinbefore stated in part payment of the consideration money of the said shares. The sellers shall within 15 days from the date of these presents deposit with M/s. Leslie and Khettry at Calcutta at least 7,000 paid-up equity shares out of the said 8,100 shares agreed to be sold by these presents to be held by M/s Leslie and Khettry till the completion of the sale of the said shares to the purchasers in terms of this agreement. In case the purchasers fail to complete the sale of the said shares in terms of this agreement, M/s Leslie and Khettry will return the said 7,000 shares to the sellers:

(h) Notwithstanding anything to the contrary herein contained, in case the sale and purchase of the said shares are not completed for any reasons whatsoever, then in such an event, M/s Leslie and Khettry will return the sum of Rs. 4,00,000 to the purchasers ;

(i) Notwithstanding anything to the contrary herein contained, in case the sellers perform all the terms and conditions herein contained and on their part to be observed and performed and the purchasers fail to complete the sale of the said shares as in the manner hereinstated, then in such an event, the sellers shall be entitled to enforce this contract specifically ;

(j) Similarly, notwithstanding anything to the contrary herein contained, in case the purchasers be willing to fulfil all the terms and conditions herein contained and their part to be observed and performed and the sellers fail to complete the sale of the said shares as hereinbefore stated, then in any event, the purchasers shall also be entitled to specifically enforce this agreement for sale,'

34. Mr. S. K. Gupta, appearing with Mr. B. L. Jain and Mr. Pratap Chatterjee, has argued this case on behalf of the petitioner, the appellant, in the above appeal.

35. Mr. S. B. Mookherjee, appearing with Mr. Anindya Mitra, has argued this case on behalf of respondents Nos. 2, 4 and 7.

36. Mr. P. C. Sen, appearing with Mr. Jayanta Mitra, argued this case on behalf of respondent No. 6.

37. Mr. Bimal Chatterjee has appeared in this case for respondent No. 1 but he has not advanced any argument.

38. Various contentions were urged on behalf of the parties appearing in this application.

39. Mr. Gupta, appearing for the appellant, has argued that the agreement dated September 11, 1984 (hereinafter referred to as 'the said agreement'), is an agreement for sale of shares, and as such it will not come within the purview of Section 372 of the Companies Act. It is also his argument that in any event, the board resolution to the approval of the Central Government as stipulated in the said section is not a condition precedent to the sale and purchase of shares. Therefore, according to him, non-compliance of Section 372 will not make the agreement for sale or the sale itself void. He submits that the board resolution may be passed or the approval of the Central Government may be obtained subsequent to the sale and purchase of shares. In support of this proposition, he cites a decision of this court in the case of Madura Prasad Saraf v. Company Law Board [1979] 49 Comp Cas 371, Mr. Gupta has also referred to several provisions of the Companies Act, 1956, to show that under these provisions certain acts can only be done with the previous approval of the Central Government. But Section 372 of the Companies Act, according to his interpretation, does not require prior approval of the Central Government or any prior sanction by a resolution of the board of directors.

40. Mr. S. B. Mookherjee appearing for the company, i.e., respondent No. 7, and also respondents Nos. 2 and 4, contends that the said agreement ex facie violates the provisions contained in Section 372 of the Companies Act, which, according to him, are mandatory in nature. The said objection has been taken on behalf of the respondent company, respondents Nos. 2 and 4, in para 2(g) of the affidavit of Mrs. Juthika Saha affirmed on January 9, 1985, which has been treated as part of the affidavit of Mrs. Juthika Saha filed in this application.

41. It is the contention of Mr. Mookherjee that under Section 372, a company shall not be entitled to subscribe for or purchase the shares of any other body corporate in excess of ten per cent. of the subscribed capital of such other body corporate, and such investment in shares must be sanctioned by a resolution of the investing company in a general meeting and further is approved by the Central Government (Section 372(4) of the Companies Act). According to Mr. Mookherjee, it is also a requirement under Section 372 that no investment shall be made by the board of directors of an investing company unless it is sanctioned by a resolution passed at a meeting of the board with the consent of all the directors present at the meeting (Sub-section (5) of Section 378). Mr. Mookherjee has submitted that in the instant case admittedly, the investment in shares exceeds, ten per cent. of the share capital of the other body corporate, i.e., his client, the respondent company. As it appears from the said agreement itself, admittedly, the share capital of the company, i.e., respondent No. 7, is 20,000 fully paid-up equity shares of Rs. 100 each and the appellant proposed to purchase 8,100 shares of respondent No. 7. Therefore, Mr. Mookherjee submits, it is much more than ten per cent. of the subscribed capital of the other company, namely, respondent No. 7.

42. Mr. Mookherjee has further submitted that the investment made by the appellants exceeds twenty per cent. of its subscribed capital. Further, according to Mr. Mookherjee, the investment made by the board of the investing company, i.e., the appellant, in all other bodies corporate exceeds thirty per cent. of its subscribed capital.

43. It is the further contention of Mr. Mookherjee that uptil now there is nothing on record to show that the appellant has sought for or obtained the approval of the Central Government in respect of such proposed investment by the appellant company in the shares of respondent No. 7 nor has such investment sought to be made by the appellant company (investing company within the meaning of Section 372 of the Companies Act) been sanctioned by a resolution passed at a meeting of the board of directors of the appellant company with the consent of all the directors present at the meeting.

44. Mr. Mookherjee has submitted that the said agreement has been made in gross violation of the mandatory provisions of Section 372 of the Companies Act and as such is illegal. Such an illegal agreement, in his submission, cannot be enforced specifically. It is mandatory, he argues, because, according to Section 372, no investing company shall be entitled to subscribe beyond the ceilings prescribed in the said section. He cites a decision of the Supreme Court in the case of Mannalal Khetan v. Kedar Nath Khetan [1977] 47 Comp Cas 185 (SC). In that case, the Supreme Court had occasion to consider Section 108 of the Companies Act, 1956, which, inter alia, provides ' A company shall not register a transfer of shares...'. The Supreme Court held that the said provision in Section 108 of the Companies Act was mandatory and any violation thereof would make registration of transfer illegal.

45. Mr. P. C. Sen, appearing for respondent No. 6, jhas submitted that the said agreement being contrary to the express mandatory provisions of Section 372 of the Companies Act, 1956, is illegal and cannot be specifically enforced under the provisions of the Specific Relief Act. He has submitted that his client has specifically raised this objection with reasons in para 10(a), (b) and (c) of his affidavit affirmed on January 11, 1985, to be used at the trial court and also treated as part of his affidavit used in this application. It is stated by respondent No. 6 in his said affidavit, that the appellant being the investing company in terms of Section 372 of the Companies Act, 1956, is not entitled to subscribe for or purchase shares of the respondent company in excess of 10 per cent. of the subscribed capital of the respondent company. In para 10(b) of his affidavit, respondent No. 6 has stated that the aggregate of the investments made by the board of directors of the appellant company (i.e., the appellant) in all other bodies corporate exceeds 30% of the subscribed capital of the appellant company and in any event, the aggregate of the investments made by the appellant company in all other bodies corporate in the same group exceeds 20% of the subscribed capital of the appellant company. He has further submitted that the investment in excess of the limit prescribed by the section has not been denied by the appellant. Mr. Sen has further submitted that Ramesh Chandra Roy in para 35 of the affidavit-in-reply filed or to be filed in the trial court (a copy of which is annexed to the affidavit-in-reply filed in this application) has not specifically denied the allegation of excess investment as made in para 10(a) and (b) of the said affidavit of respondent No. 6. It is also stated by Mr. Sen that the said purported agreement or pretended investment has not been sanctioned by a resolution of the appellant company in a general meeting and has not been approved by the Central Government. Mr. Sen has also drawn our attention to the said affidavit-in-reply and has submitted that in para 35 of the said affidavit, it has been stated that no such resolution or approval is necessary under the provisions of Section 372 of the Companies Act, 1956.

46. Mr. Sen has submitted that such resolution of the board of directors and approval of the Central Government are conditions precedent to any such investment in shares by any such investing company, and if there is any agreement for such investment or such investment in shares is made contrary to such mandatory provisions of Section 372 of the Companies Act, then such an agreement or such investment would be entirely illegal and void.

47. Mr. Sen has also submitted that the clarifications and explanations regarding purchase of shares of other companies contained in the communication No. 48 (50-Ch-IV/61) dated February 12, 1962, would show that approval of the company in the general meeting and of the Central Government is required to be obtained before a company invests in the shares of another body corporate in excess of the limits prescribed in the said section.

48. The provisions of Section 372 of the Companies Act, 1956, relevant for the purpose of this application, may be extracted :

'(1) A company (hereafter in this section and Section 373 referred to as ' the investing company ') shall not be entitled to subscribe for, or purchase (whether by itself, or by any individual or association of individuals in trust for it or for its benefit or on its account) the shares of any other body corporate except to the extent and except in accordance with the restriction and conditions specified in this section.

(2) The board of directors of the investing company shall be entitled to invest in any shares of any other body corporate up to ten per cent. of the subscribed capital of such other body corporate :

Provided that the aggregate of the investments so made by the board in all other bodies corporate shall not exceed thirty per cent. of the subscribed capital of the investing company :

Provided further that the aggregate of the investments made in all other bodies corporate in the same group shall not exceed twenty per cent. of the subscribed capital of the investing company.

(3) In computing at any time the percentages specified in Sub-section (2) and the provisos thereto, the aggregate of the investments made by the investing company in other body or bodies corporate (whether before or after the commencement of the Companies (Amendment) Act, 1960, up to that time shall be taken into account.

(4) The investing company shall not make any investment in the shares of any other body corporate in excess of the percentages specified in Sub-section (2) and the provisos thereto, unless the investment is sanctioned by a resolution of the investing company in general meeting and unless further it is approved by the Central Government.......

(5) No investment shall be made by the board of directors of an investing company in pursuance of Sub-section (2), unless it is sanctioned by a resolution passed at a meeting of the board with the consent of all the directors present at the meeting, except those not entitled to vote thereon, and unless further notice of the resolution to be moved at the meeting has been given to every director in the manner specified in Section 286. '

49. Communication No. 48(50)-Ch-IV/61, dated February 12, 1962, provides, inter alia, that the previous approval of the company in general meeting and of the Central Government is required to be obtained before a company invests in the shares of another body corporate in excess of the limits prescribed in the section. As the Central Government will not accord ex post facto approval to any investment attracting Section 372(4), any such investment made without the prior approval of the Government would attract the penal provisions of Section 374.

50. In the case of Mathura Prasad Saraf v. Company Law Board , it has, however, been held that the previous approval of the Central Government is not necessary under Section 372(4) of the Companies Act.

51. There is a good deal of force in the arguments of Mr. Mookherjee and also of Mr. Sen. In our view, from a reading of Section 372 of the Companies Act, a conclusion may be drawn that in the absence of a resolution of the investing company in its general meeting and approval of the Central Government, such investment in shares of the other body corporate in excess of 10% per cent. of the subscribed capital of such other body corporate cannot be made. Therefore, under the provisions of the said Section 372, ordinarily, the investment of an investing C9mpany shall not exceed 10 per cent. of the subscribed capital of the other body corporate ; the aggregate of the investments made by the board of directors in all other bodies corporate shall not exceed 30% of the subscribed capital of the investing company and the aggregate investments in all other bodies corporate in the same group shall not exceed 20% of the subscribed capital of the investing company. If these objections raised by the respondents opposing the petitioner/appellant are sustained at the trial, then the said agreement would become unenforceable and cannot be specifically performed. Admittedly, the investment in shares by the appellant as provided in the said agreement exceeds 10% of the subscribed capital of respondent No. 7. In the affidavit-in-reply of Ramesh Chandra Roy filed in the trial court on behalf of the appellant, there is no specific denial of the allegations made by respondent No. 6 in his affidavit that the investment by the board of directors of the appellant exceeds 30% of the subscribed capital of the appellant and in any event the aggregate of the investments made by the appellant in all other bodies corporate in the same group exceeds 20% of the subscribed capital of the appellant. In the affidavit-in-reply, no particulars (which should be within the knowledge of Ramesh Chandra Roy) of the investments made by the appellant in other bodies corporate have been given.

52. In the above circumstances, it is possible to take the view that the said agreement contravenes the provisions of Section 372 of the Act.

53. We also see some substance in the argument that the requirements stipulated in Section 372 of the Companies Act, 1956, are conditions precedent to such investment by an investing company in the shares of other bodies corporate. In our view, the approval of the Central Government is not an idle formality. Before according approval, the Central Government may have to examine whether the investing company has exceeded the prescribed ceiling and further whether there is any proper resolution sanctioning such investments. These are requirements to be taken into consideration before such investments are given effect to. At this stage, it is not necessary to express any final view as to whether approval of the board of directors of the investing company or of the Central Government subsequently obtained amounts to compliance with the requirement of the provisions of Section 372 of the Companies Act. On behalf of the appellant company it has not been stated that its investment in shares of the said company, i.e., respondent No. 7, has been approved by a resolution of the appellant company in a general meeting and that it is also approved by the Central Government. Therefore, at present, it can be taken that there is no approval of the investment by the appellant company as required by Sub-section (4) of Section 372 of the Companies Act, 1956. Hence violation of Section 379 has prima facie been established.

54. Another point was taken by Mr, P. C. Sen that it is a well-established principle of law that the shareholders of a company should be free to elect their directors. This democratic right of the shareholders cannot be affected. He has submitted that if an order is passed in terms of prayer (b) of the petition filed before the trial court, that would amount to violation of the provisions of the Companies Act, 1956. In this connection, Mr. Sen has referred to Sections 255, 256 and 284 of the Companies Act. Referring to Clause (e) of the said agreement, Mr. Sen has submitted that there cannot be a private arrangement between the directors regarding the appointment of a director of the company.

55. Section 255 provides for appointment of directors and the proportion of those who are to retire by rotation.

56. Section 256 provides for ascertainment of directors retiring by rotation and filling of vacancies.

57. Section 284 provides for removal of directors.

58. Under Clause (e) of the said agreement which has been extracted earlier, the sellers, i.e., respondents Nos. 1 to 6, shall simultaneously with the date of completion of the sale and purchase of the shares cause at least four of the existing directors of the company, i.e., respondent No. 7, who are parties to the agreement, to resign from the board of directors of the company, i.e., respondent No. 7, if they be directors on that date and would get the nominees of the purchaser, i.e., the appellant, to be appointed as directors of the company, i.e., respondent No. 7.

59. The said agreement is between sellers who are shareholders of the company, i.e., respondent No. 7, and the purchaser regarding sale of the shares of the said company. A director may resign his office. There is no notice period for such resignation. The said clause only says that four of the sellers who would be directors of the company, i.e., respondent No. 7, on the date of completion of sale and purchase of shares would resign and the sellers, i.e., respondents Nos. 1 to 6, would get the nominees of the purchaser, i.e., the appellant, to be appointed as directors. The clause further provides for what would happen in case of failure on the part of the sellers to get the nominees of the purchaser appointed as directors of the company, i.e., respondent No. 7. Further, a shareholder can cast his vote in the general meeting in a manner as he likes provided it is not contrary to the provisions of the articles of association of the company and the Companies Act.

60. The above clause, it appears, does not affect the retirement, removal and appointment of directors of the company, i.e., respondent No. 7, according to the provisions of the Companies Act, 1956. Considering the above clause, we are prima facie of the view that the said agreement does not affect the provisions of Sections 255, 256 and 284 of the Companies Act, 1956.

61. Both Mr. Mukherjee and Mr. Sen have submitted that the said agreement is hit by various provisions of the Securities Contracts (Regulation) Act, 1956 (hereinafter referred to as ' the Securities Act ').

62. In this connection, our attention was drawn to the affidavits of respondents Nos. 2 and 6 filed in the trial court.

63. In her affidavit affirmed on January 9, 1985, respondent No. 2, has stated that the said agreement is hit by the Securities Act and is void and unenforceable.

64. In his affidavit affirmed on January 11, 1985, respondent No. 6 has stated that the said agreement does not provide for the actual delivery of shares and payment thereof on the same day of the agreement or on the next day and as such is not a ' spot delivery contract '. The said agreement is contrary to the provisions of the Securities Act and is illegal, void, unenforceable and not binding on the parties thereto.

65. Mr. Mookherjee has argued that the said agreement is hit by section 13 of the Securities Act. He has submitted that according to Section (h) of the Securities Act, ' securities ' include, inter alia, shares and scrips. According to him, by virtue of the notification issued by the Central Government, the bar under Section 13 was made applicable to Siliguri, where, as stated in the said agreement, it was entered into. In the instant case, admittedly, the said agreement is not between two members of a recognised stock exchange.

66. Mr. Gupta has submitted that so far as West Bengal is concerned, Section 13 has been made applicable only to ' municipal limits of Calcutta' and 'Howrah' (See Gazette of India, 1959, Part II, Section 3, Extraordinary, page 803). He has further submitted that the agreement in the instant case being a spot delivery contract is not hit by Section 13 because, according to Section 18, Section 13 will not apply to 'spot delivery contract '. Hence, the said agreement is not hit by Section 13 of the Securities Act.

67. Any notification under Section 13 of the Securities Act declaring the section applicable to the area outside the municipal limits of Calcutta and Howrah has not been made available to us. Therefore, we are not expressing any view whether the said agreement is hit by the provisions of Section 13 of the Securities Act or not.

68. Mr. Gupta has argued that since the said agreement dated September 11, 1984, is a spot delivery contract within the meaning of the Securities Contracts (Regulation) Act, 1956, it does not come within the mischief of the Securities Act nor within the notification dated June 27, 1969, issued under Section 16 of the said Act. He has further submitted that only the shares quoted in a recognised stock exchange are securities under Section 2(h) of the Securities Act. In the instant case, the shares of the respondent company not being quoted shares, they are not securities within the meaning of Section 2(h) of the Securities Act. Hence, on this ground also, the said agreement is not hit by Section 16.

69. Mr. Gupta has further submitted that there is no averment by any party as to whether permission of the Central Government has been obtained or not. Obtaining of permission of the Central Government is a question of fact. According to Order 6, Rule 6 of the Civil Procedure Code, facts relating to compliance with condition precedent have to be pleaded and that has not been done in the instant case. In the absence of an averment that no permission of the Central Government was obtained, it is not open to the opposing respondents to allege that there is no permission of the Central Government and as such the contract is hit by Section 16 of the Securities Act. It is also the submission of Mr. Gupta that in any event, the said agreement is a ' spot delivery contract' as defined in Section 2(i) of the Securities Act and by the bye-laws and regulations of the Calcutta Stock Exchange Association Ltd. According to Mr. Gupta, it is an agreement for sale, but the actual sale is spot delivery. Mr. Gupta has further submitted that ' cash delivery contracts ' do not come within the purview of the notification issued under Section 16 of the Securities Act.

70. Mr. Gupta has further submitted that if, as contended on behalf of the respondent company, the said notification issued under Section 16 of the Securities Act applies to ' spot delivery contracts ', then his submission will be that such notification is ultra vires Section 16 of the Securities Act, and although such point has not been taken specifically in the pleadings, in his submission, there is no bar to the same being taken at this stage as the same is a pure question of law. Finally, he argues that the instant agreement is not in any manner hit by any of the provisions of the Securities Act.

71. Mr. Mookerjee has drawn our attention to the various provisions of the Securities Act in support of his argument that the said agreement alleged to be a spot delivery contract or otherwise, is squarely hit by the provisions of the Securities Act and as such is illegal. According to him, the agreement is an agreement for or relating to the purchase or sale of securities within the meaning of Section 2(a) of the Securities Act. It is his submission that it is not in dispute that the agreement in question is an agreement for purchase and sale of 'securities' which in terms of Section 2(h) of the Securities Act includes 'shares'. The expression ' securities ' is not limited to shares quoted in a recognised stock exchange. Mr. Mukherjee further contends that the said agreement being a contract for the purchase or sale of a right to buy or sell, or a right to buy and sell, securities in future is an ' option in securities ' within the meaning of Section 2(d) of the Securities Act.

72. In repelling the contention of Mr. Gupta that the said agreement is a ' spot delivery contract ', Mr. Mookherjee submits that it cannot be a spot delivery contract because in terms of Section 2(i) of the Securities Act defining 'spot delivery contract', such spot delivery contract means a contract which provides for actual delivery of securities and the paymerit of a price therefor either on the same day as the date of the contract or on the next day. After taking us through the various clauses of the said agreement, he has submitted that the said agreement does not provide for the actual delivery of securities and the payment of a price therefor either on the same day as the date of the agreement, that is, September 11, 1984, or on the next day, i.e., September 12, 1984. He lays great emphasis on the expression in the definition clause ' either on the day as the date of the contract or on the next day '. Referring to Clause (a) of the said agreement, he submits ' that the provisions of the said'sale would be completed by the method of spot delivery contract as per the rules and regulations and bye-laws of the Calcutta Stock Exchange Association Ltd. ...' cannot and does not mean that actual delivery of securities and the payment of a price therefor would be made either on the same day as the date of the agreement or on the next day. Therefore, it is his argument, that the said agreement cannot by any means be a ' spot delivery contract '. Mr. Mookherjee further argues that the said agreement being ' a contract for or relating to the purchase or sale or securities ' or 'a contract for the purchase or sale of a right to buy or sell, or a right to buy and sell, securities in future ', is clearly hit by the provisions contained in Sections 13 and 16 or in any event hit by the provisions of Section 20 of the Securities Act.

73. Mr. Mookherjee contends that admittedly the said agreement for the sale or purchase of securities was entered into by the appellant without the permission of the Central Government and in clear violation of the notification dated June 27, 1969, issued under Section 16 of the Securities Act. According to Mr. Mookherjee, it is also not a ' spot delivery contract ' within the meaning of Section 2(i) of the Securities Act. Therefore, according to Mr. Mookherjee, inasmuch as the impugned agreement was entered into in contravention of the provisions of Section 16 of the Securities Act as also the said notification issued thereunder, it is illegal according to Sub-section (2) of Section 16 of the Securities Act.

74. In support of his above submission, Mr. Mookherjee has cited a decision of this court in the case of B.K. Holdings (P.) Ltd. v. Prem Chand Jute Mills [1983] 53 Comp Cas 367 ; [1980] 2 C HN 205 ; 84 CWN 876.

75. It is also the submission of Mr. Mookherjee that under Sub-section (1) of Section 20 of the Securities Act, all options in securities entered into after the commencement of the Act shall be illegal. According to Mr. Mookherjee, the said agreement falls under the definition of ' option in securities '.

76. Mr. Mookherjee has further submitted that viewed from any angle, in the context of the Securities Act and notifications issued thereunder, the said agreement is illegal and void and as such cannot be a specifically enforceable contract.

77. Mr. P. C. Sen, appearing for respondent No. 6, has adopted the above arguments of Mr. Mookherjee.

78. Section 16 of the Securities Act provides as follows:

'(1) If the Central Government is of opinion that it is necessary to prevent undesirable speculation in specified securities in any State or area, it may, by notification in the Official Gazette, declare that no person in the State or area specified in the notification shall, save with the permission of the Central Government, enter into any contract for the sale or purchase of any security specified in the notification except to the extent and in the manner, if any, specified therein.

(2) All contracts in contravention of the provisions of Sub-section (1) entered into after the date of the notification issued thereunder shall be illegal.'

79. Under Section 16 of the Securities Act, a notification dated June 27, 1969, being No. S.O. 2561* has been issued and published by the Central Government. The said notification reads as follows ;

' In exercise of the powers conferred by Sub-section (1) of Section 16 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956), the Central Government being of opinion that it is necessary to prevent undesirable speculation in securities in the whole of India, hereby declares that no person, in the territory to which the said Act extends, shall, save with the permission of the Central Government, enter into any contract for the sale or purchase of securities other than such spot delivery contract or contract for cash or hand delivery or special delivery in any securities as is permissible under the said Act, and the rules, bye-laws and regulations of a recognised stock exchange. '

80. It, therefore, appears that under the above notification, bar under Section 16 of the Securities Act applies to the whole of India.

81. Definition of ' spot delivery contract ' under Section 2(i) of the Securities Act is as follows :

' ' Spot delivery contract' means a contract which provides for the actual delivery of securities and the payment of a price therefor either on the same day as the date of the contract or on the next day, the actual period taken for the despatch of the securities or the remittance of money therefor through the post being excluded from the computation of the period aforesaid if the parties to the contract do not reside in the same town or locality.'

82. Article 48 of the bye-laws of the Calcutta Stock Exchange Association Ltd. provides that:

' For purposes of these bye-laws and regulations, the term ' bargain ', ' transaction ', ' dealing ' or ' contract' shall have one and the same meaning unless the context indicates otherwise.'

83. Article 52 of the said bye-laws provides that:

' Save as otherwise provided, bargains in securities may be of the following kinds :

(i) for ' spot delivery ', i.e., for delivery and payment on the same day as the date of the contract or on the next day. '

84. The agreement in the instant case provides that ' the sale would be completed by the method of spot delivery contract as per rules and regulations and bye-laws of the Calcutta Stock Exchange Association Ltd.... '

85. It, therefore, appears that the definition of spot delivery contract in Section 2(i) of the Securities Act and in Article 52 of the said bye-laws is more or less the same.

86. The agreement in the instant case, it appears, is for, or relating to, the purchase or sale of securities. We are unable to accept Mr. Gupta's contention that under Section 2(h) of the Securities Act, only quoted shares are securities. In the case of B. K. Holdings P. Ltd. v. Prem Chand Jute Mills : 84CWN876 , it has been held that the expression ' securities ' in Section 2(h) of the Securities Act is not confined only to shares or marketable securities which are quoted in the stock exchange. Therefore, 'spot delivery contract', in our view, is not limited to transactions relating to only shares and securities quoted in the stock exchange.

87. In the affidavit of respondent No. 6, it is specifically stated that the said agreement is contrary to the Securities Contracts (Regulation) Act and is illegal and void, unenforceable and not binding on the parties. The reason for such contravention is also stated. The appellant has come forward for specific performance of the agreement and hence it is for the appellant to adduce evidence prima facie to show that the said agreement is legal. It is nobody's case that permission of the Central Government has been obtained or applied for. There is no knowing as to whether such permission will be given by the Central Government if and when it will be applied for Section 20(1) of the Securities Act is in the following terms :

' Notwithstanding anything contained in this Act or in any other law for the time being in force, all options in securities entered into after the commencement of this Act shall be illegal. '

88. Under Section 2(d) of the Securities Act, ' option in securities' means a contract for the purchase or sale of a right to buy or sell, or a right to buy and sell, securities in future, and includes a teji, a mandi, a teji mandi, a galli, a put, a call or a put and call in securities.

89. Giving our careful consideration to the relevant provisions of the Securities Act, which, according to Mr. Mookherjee and Mr, Sen, are applicable to the instant case as stated hereinbefore, we are of the opinion that, prima facie, the said agreement does not appear to be a ' spot delivery contract '. On our careful reading of the said agreement, we do not find any term therein which provides for the actual delivery of securities (which includes shares within the meaning of Section 2(h) of the Securities Act) and the payment of a price therefor either on the same day as the date of the contract or on the next day. The words ' as the date of the contract ' make the position clear. It is not provided anywhere in the agreement that actual delivery of shares and payment therefor would be made on September 11, 1984, the date of agreement or on the next date. Hence, in our view, prima facie, it is not a spot delivery contract. As at present, there is no permission of the Central Government, a prima facie view can be taken that the agreement is hit by Section 16 of the Securities Act. If, however, it is not a ' spot delivery contract ' within the meaning of the Securities Act, then one can possibly conclude or take a reasonable view on the interpretation of the ' contract ' as defined in Section 2(a) and ' option in securities' as defined in Section 2(d) of the Securities Act, that the said agreement in the present case is hit by Section 16 or Section 20 of the Securities Act and, therefore, illegal. Admittedly, it is not the appellant's case that the said agreement is entered into by the appellant with the necessary permission of the Central Government. In our view, on the materials on record available at this stage, we are of the opinion that the contesting respondents have prima facie established that the said agreement is hit by the provisions of the Securities Contracts (Regulation) Act, 1956.

90. Relying on a decision of this court in the case of Alliance Mills (Lessees) Pvt. Ltd. v. Union of India, : AIR1985Cal112 , Mr. Gupta has submitted that inasmuch as respondents Nos. 1 to 6 have acted upon the said agreement and have failed to perform their part of the obligations thereunder, they cannot now contend that the said agreement was not legal or valid in view of the provisions of the Companies Act, 1956, and the Securities Contracts (Regulation) Act, 1956, and the notification issued thereunder.

91. In the above case, where a jute company entered into a contract for supply of gunny bags to a Government company, acted upon the contract but failed to perform its part of the contract, whereupon the Government company cancelled the contract, it was not open to the jute company to contend subsequently that the contract was not legal or valid for not being in accordance with the provisions of the Forward Contracts (Regulation) Act, 1952, and the bye-laws of the East India Jute and Hessian Exchange Ltd.

92. In our opinion, the above observation was made by Ajit Kumar Sengupta J. in a different context. If, however, the said observation of His Lordship means that if an illegal contract is performed in part by a patty, it is not open to it to contend subsequently that it is not legal or valid, then, with respect, we are unable to agree with the above view of His Lordship. If a contract is not legal or valid, then by acting upon it by any of the parties thereto, the same cannot be said to be valid or legal. Acting by the parties upon a contract, which is contrary to any provision of law or statute and as such is illegal, invalid and not unenforceable cannot make the same legal, valid and enforceable. The above decision is also distinguishable because in the instant case, it prima facie appears that respondents Nos. 2, 5 and 6 have not partly performed the said agreement as stated hereinafter.

93. Mr. Mookherjee has further submitted that the said agreement is vague, uncertain and unworkable, and, therefore, it cannot be specifically enforced. Further, the appellant's application is pending before the trial court and shall be heard soon. Hence, the appellant is not entitled to any interim order at this stage. According to Mr. Mookherjee, parties do not know who are the holders of the 8,100 shares. Further, it is not known what are the distinctive numbers of the share scrips of the 8,100 shares. He has also submitted that respondents Nos. 1 to 6 do not hold the 8,100 shares in the company, i.e., respondent No. 7, The agreement does not say the shareholding of each one of the six sellers. Admittedly, the sellers are not registered holders of the 8,100 shares. There are no particulars of the shares and no mention of the names of the shareholders. In Clauses (a) and (b) of the said agreement, there is no whisper about the nominee or nominees of the sellers, but, regarding the purchaser, there is mention about its nominee or nominees. Further, the representations recorded in the agreement do not say that 8,100 shares are a controlling block. Such representation is stated only in the plaint and petition for the purpose of the suit. Referring to Clause (e) of the said agreement, it has also been submitted by Mr. Mookherjee that if the sellers are not directors of respondent No. 7 on the date of completion of the agreement, this clause cannot operate. It is also the submission of Mr. Mookherjee that how can the sellers act as nominee-directors of the purchaser. Further, if the nominee directors do any act against the purchaser's interest, then how to enforce the obligation of the sellers. Mr. Mookherjee has also submitted that the time mentioned in the said agreement for completion of the sale and purchase of the shares has already expired. It has also been submitted that according to the appellant, 1,286 shares are untraceable. Hence, according to Mr. Mookherjee, the said agreement is incapable of being specifically performed and in that view of the matter, the appellant is not entitled to any interim order, far less a wide order in terms of prayer (b) of the petition filed in the trial court.

94. Mr. Gupta has submitted that under the said agreement, respondents Nos. 1 to 6 are obliged to sell 8,100 shares whether held in their names and/or in the names of their nominees and/or benamidars. According to him, as a matter of fact, respondents Nos. 1, 3 and 5 have deposited shares held by them and their relations and friends. He has submitted that the sellers with the strength of the shareholding will get the appellant's nominee or nominees appointed as director or directors of respondent No. 7 and if they are unable to do so, then the sellers who will remain directors of the company, i.e., respondent No. 7, at the date of completion of sale will act as the nominee or nominees of the purchaser. There is no illegality about it.

95. Mr. Gupta has further submitted that in view of the representation contained in the said agreement, the respondents are estopped from denying that they are not the owners of the 8,100 shares. According to Mr. Gupta, respondents Nos. 1 to 6, by their declaration, act or omission intentionally caused the appellant to believe that the said respondents are the owners of the said shares. In view of their representation, the said respondents cannot now contend otherwise and are estopped from denying that the respondents are owners of the 8,100 shares under Section 115 of the Evidence Act. Referring to page 2 of the said agreement to the effect that: ' Whereas the sellers have approached the purchaser with an offer for sale of 8,100 fully paid-up equity shares of Ambari Tea Co. Ltd...' Mr. G'upta has submitted that the same amounts to an implication that the said respondents are the owners or are in a position to become owners of the said shares. Further submission of Mr. Gupta is that respondents Nos. 1 to 6 are owners of the 8,100 shares but some of them are being held by and registered in the name of nominees or benamidars of the said respondents. Mr. Gupta has further submitted that from the letter dated October 26, 1984, of respondent No. 1, letter dated October 29, 1984, of respondent No. 3 and letter dated November 30, 1984, of respondent No. 5 all addressed to M/s. Leslie and Khettry, advocates-on-record of the appellant, it will appear that the said respondents were owners of more shares than what were registered in

their names and further, the excess shares were held in the names of their respective nominees or benamidars.

96. By the said agreement, respondents Nos. 1 to 6 agreed to sell 8,100 shares of respondent No. 7. The said agreement neither mentions the shareholding of each one of respondents Nos. 1 to 6 nor the distinctive numbers of the shares held by each one of respondents Nos. 1 to 6. The agreement is silent about the fact of holding of shares by the nominee or benamidars of respondents Nos. 1 to 6. There is only a bald statement in the said agreement that the sellers (i.e., respondents Nos. 1 to 6) have represented to the purchaser that 8,100 fully paid-up equity shares in the company, i.e., respondent No. 7, offered for sale include all the shareholding of the sellers in the company. As stated earlier, undisputedly, 3,652 shares stand in the names of respondents Nos. 1 to 6, i.e., respondent No. 1--249 shares; respondent No. 2--135 shares; respondent No. 3--114 shares; respondent No. 4--84 shares; respondent No. 5--590 shares and respondent No. 6--2,480 shares (see affidavit-in-opposition of respondent No. 2 filed in the trial court). This is not denied in the affidavit-in-reply filed in the trial court. The appellant has not stated as to how many shares are held by the nominees or benamidars of respondents Nos. 1 to 6.

97. Although in his letter dated October 26, 1984, respondent No. 1 stated that a total of 1,885 shares were held by him, his family members, friends and relations' in his letter dated October 29, 1984, similarly respondent No. 3 stated that 1,139 shares were held by him, his family members, friends and relations and in his letter dated October 30, 1984, respondent No. 5 stated that 113 shares were held by him, his family members, friends and relations, yet the said respondents have not said in their letters that they were the owners of shares as mentioned in their respective letters.

98. Respondent No. 2 in her affidavit filed in the trial court (para 16) has stated that besides 136 shares, she does not hold any other share in the company, i.e., respondent No. 7.

99. Respondent No. 6 in his affidavit filed in the trial court (para 5) has stated that all his shares in the company are lying in his name and he had no occasion to represent and never represented to the appellant to the contrary. He has not specifically stated the number of shares held by him but as the number of shares held by respondent No. 6 is mentioned by respondent No. 2 as stated above, it can be said that he is the owner of those shares.

100. The agreement does not contain any express representation by respondents Nos. 1 to 6 that they are the owners of the 8,100 shares. In the plaint and the petition filed in the trial court, the appellant has mentioned about various representations made by respondents Nos. 1 to 6, but all of them do not appear from any document.

101. In view of what has been stated above, the question regarding the ownership of the shares of each one of respondents Nos. 1 to 6 is a very much disputed question of fact. Similarly, whether respondents Nos. 1 to 6 hold their shares in the names of their respective nominees or benamidars as alleged by the appellant is also a very much disputed question of fact. All these disputed questions of fact cannot be decided merely on affidavit evidence at this stage. Further, the question of benami cannot be decided on the basis of affidavit evidence at this stage. Also, in the absence of benamidars, the question of benami cannot be decided.

102. Here it may be noted that the appellant has not produced any prima facie proof of declaration of benami in respect of the shares alleged by the appellant being held by respondents Nos. 1 to 6 in the names of their nominees or benamidars nor filing of any return of such declaration as required by Sub-sections (1) and (4) of Section 187C of the Companies Act, 1956.

103. The said agreement does not mention that the sellers, i.e., respondents Nos. 1 to 6, hold shares in the names of their nominees or benami-dar. But, on the contrary, Clause (a) of the agreement states, inter alia, that the sellers would make over to the purchasers or their nominee or nominees share scrips of 8,100 shares together with the relative usual transfer deeds in respect thereof in favour of the purchasers and/or their nominee or nominees duly signed by the respective sellers in whose name or names the respective shares out of the said 8,100 shares stand. This shows that the 8,100 shares do not stand in the name of nominee or nominees or benamidars of the sellers.

104. It appears to us that there is a good deal of force in the argument advanced by Mr. Mookherjee and Mr. Sen. It is doubtful as to whether in the absence of the nominee or benamidars in the suit and the particulars and distinctive numbers of shares held by such nominees or benamidars, an effective decree can be passed. According to the appellant, 1,286 shares out of the 8,100 shares are untraceable. Further, if the sellers act as nominee-directors of the purchasers and they do not carry out the wishes or dictates of the purchasers, various complications will arise. Enforcement of Clause (c) of the agreement would involve constant supervision of court. Where such is the position, no further interim order should be passed at this stage.

105. It cannot also be said that the contesting respondents are estopped from denying that any of their shares are held in the names of their nominees or benamidars. Estoppel has to be pleaded. There is no such pleading either in the plaint or in the petition filed in the trial court or of this application. There is no express mention of any such representation in the same agreement. The representation relied upon by the appellant is either oral or implied. Therefore, at this stage, the appellant cannot rely on any estoppel on the part of the contesting respondents.

106. If, however, the representation as recorded in the said agreement to the effect that 8,100 fully paid-up equity shares in the company, i.e., respondent No. 7, offered for sale include all the shareholdings of the sellers in the company (i.e., respondent No. 7), means that the said respondents are the owners of 8,100 shares, then, in our view, the interest of the appellant is fully protected by the order in terms of prayer (c) of the petition filed in the trial court. But, in the absence of particulars of those shares as also about the shareholding of each one of respondents Nos. 1 to 6 and further in view of the various infirmities and unworkability of the said agreement as fully stated hereinbefore and hereinafter, in our prima facie view, an order in terms of prayer (b) of the appellant's petition filed in the trial court cannot be granted at this stage.

107. Next question for consideration is whether respondent No. 2 was authorised to sign the said agreement for respondent No. 6.

108. Mr. Sen argued that admittedly the said agreement was not signed by respondent No. 6, Shyamananda. According to Mr. Sen, the appellant's case is that respondent No. 2, Juthika, signed the said agreement for respondent No. 6 as she had authority to do so, Mr. Sen has submitted that it has not been alleged either in the petition filed before the trial court or in the petition of this application that respondent No. 2 was authorised to sign for respondent No. 6. Authorisation being a part of cause of action has not been pleaded in the plaint. It is further submitted by Mr. Sen that the question of authority is a question of fact. The said agreement ex facie does not show that respondent No. 6 signed the same. No written authority has been produced before the court. Therefore, according to Mr. Sen, in the absence of proper pleading or material, the court cannot go into this question of authority at this stage. In this connection, Mr. Sen has referred to paras 8 and 11 of the petition filed in the trial court and para 7 of the petition of the instant application.

109. Mr. Mukherjee has submitted that respondent No, 2 did not sign the agreement for respondent No. 6. The initials on the right side margin of each page of the said agreement have not been made by respondent No. 2. Mr. Mukherjee has submitted that the circumstances in which respondent No. 2 put her signature and initials on the said document have been explained by her in her affidavit filed before the trial court and which is part of her affidavit in this application. Mr. Mukherjee has referred to paras 2, 15, 17, 30, 32, 33, 34 to 37 of the affidavit of respondent No. 2 filed before the trial court and annexure ' e ' thereto.

110. Mr. Gupta has submitted that respondent No. 6 is a party to the said agreement. He has argued that on the face of the agreement, respondent No. 6 is a party just as the appellant is a party to the said agreement. There is no reply by respondent No. 6 to the letter dated October 18, 19, 1984, of M/s. Leslie and Khettry, advocates-on-record of the appellant. Although this letter was received by respondent No. 6, he did not reply thereto and it has not been explained by him why he did not give a reply. If respondent No. 6 was not a party to the agreement the most natural thing would have been to deny that he was a party to the said agreement. In this connection, Mr. Gupta has referred to para 24 of the affidavit of respondent No. 6 filed in the trial court. Further, no step was taken by respondent No. 6 in respect of his 73 shares deposited with the appellant's advocates-on-record, M/s. Leslie and Khettry, against the appellant or respondent No. 2 or A. K. Pradhan, the secretary of respondent No. 7, who, according to respondent No. 6, must have made over illegally 73 shares belonging to respondent No. 6 to M/s. Leslie and Khettry. Respondent No. 6 has also not taken any steps with regard to 2,222 shares seized by the police pursuant to the order of search and seizure passed in the criminal proceedings instituted against respondents Nos. 1 to 6 by Ramesh Chandra Roy (in the criminal case it is stated 'Roy Chowdhury'), secretary of the appellant, who was the complainant in the said proceedings.

111. Let us now examine the respective stands of the appellant and respondents Nos. 2 and 6 on this issue.

112. In its plaint and petitions filed in the trial court and in this application, the appellant has not alleged that the said agreement was signed and executed by respondent No. 2 as the authorised agent or for and on behalf of respondent No. 6. In paras 8 and 11 of the plaint, paras 8 and 11 of the appellant's petition filed in the trial court and in para 7 of the petition of the instant application, it is alleged that the said agreement was entered into between respondents Nos. 1 to 6 and the appellant and that the said respondents signed the said agreement dated September 11, 1983. Nowhere it is alleged by the appellant that respondent No. 2 signed the said agreement as authorised agent or for and on behalf of respondent No. 6.

113. In the letter of M/s. Leslie and Khettry, advocates-on-record of the appellant dated October 18, 19, 1984, addressed to respondents Nos, 1 to 6 and sent to them by registered post with A/D it is, inter alia, stated as follows:

' We understand that by an agreement dated September 11, 1984, you agreed to sell to our clients 8,100 fully paid-up equity shares of Ambari Tea Co. Ltd.'

114. Respondent No. 2, although he received the said letter, did not deny that she signed the agreement as an authorised agent and for and on behalf of respondent No. 6.

115. In para 2(j) of the affidavit filed in the trial court, respondent No. 2 has stated that respondent No. 6 has not signed the said agreement and is not a party thereto.

116. In para 9 of her affidavit filed in the trial court, she has stated that, after she put her signature on the agreement, respondent No. 3 asked her to put her signature again below the signatures of the other parties. According to her, when she put her signature for the second time, there was nothing below her signature. According to her, respondent No. 3 told her that respondent No. 6 had agreed and would sign the said agreement after coming back from Banaras.

117. Similarly, respondent No. 6, although he received the said letter, did not send a reply denying that he entered into the agreement or authorised anybody to enter into the same on his behalf.

118. In para 7 of his affidavit-in-opposition filed in this application, respondent No. 6 has denied that he had signed the said agreement or that it is binding on him.

119. In para 8 of his affidavit filed in the trial court, respondent No. 6, has said that he never entered into any agreement with the petitioner (i.e., appellant) for sale of his shares in Ambari Tea Co. Ltd. at Siliguri or at any other place nor did he authorise anybody else to do so. He has further said that he did not sign the said agreement nor authorise respondent No. 2 or any one else to sign and execute the said agreement on his behalf. Again, in para 10, respondent No. 6 has repeated what he has stated in para 8 of the said affidavit.

120. Regarding the said letter of M/s. Leslie and Khettry dated October 18, 19, 1984, respondent No. 6, in para 24 of his affidavit filed in the trial court, has stated that the petitioner (i.e., appellant) has caused the said letters to be written on its behalf knowing that the contents thereof were false only to create a ground for criminal proceedings and to insult him. He has denied the allegations contained in the said letter.

121. An affidavit affirmed on February 28, 1985, by one Ramesh Chandra Roy, said to be the secretary of the appellant, has been filed in this application as affidavit-in-reply of the appellant to the affidavits-in-opposition filed by respondents Nos. 2 and 6 in this application. A copy of the affidavit-in-reply proposed to be filed by and/or on behalf of the appellant in its application before the trial court has been annexed to the affidavit-in-reply filed in this application.

122. In the affidavit-in-reply filed or proposed to be filed by and/or on behalf of the appellant (hereinafter referred to as 'the affidavit-in-reply'), it is stated that respondent No. 2 signed the said agreement on behalf of respondent No. 6 and respondent No. 2 was fully aware of the contents of the said agreement. Respondent No. 2 signed the said agreement for and on behalf of respondent No. 6 and she represented herself to be a duly authorised representative of respondent No. 6. It is further stated that both respondents Nos. 2 and 6 represented that respondent No. 2 at all material times was a duly authorised representative of respondent No. 6. In the said affidavit-in-reply, Ramesh Chandra Roy has stated that the entire endorsement at the bottom of the second signature of respondent No. 2 was written in her presence and with her full knowledge, consent and approval. It is further stated that respondent No. 2 put her signatures at two places on page 10 of the said agreement and the second signature was put by her in her capacity as an authorised signatory of respondent No. 6, and the endorsement below her last signature was put in the presence of all the parties with the full knowledge and consent of respondent No. 2 and also in the presence of one Pijush Kanti Ghosh, advocate, on September 11, 1984, at Siliguri. It is further stated that respondent No. 2 is the sister-in-law of respondent No. 6 and both of them are sharing in the same mess and residing in the same home (paras 4, 5, 11, 13, 16 and 32 of the affidavit-in-reply). In this connection, it should be noted that the endorsement under the second signature of respondent No. 2 is not in her handwriting. Ramesh Chandra Roy has not stated that the endorsement under the second signature of respondent No. 2 was put by her. Although Ramesh Cbandra Roy has stated that the said endorsement below the second signature of respondent No. 2 was put in the presence of all the parties with the full knowledge and consent of respondent No. 2 and also in the presence of Pijush Kanti Ghosh, advocate, on September 11, 1984, at Siliguri, yet he has not stated who made the endorsement.

123. A certified copy of the deposition of Ramesh Chandra Roy, the secretary of the appellant in the criminal case started before the 7th Metropolitan Magistrate against respondents Nos. 1 to 6 upon the complaint filed by Ramesh Chandra Roy (although in the cause title of the said case the name of Ramesh Chandra Roy is stated as Ramesh Chandra Roy Chowdhury and he signed the deposition as Ramesh Chandra Roy Chowdhury) was placed before us. In the said case, in his evidence given on January 22, 1984, Ramesh Chandra Roy has stated that the said agreement dated September 11, 1984, was between respondents Nos. 1 to 6 and the appellant. But in his evidence given on October 29, 1984, he stated that respondent No. 6 was a party to the said agreement. Juthika Saha (respondent No. 2) signed the said agreement on behalf of herself as well as on behalf of Shymananda Saha (respondent No. 6). On the last occasion, Ramesh Chandra Roy stated that his evidence that all the accused persons (i.e., respondents Nos. 1 to 6) signed the said agreement was not correct. Due to hurry, Ramesh Chandra Roy made that mis-statement and he wanted that his previous statement should be corrected. It is to be noted that if Ramesh Chandra Roy was present at the time when the said agreement was signed by the parties as will appear from his affidavit-in-reply filed in the trial court, how could such a mistake occur.

124. We have stated in detail the materials before us on the question whether respondent No. 2 had any authority to sign the said agreement for and on behalf of respondent No. 6. On the materials available before us at this stage, it appears that the question regarding the authority of respondent No. 2 to sign the said agreement for respondent No. 6 is a very much disputed question of fact and no final opinion in respect thereof can be given at this stage and without further evidence. But, on the materials available to us at this stage and on the affidavit evidence, it cannot be said, even prima facie, that respondent No. 2 was authorised to sign the said agreement on behalf of respondent No. 6. Ramesh Chandra Roy was present at the time when the said agreement was signed and the said endorsement was put, but he has not stated who made the said endorsement, particularly when, according to him, the entire endorsement at the bottom of the second signature of respondent No. 2 was made in her presence and with her knowledge, consent and approval. In spite of the statement made by respondent No. 2 in her affidavit filed in the trial court to the effect that there was nothing below her signature when she signed for the second time, Ramesh Chandra Roy in his affidavit-in-reply has not disclosed the name of the persons who made the said endorsement. No affidavit has been filed by Pijush Kanti Ghosh, advocate, Siliguri, who is a witness to the signature of the parties to the said agreement and when, according to Ramesh Chandra Roy, the said endorsement below the last signature of respondent No. 2 was put in the presence of Pijush Kanti Roy on September 11, 1984. In the above view of the matter, it is not possible to take a prima facie view at this stage that respondent No. 2 had the authority to sign the said agreement for respondent No. 6.

125. Mr. Gupta has submitted that the said agreement has been acted upon by the parties. According to him, the appellant deposited Rs. 4,00,000 with M/s. Leslie and Khettry in terms of the said agreement and respondent No. 1 deposited 1,885 shares on September 14, 1984, respondent No. 3 deposited 1,139 shares on September 15, 1984, respondentNo. 5 deposited 1,139 shares and respondent No. 6 deposited 73 shares with the appellant's advocates-on-record, M/s. Leslie and Khettry. In view of the part performance of the said agreement, respondents Nos. 1 to 6 should not be allowed to act in any way contrary thereto.

126. Mr. Mookherjee submitted that there is a contradiction between the statement of respondent No. 1 and the statement of Ramesh Chandra Roy, the secretary of the appellant regarding deposit of 73 shares of respondent No. 6 as will appear from the letter of respondent No. 1 dated October 26, 1984, and the statement of Ramesh Chandra Roy in the affidavit-in-reply filed in the trial court. Mr. Mookherjee has further submitted that pursuant to an order of search and seizure made in the criminal case initiated wrongfully and with ulterior motive by Ramesh Chandra Roy against respondents Nos. 1 to 6, 135 shares of respondent No. 2 were seized by the police.

127. Mr. P. C. Sen has submitted that respondent No. 6 has not in any way performed the said agreement. He has not deposited any share with M/s. Leslie and Khettry. Respondent No. 6 in his affidavit filed in the trial court has fully explained the circumstances in which his 73 shares were made over to M/s. Leslie and Khettry.

128. Regarding the deposit of shares by appellants Nos, 1, 3 and 5, there is no dispute. Respondent No. 2 has not deposited any share belonging to her with M/s. Leslie and Khettry. Deposit of 73 shares of respondent No. 6 by him or respondent No. 2 is disputed.

129. In the plaint and the petition filed in the trial court, the petitioner (i.e., the appellant) has stated that it has come to know that respondents Nos. 1 to 6 in pursuance of the said agreement duly deposited 4,457 fully paid-up equity shares of the company, i.e., respondent No. 7, with M/s. Leslie and Khettry (plaint para 13 and petition para 13).

130. In his letter dated October 26, 1984 (annexure A to the petition of the trial court, para 42), respondent No. 1 has stated that respondent No. 2 deposited 73 shares belonging to respondent No. 6 with M/s. Leslie and Khettry on September 15, 1984.

131. In para 12 of the affidavit-in-reply filed in the trial court, Ramesh Chandra Roy has stated that respondent No. 2 acting on behalf of respondent No. 6 deposited with M/s. Leslie and Khettry some of the shares held by respondent No. 6 in his own name. In para 43 of the affidavit in-reply, Ramesh has said that respondent No. 6 in fact deposited and/ or caused to be deposited through respondent No. 2 some of the shares held by him with M/s. Leslie and Khettry within the agreed period. But, in para 41 of the affidavit-in-reply, Ramesh has said that respondent No, 6 deposited some of his shares with M/s. Leslie and Khettry pursuant to the said agreement.

132. In para 12 of her affidavit filed in the trial court, respondent No. 2 has stated that she never deposited any share with M/s. Leslie and Khettry.

133. In para 13 of his affidavit filed in the trial court, respondent No. 6 has denied that he deposited any share with M/s. Leslie and Khettry. He has stated that 73 shares belonging to him which were lying with the company, i.e., respondent No. 7, as they were lodged with respondent No. 7 for mutation in his name in the share register of respondent No. 7, must have been illegally made over by Mr. A. K. Pradhan, secretary of respondent No. 7, who had all along been conspiring and colluding with respondents Nos. 1 and 3 in order to cause serious loss and prejudice to respondent No. 7 and the opposite group of directors in the board, to the appellant.

134. In view of the above facts and circumstances, the deposit of 73 shares belonging to respondent No. 6 is a highly disputed question of fact. Regarding deposit of 73 shares, Ramesh contradicts himself as will appear from his affidavit as mentioned earlier. In spite of the specific allegation made by respondent No. 6 as stated above, A. K. Pradhan has not filed any affidavit or come forward to dispute and deny the allegations made by respondent No. 6 in his affidavit filed in the trial court. In the absence of further evidence, it is not possible to express any final view on this point. But, on the materials now before us, it can be said, prima facie, at this stage, that the appellant has not proved acting upon the said agreement by respondent No. 6. In this connection, it should be noted that respondents Nos. 2 and 4 did not deposit any share with M/s. Leslie and Khettry. It further appears that the respondents have not taken any benefit under the contract. In the above view of the matter at this stage, no prima facie conclusion can be arrived at to the effect that all the respondents have partly performed the said agreement.

135. Mr. Mookherjee has further submitted that the appellant is not a shareholder of the company, i.e., respondent No. 7. The suit is not a representative action by a shareholder. Mr. Mookherjee has also submitted that admittedly, the respondent company, being respondent No. 7, is not a party to the said agreement dated September 11, 19,84. He has submitted that there are provisions in the said agreement which directly or indirectly impinge on the rights of the respondent company. Further, according to him, if the court is inclined to restore the order in terms of prayer (b) of the notice of motion before the trial court which was granted and later on vacated by the trial court on the returnable day after hearing the parties, then such order would seriously prejudice and affect the statutory rights of the respondent company. The order sought for by the appellant is an order of injunction restraining respondents Nos. 1 to 6, their servants or agents and/or nominees from doing any act with regard to the constitution and/or management of the said company which may be contrary to and/or in violation of the said agreement dated September 11, 1984, in any manner whatsoever.

136. Mr. Mookherjee has also drawn our attention to Clause (d) of the said agreement, which, inter alia, provides that 'at the time of completion of sale and purchase of the said shares as mentioned in Sub-Clause (a) and at the time of the registration of the said shares in the name of the purchasers and/or their nominee or nominees in the share register and other records of the said company, the issued and subscribed share capital of the said company shall not be in excess of 20,000 fully paid-up equity shares.'

137. It has been further argued by Mr. Mookherjee that a limited company having a share capital may, if so authorised by its articles, alter its share capital by increasing, consolidating, converting, etc., in accordance with the provisions of the Companies Act. It is also the argument of Mr. Mookherjee that such right of the company cannot be impinged upon by the provision incorporated in Clause (d) of the said agreement, and if such a provision is there, that will be in clear contravention of the provisions of law, and no court will be inclined to allow any party to the agreement to do such unlawful act by holding it to its bargain.

138. Further, according to Mr. Mookherjee, as the company, i.e., respondent No. 7, is not a party to the said agreement, no order affecting the management and affairs of the company, i.e., respondent No. 7, should be passed.

139. Mr. Sen has submitted that as the company, i.e., respondent No. 7, is not a party to the said agreement, no interim order should be passed which would impinge upon the right of the company. He has referred to an unreported decision of this court dated September 19, 1979, in Matter No. 823A of 1977 (Jiwan Kumar Lohia v. Durgadutt Lohia).

140. Mr. Gupta has submitted that the company is a party to this suit and hence an interim order in terms of prayer (b) of the petition of the trial court can be passed. By the said prayer, an injunction has been asked against respondents Nos. 1 to 6, their servants, agents and/or nominees and it will not affect the company.

141. It appears that there is a good deal of force in the arguments advanced by Mr. Mookherjee and Mr. Sen as stated above. The company, i.e., respondent No. 7, admittedly, is not a party to the said agreement. The appellant in para. 27 of the plaint has stated that reliefs asked for in the plaint relate to management, control and regulation of the assets and affairs of the company, i.e., respondent No. 7, and, as such, it is necessary to make respondent No. 7 a party to the suit although no specific relief has been claimed against it. Prayer (b) of the petition which has been set out earlier, it appears, involves acts relating to the constitution and management of the company, i.e., respondent No. 7.

142. In the case of Jiwan Kumar Lohia v. Durgadutt Lohia (Matter No. 223A of 1977--19-9-1979), a reference was made to a judgment of Salil K. Roy Chowdhury J. in Special Suit No. 25 of 1971 (Hamurilall Santhalia v. Mohanlal Kakarania). In the said case, which related to arbitration, Salil K. Roy Chowdhury J., by his order dated February 3, 1972, refused to pass an injunction on the ground that the company was not a party to the arbitration agreement. The relevant portion of the said judgment is set out hereunder.

'The said company not being a party to the arbitration agreement, it would be gross injustice to pass any order of injunction which would directly or indirectly affect the administration of the affairs of the company and that would amount to making an order in the absence of a vitally interested party. '

143. In the instant case, the applicant itself has admitted that the reliefs asked for by it in the plaint relate to management, control and regulation of the assets and affairs of the company, i.e., respondent No. 7. Further, prayer (b) also had the effect of affecting the constitution and/or management of the company.

144. Granting of an injunction is an equitable relief and as such a discretionary relief. In our view, such considerations, as pointed out by Mr. Mookherjee and Mr. Sen, ought to be taken into account by a court before exercising such a discretion or granting such equitable relief. Further, in our opinion, such an order of injunction as sought for by the appellant is most likely to affect the independent rights of the respondent company conferred by the statutes directly or otherwise.

145. For reasons stated hereinbefore and inasmuch as the company, i.e., respondent No. 7, is not a party to the said agreement and as it is more or less admitted by the appellant that the reliefs claimed by it in the plaint relate to management, control and regulation of the assets and affairs of the said company, in our view, prima facie, the order in terms of prayer (b) of the petition filed in the trial court and now prayed for by the appellant will have an effect upon the management and assets of the company, i.e., respondent No. 7.

146. Mr. Gupta has further argued that no alternative remedy is available to the appellant in the instant case. The subject-matter of the agreement is not an ordinary article of commerce and is not easily available in the market and is of special value and interest to the appellant and consists of goods which cannot be easily had or obtained. Further, having, regard to the nature of the said company and the limited market for its shares, damages would not be an adequate remedy. The 8,100 fully paid-up equity shares of the said company constitute a controlling block of shares of the said company and the said agreement in essence intended to transfer the controlling interest and power of respondents Nos. 1 to 6 in the said company to the appellant and/or its nominees. Mr. Gupta has referred to para. 18 of the petition in the trial court. He has also relied upon Explanation (ii) to Section 10 of the Specific Relief Act, 1963, and the case of Bank of India Ltd, v. Jamsetji A. H. Chinoy, AIR 1950 PC 90. Therefore, according to him, in the instant case, no alternative remedy is available to the appellant.

147. Mr. Mookherjee has submitted that in the instant case, as damages are adequate remedy to the appellant, it is not entitled to a decree for specific performance of the said agreement. He has further submitted that parties themselves have provided for the remedy in the agreement in case it cannot be performed.

148. In the case of Bank of India Ltd. v. Jamsetji A. H, Chinoy, AIR 1950 PC 90, the Privy Council, while dealing with a case of specific performance relating to the sale and purchase of shares in a limited liability company, observed that having regard to the nature of the company and the limited market for its shares, damages would not be an adequate remedy.

149. In Clause (b) of the said agreement, it is provided that in case the sellers, i.e., respondents Nos. 1 to 6, are unable to get the shares registered in the name of the purchasers, i.e., the appellant or their nominee or nominees in the share register and other records of the said company, i.e., respondent No. 7, simultaneously with the completion of the sale of the said shares, the purchasers, i.e., the appellant, shall, without prejudice to any of their other rights and contentions, be entitled to treat the sale of the said shares as void and to get back the consideration money in respect thereof. Again, in Clause (g), it is provided that in case the purchasers (the appellant) failed to complete the sale of the said shares in terms of the agreement, M/s. Leslie and Khettry will return the said seven thousand shares to the sellers. Again, in Clause (h) of the agreement, it is provided that if the sale and purchase of the said shares are not completed for any reason whatsoever, then in such event, M/s. Leslie and Khettry will return the sum of Rs. 4,00,000 to the purchasers (the appellant).

150. It, therefore, prima facie, appears that the agreement provides for an alternative remedy in the case of contingencies mentioned above. Further, order in terms of prayer (c) of the petition as mentioned hereinbefore will protect the appellant. As, in our view, prima facie, the said agreement is contrary to the provisions of the Companies Act, 1956, and the Securities Contracts (Regulation) Act, 1956, as the appellant is not entitled to any relief which touches on the management, administration and assets of the company as fully stated hereinbefore, the appellant is not entitled to any further relief at this stage. The abovementioned clauses of the said agreement, prima facie, show that the said agreement in its nature is determinable. It should also be noted that admittedly the 8,100 shares being the subject-matter of the sale cannot be said to be the majority holding in the company or the controlling block of shares. The appellant has also not been able to prove prima facie that the said 8,100 shares form the majority holding of the company of which the issued share capital is admittedly 20,00,000 divided into 20,000 equity shares of Rs. 100 each. Therefore, our prima facie view is that the appellant is not entitled to any further relief at this stage.

151. Mr. Sen has further submitted that the instant suit for specific performance of the contract is not maintainable. There is no proper pleading in the plaint. He has submitted that Form No. 47 of Appendix A to the First Schedule to the Civil Procedure Code which specifies the form of the plaint for specific performance has not been complied with. In the instant case, the appellant has not stated in the plaint that it has applied to the respondents specifically to perform the agreement on their part, but the respondents have not done so. In this connection, he has referred to the case of Ouseph Varghese v. Joseph Alley : [1970]1SCR921 .

152. Mr. Gupta has submitted that Form No. 47 was framed on the basis of Section 24 of the Specific Relief Act, 1877. He has also submitted that under Order 48, Rule 3, of the Civil Procedure Code, forms given in the appendices, with such variation as the circumstances of each case may require, shall be used for the purposes therein mentioned. He has also referred to Form No. 42 of Appendix A of the First Schedule to the Civil Procedure Code and submitted that the decision of the Supreme Court applies to Form No. 47 and not to Form No. 48. Form No. 48 does not prescribe what is stated in para. 2 of Form No. 47. Mr. Gupta has submitted that Section 16 of the Specific Relief Act, 1963, only requires that the plaintiff must aver performance of, or readiness and willingness to perform the contract according to the true construction. He has referred to paras. 13, 20(1) and31 of the petition. Further submission of Mr. Gupta is that in para. 15 of the plaint the appellant has stated that it has performed and/or has always been ready and willing to perform the essential terms of the said contract and/or agreement dated September 11, 1984, which are to be performed by the appellant according to its true construction: Mr. Gupta has further submitted that this point was not argued before the trial court.

153. In the case of Ouseph Varghese v. Joseph Alley : [1970]1SCR921 , the Supreme Court observed that a suit for specific performance has to conform to the requirements prescribed in Forms Nos. 47 and 48 of the First Schedule to the Civil Procedure Code. In a suit for specific performance, it is incumbent on the plaintiff not only to set out the agreement on the basis of which he sues in all its details, he must go further and plead that he has applied to the defendant specifically to perform the agreement pleaded by him but the defendant has not done so.

154. In our view, it is not necessary to express any view on this point at this stage, because in our opinion, the defect, if any, in the plaint is curable by amendment.

155. Mr. Gupta has submitted that in the instant case, the balance of convenience being in favour of the appellant, an order for stay of the order dated December 5, 1984, should be made. According to him, the trial court should have continued the order in terms of prayer (b) of the petition filed in the trial court. He has referred to Clauses (c), (e) and (f) of the said agreement. He has further submitted that granting of an order in terms of the said prayer (b) would not amount to disposal of the suit.

156. Mr. Mookherjee has submitted that the ambit of prayer (b) of the petition filed in the trial court is very wide. The application is pending before the trial court and it should be allowed to consider whether an order in terms of prayer (b) shall be made or not. Mr. Mookherjee has further submitted that the assets belong to the company and the shareholders have only the right to participate in the profits. In this connection, he relies on the case of Mrs. Bacha F. Guzdar v. CIT : [1955]27ITR1(SC) . According to Mr. Mookherjee, an order in terms of prayer (b) would affect the constitution, management and assets of the company, i.e., respondent No. 7, at the instance of some of its shareholders. Admittedly, the company is not a party to the said agreement. Mr. Mookherjee has further submitted that the sellers, being some of the shareholders of the company, i.e., respondent No. 7, have only the right to participate in the profits of the company. They have no right in the assets of the company before its liquidation. If respondents Nos. 1 to 6 are not entitled to the assets of the company and are not entitled to do any act affecting the constitution, management and assets of the company, they cannot be compelled to do so at the instance of the appellant which is not yet a shareholder of the company and the said agreement prima facie suffers from various other infirmities mentioned earlier.

157. On this point, Mr. Sen has submitted that if an order in terms of prayer (b) is made, there is every possibility of interference in the matter of the decisions to be taken at the company meetings which the courts are generally reluctant to do unless there is almost a manifest breach of the articles or the statutes. He had relied upon the case of Mahaliram Santhalia v. Fort Gloster Jute Mfg. Co. Ltd. : AIR1955Cal132 .

158. In the case of Mrs. Bacha F. Guzdar v. CIT : [1955]27ITR1(SC) , the Supreme Court in para. 7 of the report has very clearly explained the position of a shareholder with respect to the company's assets. It has observed that the true position of a shareholder is that on buying shares, an investor becomes entitled to participate in the profits of the company in which he holds the shares if and when the company declares, subject to the articles of association, that the profits or any portion thereof should be distributed by way of dividends among the shareholders. A shareholder has a further right to participate in the assets of the company which would be left over after winding up but not in the assets as a whole.

159. In the case of Mahaliram Santhalia v. Fort Gloster Jute M/g. Co. Ltd., : AIR1955Cal132 , it has been observed that the courts are generally reluctant to interfere with the decisions taken at company meetings, unless there is almost a manifest breach of the articles or the statutes, because it is the company and not the court which is responsible for its management. Prima facie, the decision of the chairman at the company meeting is allowed to stand until it is proved to be in breach of the articles or the statutes. The burden of holding and conducting the company meetings and recording votes cast therein and for taking decisions at such meetings is the primary responsibility of the company's shareholders and their chosen directors and not of the court.

160. According to Clause (c) of the said agreement, the sellers shall not till the completion of the sale of the shares in terms of the said agreement in any way transfer and/or encumber and/or dispose of any of the shares. In view of the continuance of the order in terms of prayer (c) of the petition filed in trial court, there should not be any apprehension on the part of the appellant regarding breach of this clause.

161. We have already stated earlier why, according to us, the appellant at this stage is not prima facie entitled to any order which will affect the management, affairs and assets of the company. The assets belong to the company and the shareholders are entitled only to participate in the profits of the company. The affairs of the company will be managed by its board of directors. Prima facie it is a disputed question of fact whether the 8,100 shares belong to respondents Nos. 1 to 6. Further, neither do the 8,100 shares constitute a controlling block of shares, nor is there any representation in the said agreement that the same is a controlling block of shares. It has not been prima facie established, out of the said 8,100 shares, how many shares are held by respondents Nos. 1 to 6 through their nominees or benamidars nor does the agreement mention about sellers' nominees or benamidars. At present, the board of directors of respondent No. 7 is functioning under a chairman appointed by the court. Prayer (b) of the petition filed in the trial court is very wide and if granted it will affect the management and administration of the company, i.e., respondent No. 7. The appellant's application before the trial court is pending. In the above view of the matter and for reasons mentioned earlier, according to us, prima facie the balance of convenience is not in favour of the appellant and no further interim order should be passed at this stage.

162. Mr. Mookherjee has also taken a point that this suit against the company, i.e., respondent No. 7 is not maintainable. He has submitted that the registered office of the company, i.e., respondent No. 7 is situate at 188A, Rash Behari Avenue, outside the original side jurisdiction of this court. According to the appellant, the said agreement was signed and executed at Siliguri. Causes of action as pleaded in paras 10(a), (g) and (j), 11, 12, 13 and 26 which according to the appellant have arisen within the original side jurisdiction of this court do not affect the company, i.e., respondent No. 7, which is not a party to the agreement. Therefore, according to Mr. Mookerjee, as this court lacks jurisdiction so far as the company, i.e., respondent No. 7, is concerned, no order should be made which will in any way affect the company, i.e., respondent No. 7, directly or indirectly.

163. In our view, there is a good deal of force in the above argument of Mr. Mookherjee. It, prima facie, appears that this court has no jurisdiction over the company, i.e., respondent No. 7.

164. Mr. Mookherjee has further submitted that the agreement was signed by the appellant company through its secretary, Ramesh Chandra Roy. He has submitted that the contract for purchase should be made only by the board of directors of the appellant company. There is nothing on record to show that the secretary was authorised to enter into the said agreement for and on behalf of the company. He has referred to Section 2(45) of the Companies Act which provides that ' secretary ' means any individual possessing the prescribed qualifications appointed to perform the duties which may be performed by a secretary under the Companies Act and any other ministerial or administrative duties. He has submitted that Sections 75, 97, 113, 118, 125, 149, 160, 161, 162, 163, 304, 322, 383A and 548 are the provisions of the Companies Act relating to the secretary's duties. He has referred to a decision of the Supreme Court in the case of Lakshmiratan Cotton Mills Co. Ltd. v. Aluminium Corporation of India Ltd., : [1971]2SCR623 . According to Mr. Mookherjee, entering into a contract is not ministerial or administrative duty.

165. Mr. S. K. Gupta has submitted that the board of directors may, by a resolution passed at a meeting, delegate to, inter alia, any other principal officer of the company the power specified in Clause (c) of Sub-section (1) of Section 292 that is, power to invest funds of the company. The principal officer, according to Mr. Gupta, includes a secretary and in the instant case there is a board resolution investing upon the secretary the power of the board contained in Sub-section (1)(c) of Section 292 of the Companies Act.

166. In the instant application, we do not think it is necessary to go into or decide the above question and we, therefore, leave it at that.

167. For all the reasons stated hereinbefore and particularly, as in our view, it has been prima facie established that the said agreement contravenes the provisions of the Companies Act, 1956, and the Securities Contracts (Regulation) Act, 1956, no order should be made in this application. This application is, therefore, dismissed. In the facts and circumstances of this case, there will be no order as to costs.

168. The learned trial judge will be at liberty to dispose of the application pending before him on its merits.

Prabir Kumar Majumdar, J.

169. I agree.


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