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Hind Ceramics Ltd. Vs. Company Law Board and ors. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtKolkata High Court
Decided On
Case NumberC.R. No. 7924(W) of 1969
Judge
Reported in[1972]42CompCas610(Cal)
ActsCompanies Act, 1956 - Sections 198(1), 198(4), 309, 309(4) and 310
AppellantHind Ceramics Ltd.
RespondentCompany Law Board and ors.
Appellant AdvocateA.C. Mitter, ;D. Gupta and ;Deb Barman, Advs.
Respondent AdvocateS. Roy Choudhury and ;D. Das, Advs.
Cases ReferredP. Bhoowa Reddy v. State of Mysore
Excerpt:
- k.l. roy, j.1. the petitioner-company has a paid up share capital of rs. 6,25,000 consisting of 6,250 shares of rs. 100 each. the company is a director controlled company. some time in 1965, m/s. dalmia cement (bharat) ltd. acquired 99.97 per cent. of the issued shares of the company and the petitioner became a 100 per cent. subsidiary of the dalmia company. there was a consequent change in the petitioner's board ofdirectors and the following directors, as nominated by the dalmia company, were appointed to the board of the petitioner : (1) shri m. h. dalmia, (2) shri r. s. lodha, (3) shri p. k. khaitan and (4) shri a, k. jalan. these directors are paid rs. 100 as sitting fee for each meeting of the board attended by them and no other remuneration. it is claimed that prior to the present.....
Judgment:

K.L. Roy, J.

1. The petitioner-company has a paid up share capital of Rs. 6,25,000 consisting of 6,250 shares of Rs. 100 each. The company is a director controlled company. Some time in 1965, M/s. Dalmia Cement (Bharat) Ltd. acquired 99.97 per cent. of the issued shares of the company and the petitioner became a 100 per cent. subsidiary of the Dalmia company. There was a consequent change in the petitioner's board ofdirectors and the following directors, as nominated by the Dalmia company, were appointed to the board of the petitioner : (1) Shri M. H. Dalmia, (2) Shri R. S. Lodha, (3) Shri P. K. Khaitan and (4) Shri A, K. Jalan. These directors are paid Rs. 100 as sitting fee for each meeting of the board attended by them and no other remuneration. It is claimed that prior to the present board of directors taking over the management, the company incurred very heavy losses as stated below :

Year Amount of loss

19621.62 lakhs 19632.75 lakhs 19645.77 lakhs 19655.71 lakhs

It is further claimed that under the management of the presentboard of directors, the company made trading profits of Rs. 1.70 lakhsand Rs. 2.42 lakhs for the years 1966 and 1967 respectively and it isstated that the company is expected to earn even higher profits in thesubsequent years and to be put on a sound financial position. In thesecircumstances it was felt that the directors should be allowed some reasonable remuneration in addition to the sitting fee and accordingly the boardof directors recommended that they be paid a commission of 3 per cent. onthe net profits as determined under the Companies Act and further that inview of the accumulated losses of the past years as there would be no netprofits of the company in the next few years, the directors be jointly paida minimum remuneration of Rs. 10,000 per annum for a period of fiveyears. This recommendation was placed before the annual generalmeeting of the petitioner held on the 5th April, 1968, and the followingresolution was passed, namely :

' Resolved that pursuant to Section 309 of the Companies Act, 1956, and other applicable provisions a commission of 3 per cent. of net profits be payable to the board of directors for a period of 5 years with effect from 1st January, 1968, to be shared by the directors in such manner as the board may from time to time determine, provided that in the event of absence or inadequacy of profits in any year a sum of Rs. 10,000 per annum be payable to the board of directors as minimum remuneration.'

On the 17th May, 1968, the petitioner forwarded two applications in Form No. 26 and in Form No. 25C in the Appendix to the Companies Act respectively to the respondent, Company Law Board, asking for its sanction to the proposal for payment of commission at 3 per cent. of the net profits as aforesaid and in the absence of or inadequacy of profits a minimum remuneration of Rs. 10,000 per annum to be shared by the directors in addition to the sitting fee of Rs. 100 per meeting with effect from 1st January, 1968. Along with the applications all the relevant documents were enclosed including a statement of the past history of the trading of the company, the improvements effected by the present directors and the fact of the absence of any managing agents, manager or whole-time director. It was also pointed out that of the four directors one was industrialist and a qualified chemical engineer, one a chartered accountant, one a solicitor and the fourth also an industrialist and an economics graduate. By its letter dated the 20th July, 1968, the Company Law Board informed the petitioner that it had carefully considered the said applications but having regard to all the facts and circumstances of the case the Board regretted its inability to approve the same and the applications were rejected. But the said letter went on to give, what appears to me, some gratuitous advice to the petitioner, viz., that if it chose to appoint a managing director or a whole-time director to look after its business, the Board would be favourably inclined to consider such appointment and the payment of some reasonable minimum remuneration to the proposed managing director or whole-time director.

2. It is to be mentioned that there is no dispute that at the time of the application for approval by the Board, the petitioner's total accumulated losses brought forward amounted to Rs. 11,41,362 and this fact together with the other liabilities were fully stated in the two applications.

3. This rule was issued on the 18th July, 1969, calling on the respondents, the Company Law Board, the Union of India and the Registrar, Joint Stock Companies, West Bengal, to show cause why appropriate writs and/or directions should not issue for quashing the decision contained in the aforesaid letter dated the 20th July, 1968, and for directing the respondents not to give effect to the said decision and further to show cause why the respondents should not be directed to approve the aforesaid applications by the petitioner.

4. Though practically no reasons were given in the letter dated the 20th July, 1968. for refusing sanction to the petitioner's proposal to remunerate its directors, in the affidavit-in-oppositioa filed on behalf of the respondent. Company Law Board, in showing cause reasons have been given for the refusal and both the learned counsel, Mr. A. C. Mitter and Mr. Roy Choudhury, agreed to treat the statements in the said affidavit as the reasons for such refusal. Such reasons are stated in paragraph 11(c) of the said affidavit and may be summarised thus :

(i) That on December 31, 1967, the company had a total accumulated loss of Rs. 11,41,362 and these losses had completely wiped out the paid up capital and the reserves amounting to Rs. 6,25,000 and Rs. 3,63,700, respectively. The company was carrying on with loan capital amounting to Rs. 22,15,242 and in the year 1966 alone it had to pay interest on this loan of Rs. 75,752. Even though the company had earned profits ofRs. 1,69,750 and Rs. 2,42,457 in the years 1966 and 1967, respectively, the fact remained that it would take a minimum of five more years to wipe out the previous loss before the company would be in a position to earn profits as defined in Section 198(1) of the Companies Act (hereinafter referred to as ' the Act'). No dividends had been declared by the company since 1962.

(ii) That the guiding principle of Section 309(4) of the Act is to link up the remuneration of the part-time directors with the profitability of the company. A part-time director is different from a whole-time director or a ma'naging director who devotes his full working hours to the affairs of the company. The sitting fee is by and large adequate compensation for whatever services a part-time director renders and any remuneration in excess of the sitting fees should be linked up with the profitability of the company. No case has been made out by the petitioner for relaxation by the Board of the above principle and to grant approval for payment of extra remuneration to its directors for five years which would further impede the recovery of the company as it would increase its total expenditure by another Rs. 50,000 for these years.

Though in the petition several grounds have been raised challenging the validity of Sections 309, 310 and 311 of the Act, Mr. Mitter, without abandoning the petitioner's objection to the vires of the aforesaid sections and reserving its right to argue the same on a proper occasion in future, confined his arguments to the other grounds challenging the validity of the impugned order and the decision of the Company Law Board.

5. It would be convenient at this stage to consider the provisions of the Act and the rules framed thereunder dealing with the managerial remune-ration of companies.

6. Sections 2(13) and 2(26) define a 'director' and a 'managing director ' respectively and by ' managing director ' is meant a director who is entrusted with substantial power of management. The sections dealing with managerial remuneration are Sections 198, 309, 310 and 311. Section 198(1) provides that the total managerial remuneration payable by a public company or a private company which is a subsidiary of a public company to its directors and its managing agent, secretaries and treasurers or manager in respect of any financial year shall not exceed eleven per cent. of the net profits of that company for that financial year computed in the manner laid down in Sections 349, 350 and 351. Section 198(2) lays down that such percentage shall be exclusive of any fees payable to directors under Section 309(2). Sub-section (3) of that section provides for payment of monthly remuneration within the limits prescribed above to a managing or a whole-time director or to the manager. Section 198(4) is material for the purpose of this application and is set out in full below :

'(4) Notwithstanding anything contained in Sub-sections (1) to (3), if in any financial year, a company has no profits or its profits are inadequate, the company may, subject to the approval of the Central Government, unless such approval has been obtained under any other provision of this Act, pay to its directors (including any managing or whole-time director), its managing agent, secretaries and treasurers, or manager or if there are two or more of them holding office in the company, to all of them together by way of minimum remuneration, such sum not exceeding fifty thousand rupees per annum (exclusive of any fees payable to directors under Sub-section (2) of Section 309), as it considers reasonable : '

There is a proviso which permits the Central Government to sanction an increase in the minimum monthly payment made to any managing or whole-time director or the manager in excess of the minimum remuneration of fifty thousand rupees for such period and subject to such conditions as may be prescribed.

7. There is also an Explanation to this section which provides that for the purposes of this section and Sections 309, 310, 311, 348, 352, 381 and 387, 'remuneration' shall include certain perquisites, i.e., expenditure incurred by the company in providing certain services for the directors.

8. It is to be mentioned that in computing the net profits of a company in the manner laid down in Section 349 all past losses, in the shape of excess of expenditure over the income in any year in so far as such excess has not been deducted in any subsequent year preceding the year in respect of which the net profits have to be ascertained, are to be deducted. Accordingly, it is clear that in the present case in respect of the financial years for which the application has been made the petitioner-company did not have any net profit as its outstanding accumulated losses had not been wiped out.

9. Section 309 provides that the remuneration payable to the directors of a company, including any managing or whole-time director, shall be determined in accordance with and subject to the provisions of Section 198 and the present section, either by the articles of the company, or by a resolution or, if the articles so require, by a special resolution, passed by the company in general meeting. Sub-section (2) provides for the sitting fee of the directors as already mentioned. Sub-section (4) provides that a director who is neither a whole-time director of the company nor a managing director may be paid remuneration by way of a monthly, quarterly or annual payment with the approval of the Central Government or, by way of commission, if the company by special resolution authorises such payment, provided that such remuneration shall not exceed one per cent. of the net profits of the company, if the company has a managing or whole-time director, a managing agent or secretaries and treasurers or a manager, and three per cent. of the net profits of the company, in any other case. There is a further proviso that the company in general meeting may, with the approval of the Central Government, authorise the payment of such remuneration at a rate exceeding one per cent. or, as the case may be, three per cent. of its net profits. Sub-section (5) provides that the net profits referred to in the above sub-section shall be computed in the manner referred to in Section 198(1). There is a provision in Sub-section (5A) that if any director who draws or receives any remuneration in excess of the limit prescribed above, he shall refund the excess to the company and until such sum is refunded, hold it in trust for the company and the company is not entitled to waive the recovery of any sum so refundable. Sub-section (7) provides that the special resolution referred to in Sub-section (4) shall not remain in force for a period of more than five years but may be renewed, from time to time, by special resolution for further periods of not more than five years at a time. Section 310 provides for the increase in remuneration of directors and requires that any provision relating to the remuneration of any director including a managing or whole-time director which purports to increase the amount thereof shall not have any effect unless approved by the Central Government provided that no such approval would be necessary for increasing the sitting fee of the directors up to Rs. 250. Section 311 deals with the remuneration of a managing director on appointment and is not material for this application.

10. Mr. A. C. Mitter, the learned counsel for the petitioner, contended that the reasons given for the impugned order in the afndavit-in-opposition show a lack of appreciation of the provisions of the Companies Act. The petitioner is entitled as of right to fix the remuneration of its directors at three per cent. of the net profits under the proviso to Section 309(4)(b). Sanction is only required where remuneration over 3 per cent. of the net profits is intended to be given. Section 310 comes into operation only when the remuneration fixed for the directors under an existing agreement is sought to be increased beyond the limits prescribed in Section 309. In this case as there is no agreement for payment of remuneration to the directors of the pstititioner, Section 310 has no application. Undoubtedly Section 309 cannot be applied until and unless a company has net profits as defined in Section 198 in the relevant financial year. As in the present case the petitioner-company had no net profits in any of the financial years for which the sanction has been asked for, Mr. Mitter conceded that Section 309 also did not come to his aid. The learned counsel contended that the reasons given for rejecting the petitioner's application as set out in paragraph 11 of the affidavit-in-opposition are not in accordance with the provisions of the Companies Act. The first objection is that the directors are only part-time directors and so the sitting fee is sufficient remuneration for the services rendered by them. As a corollary if a whole-time director or manager was appointed the application would have been favourably considered. The second objection is that there can be no remuneration where there is no net profit. The necessary corollary is that until the past losses are wiped out no application for remuneration to directors would be maintainable. Mr. Mitter pointed out that in the Act no distinction has been made anywhere between the so-called part-time directors and the whole-time directors. The applicant is a director managed company and as there are no managing directors or managers or secretaries, the board of directors conduct the management and the affairs of the company. Mr. Mitter pointed out that in rejecting the petitioner's application the respondent-Board has completely overlooked the provisions of Section 198(4) that even in any year in which there are no net profits the company is entitled to pay its directors minimum remuneration not exceeding fifty thousand rupees subject to the sanction by the Central Government. The learned counsel argued that the non obstante clause in Section 198(4) ' notwithstanding anything in Sub-sections (1) to (3) ' would exclude the operation of Sub-section (1) in any event. Mr. Mitter referred me to an extract from Standard Board Practice on the importance of the functions of the board of directors of a company and pointed out that the Board could appoint a part-time director in addition to the ordinary directors. Thus a part-time director is not an ordinary director of the company and the Company Law Board has confused the issue by treating the ordinary directors as part-time directors. The learned counsel submitted that though no reasons have been given in the impugned order so as to make it a speaking order, as such reasons have been disclosed in the affidavit-in-opposition, the reasons can be scrutinised by this court so as to be satisfied that the order made is not perverse. He pointed out that the principle laid down by the House of Lords in Edwards v. Bairstow, [1956] A.C. 14 ; [1955] 28 I.T.R. 579 (H.L.) has been approved by the Supreme Court in Provincial Transport Services v. State Industrial Court, Nagpur, : (1962)IILLJ360SC , where it has been observed that :

'It has often been pointed out by eminent judges that when it appears to an appellate court that no person properly instructed in law and acting judicially could have reached the particular decision the court may proceed on the assumption that misconception of law has been responsible for the wrong decision. ..... The Industrial Court erred in thinking that it was bound by this decision of the Labour Commissioner and this error on its part was, in our opinion, an error so apparent on the face of the record that it was proper and reasonable for the High Court to correct that error. '

Mr. Mitter pointed out that any distinction between a so-called administrative order and a quasi-judicial order so far as the writ of certiorari is concerned has been removed by the recent decision of the Supreme Court in Kraipak's case, : [1970]1SCR457 and no protection could be sought against an attack on the validity of an order on the ground that it is wholly an administrative order.

11. According to Mr. Mitter the impugned order is vitiated by reason of the failure of the Board to appreciate that one of the applications was in Form 25C in Appendix I to the Act which is a form prescribed for an application under Section 198(4) and Section 398(3)/387. The Board has failed altogether to consider the provisions of Section 198(4) and has based its refusal on the provisions of Sections 309 and 310 on the ground of absence of net profits. It has also referred to Section 198(1) without considering the non obstante clause in Section 198(4).

12. Lastly, Mr. Mitter submitted that if this court was satisfied that the impugned order was bad then it would direct the respondent-Board, to give approval to the petitioner's application for payment of minimum remuneration of Rs. 10,000 per annum to its directors instead of sending it back to the Board for reconsideration. He pointed out that the practice of sending matters back to the authority concerned arose from the procedure prescribed in Section 45 of the Specific Relief Act, Under Article 226, a High Court is empowered to give such orders and directions as it thinks fit. He referred to the decision of the Supreme Court in P. Bhooma Reddy v. State of Mysore, : [1969]3SCR14 , where in an appeal from an order dismissing an application under Article 226, the Supreme Court declared the impugned order of cancellation to be invalid and set aside the order. It further issued a writ of mandamus for the grant of licences to the appellant and observed that in order to give effect to the order for the issue of licences in favour of the appellant it is necessary to give the further direction that the licences already issued to respondent No. 4 should be cancelled. Mr. Mitter submitted that in this case the court should also direct the Board to grant the approval to the petitioner's application to remunerate its directors.

13. Mr. Roy Choudhury, the learned counsel for the respondents, raised a point of demurrer that the petition is not maintainable as it does not show that any legal right has been infringed or that any legal duty has not been performed. He contended that in law there is no right in an ordinary director to get any remuneration apart from sitting fees irrespective of the company having any net profits and as the directors have no such legal right there could be no recourse to Article 226 for the vindication of any such right. He relied on the decision of the Supreme Court in Shivendra Bahadur's case, : (1962)ILLJ247SC , that there must be a legal right to be enforced by a writ. He referred to a decision of the English Court of Appeal in In re George Newman & Co., [1895] 1 Ch. 674 (C.A.), where it has been held that the directors have no right to pay themselves for their services out of the company's assets unless authorised so to do by the instrument which regulates the company or by the shareholders at a properly convened meeting. I do not see the application of the last case to the facts in the present case. Here the petitioner is the company itself and the remuneration has been sanctioned by the company at its annual general meeting. The point of demurrer raised by Mr. Roy Choudhury seems to be based on a misapprehension. The directors are not the petitioners in this application. It is the company which is asking the court to hold that the Company Law Board has failed to decide in a judicial manner its application for payment of remuneration to its directors made under the provisions of the Companies Act. The company has a right under the provisions of the Act to make such an application and there is a corresponding duty on the Board to consider such application judiciously. If the reasons given in the affidavit-in-opposition for the refusal to grant the approval are not sustainable or are such that no reasonable man acting judicially could have reached that determination, this court would have certainly jurisdiction to quash or rectify the impugned order and to give such further directions to the Board as it thought fit. The preliminary objection of Mr. Roy Choudhury must be rejected.

14. Mr. Roy Choudhury quoted extensively from the book Law and Practice Relating to Company Directors by Powell-Smith for the proposition that apart from the working or executive directors, that is persons who are full-time executives, it is sometimes desirable to take in ' outside ' direc- tors who have no association with the company other than as a director. The learned author expresses the opinion that in the competitive work of commerce and industry there should not be room for directors who are merely decorative. But one of the observations therein relied on by Mr. Roy Choudhury seems to me to belie the proposition assumed both by the Board and by Mr. Roy Choudhury that part-time directors are the ordinary directors of a company. The learned author observes that a decision to appoint part-time or outside directors may be made for a wide variety of reasons. So a part-time director is an outsider who is taken into a Board not for the purpose of the management of the company but to add prestige to the board of directors or other extraneous reasons. In a. director-managed company which has neither a managing director nor manager, the board of directors cannot be described as part-time directors. The board of directors is responsible for the entire management of the company.

15. Mr. Roy Choudhury next referred to the report of the joint committee of the Company Law Committee and particularly to the following observations contained in the report :

' On principle, we are not in favour of payment of commission to a director who is not also a full-time employee of the company. Having regard, however, to the desirability of keeping the position flexible, we do not recommend any rigid scale of payment for directors or indeed any rigid method of remuneration. We would leave it to the company to decide how its directors should be remunerated, but would suggest that if any commission on profits is to be paid to the ordinary directors, the aggregate amount of the profits thus disbursed to them should not exceed 1 per cent. of the 'net profits' as defined in the Act in the case of companies managed by managing agents ; in other cases this percentage may extend to 3 per cent. of the net profits as defined in the Act.....The commission,when paid, should come out of the net profits, on which the remuneration of managing agents is based, and, therefore, such commission, if any, as is paid to directors should be treated as part of the working expenses of a company.'

16. Mr. Roy Choudhury submitted that this is the principle which has guided the Board in rejecting the petitioner's application on the ground of absence of net profits in the relevant years. Mr. Roy Choudhury analysed the provisions of the relevant sections of the Act and according to him the scheme of the Act is broadly as follows :

(i) No remuneration can be paid to directors under Section 309 unless the company has made profits as computed under Section 198(1). The only exception is the sitting fee of the directors which would be increased to a limit of Rs. 250 per sitting.

(ii) The exceptional circumstances prescribed in Section 198(4) contemplate loss in a particular year and the sanction of remuneration to the directors up to the limit of Rs. 50,000 for that year only. The subsection does not contemplate a blanket sanction for five years irrespective of the position of profits. As, admittedly, in this case there were no net profits as computed under Section 198 in the relevant years no remuneration could be sanctioned to its directors by the petitioner or approved by the Board under Section 198(1), 309 or 310. So the only provision under which remuneration could be paid to the directors is Section 198(4). What is contemplated in that sub-section is payment of minimum remuneration to the directors by the company in a year in which there are no profits. The sub-section cannot apply to a case of remuneration being paid for a period exceeding that year. If at the end of a particular year the company finds that it has earned no profits but that some minimum remuneration should be paid to its directors it can apply for sanction under Section 198(4). As such an application would depend on the company suffering a loss of profit in any year it can only be made for a particular year depending on the trading results of the company for that year. If, for instance, in the year 1965 when there was a loss of Rs. 5.71 lakhs the company had applied under Section 198(4) for payment of minimum remuneration to its directors the application would be within the subsection. Similarly, such an application for 1967 when there was a loss would also be maintainable for that year. If Section 198(4) is not attracted there are no other provisions of the Companies Act which would enable the petitioner to pay any remuneration to its directors when the company has not earned any net profits as contemplated in Section 198.

I am unable to accept the contention of Mr. Roy Choudhury that Section 198(4) would apply to an application for payment of remuneration to the directors only for any particular year in which the company has suffered a loss. The proviso to that very sub-section shows that in the case of the manager or a whole-time director the sanction for minimum remuneration in excess of Rs. 50,000 may be granted for such period as may be specified in the order granting the sanction. So, the contention that such sanction must be confined to a particular year for which the application is to be made under that sub-section cannot be accepted. Further, Section 309, which also deals with the remuneration of directors, by Sub-section (4) authorises the Government to sanction payment of remuneration in excess of the limits prescribed therein if the company has in general meeting authorised the payment of such remuneration. By Sub-section (7) it limits the operation of such resolution to a period of five years but permits renewal of the resolution from time to time for a further period of five years. It would, therefore, seem that the scheme of the Act, so far as the sanction to the proposal for remuneration of the directors is concerned, is to confine such sanction to a period of five years at the first instance. In this case the company by its resolution recommended payment of remuneration to its directors for a period of five years commencing from the 1st January, 1966.

17. There is more substance in Mr. Roy Choudhury's contention that the Board is under no obligation to grant such sanction if it considers the financial position of the company to be such that the granting of the sanction would put an additional financial burden on the company and that would delay its recovery. Undoubtedly, at the date of the application there was a carried forward loss of over Rs. 11 lakhs. In the affidavit-in-opposition it has been pointed out that the paid up capital and reserves have been wiped out and the company is operating on its loan capital. Even if the company continues to make progress as it has done in the past two years, it would take at least another five years to recoup its past losses. In the affidavit-in-reply the petitioner has stated that the trading profits for the years 1968 and 1969 were rupees two lakhs each and that in the balance-sheet and the profit and loss account for the year 1969, the balance of the loss carried over at the end of that year is shown as Rs. 4,96,836. This statement has been verified by me as the said balance-sheet and the profit and loss account was produced for my inspection.

18. While I am of opinion that the Company Law Board has erred in treating both the petitioner's applications in Form No. 25-C and Form No. 26 as applications under the provisions of Sections 198(1) and 309 and 310 and in failing to take into consideration the provision of Section 198(4), I am unable to accede to the suggestion of Mr. Mitter that I should direct the Board to grant approval to the proposal of the petitioner to allow remuneration to its directors at the rate of Rs. 10,000 per annum for a period of five years as claimed in the petition.

19. Apart from the facts considered by the Board, the further facts disclosed in the affidavit-in-reply of further trading profits being earned in the subsequent years and of the accumulated losses being reduced considerably, should also be taken into consideration in dealing with the application for payment of remuneration to its directors by the petitioner. But, it is for the Company Law Board to take into consideration all the relevant facts and decide whether approval should or should not be granted to the proposal for the payment of remuneration to the directors. The facts here are not so cut and dry as in the case before the Supreme Court in P. Bhoowa Reddy v. State of Mysore, : [1969]3SCR14 . In that case a licence was granted to the petitioner which was subsequently cancelled and an offer was made to him to grant fresh licence on his making certain payments. Though the petitioner deposited Rs. 40 lakhs in accordance with the proposal no licence was ultimately issued to him. It was in these circumstances that the Supreme Court directed the respondent to issue the licence to the petitioner. In the present case the facts are not so overwhelmingly compelling to induce me to direct the Company Law Board to grant the approval asked for. It would be for the Board to consider the matter in the light of the provisions of Section 198(4) of the Act and the financial position of the company and then to approve or refuse approval to the petitioner's application. I, therefore, set aside the impugned order and direct the respondent, Company Law Board, to consider the petitioner's application in Form No. 25-C in the light of the provisions of Section 198(4) of the Companies Act. The rule is made absolute to the extent indicated above. All interim orders are vacated. There would be no order as to costs.


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