# [2006] Supp. 4 S.C.R. 462 - **Citation:** [2006] Supp. 4 S.C.R. 462 - **Court:** Supreme Court of India - **Decided:** 2006-08-11 - **Bench:** H.K. Sema, A.K. Mathur - **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/2006-supp-4-s-c-r-462-21587 - **Pages:** 33 ## Headnote letters Patent Appeal: Civil Procedure Code, 1980; Section lOOA-Appeal-Vested right-C'essation of-Held, can be taken aw~ by a subsequent enactment either expressly or by necessary intendment, after the insertion of section I OOA where appeal has been decided from an original order by a single Judge, no further appeal has been provided and D that power which used to be there under the Letters Patent of the High Court has been subsequently withdrawn. Interpretation of statutes; Statement by the law Minister made on the floor of the House or the E letter of the Law Minister-Held: change the words and intendment of a Statute which is borne out from the words and the same has to be given its natural meaning. F The Companies Act, 1956; Sections 397 & 398-0ppression and mismanagement-Held, on facts, clear case of oppression and mismanagement made out. The respondent company was promoted by two non-resident Indian Doctors, the appellants (holding 52. 74% of the equity shares in the said company) along with respondent no.2, who is the younger brother of appellant G no.I who were first directors of the company. Appellant no.I contributed Rs. 4.26 crore out of which equipments worth Rs. 3.5 crore were brought from USA for which he was to be allotted shares. Though the Reserve Bank of India granted permission on 22.3.1997 to allot shares in favour of appellant no. I but the same was withdrawn on 20.5.1998 at the instance of the company. The H 462 KAMAL KUMAR DUTT Av. RUBY GENERAL HOSPITAL LTD. 463 company filed a writ petition challenging the said approval by the Reserve A Bank of India before the High Court of Calcutta. The High Court directed to give personal hearing to the parties and the Reserve Bank of ,India once granted approval for allotment of shares in favour of appellant no. 1. The said approval was again challenged by the company by filing a writ petition before the High Court. Then again some directions were not properly followed and another B writ petition was filed by the company. In compliance to the directions issued by the High Court, the Reserve Bank of India after hearing the parties passed an order granting permission to allot shares to the appellant no.I against supp)y of second hand medical equipment as capital contribution. Subsequently, a writ petition was filed by the company in 2004 before the High Court of Calcutta and the same is said to be still pending. The main grievance of C appellant no.I was denial of his shares for supply of medical equipments worth Rs. 3.5. crore and consequential ousting from the chairman and directorship of the company for which an 11pplication under Sections 397 & 398 of the Companies Act, I956 (hereinafter to be referred to as the Act) was filed alleging various acts and oppression and mismanagement in the affairs of the company before the CLB and inter alia praying that necessary directions D may be given to relieve the company from mismanagement of the respondents and to relieve the oppressive, harsh and unreasonable conduct of the respondents on the appellants and other members of the company and to stop such acts or conducts of the respondents which are prejudicial to the interest of the shareholders of the company and the public at large; to direct the E respondents to comply with the statutory provisions of the Act to serve the notice of the Board of Directors meetings of the company and the meetings of the shareholders of the company on the appellants and other shareholders; the appellants should be involved in the effective management of the affairs of the company; to remove the Managing Director (respondent no.2) from the company and to prohibit him from interfering with the effective management F of the company; to quash the allotment and issue of the shares of the value of Rs. 42, I0,000/- allotted illegally and unlawfully by the respondents to corporate shareholders, to direct the respondents to restore the shares of the appellants which are shown as share application ## Text _Characters 0–39,965 of 88,324. This is a partial read: ask again with offset=39965 for what follows._ A B c KAMAL KUMAR DUTTA AND ANR. RUBY GENERAL HOSPITAL LTD. AND ORS. AUGUST 11, 2006 [H.K. SEMA AND A.K. MATHUR, JJ.] letters Patent Appeal: Civil Procedure Code, 1980; Section lOOA-Appeal-Vested right-C'essation of-Held, can be taken aw~ by a subsequent enactment either expressly or by necessary intendment, after the insertion of section I OOA where appeal has been decided from an original order by a single Judge, no further appeal has been provided and D that power which used to be there under the Letters Patent of the High Court has been subsequently withdrawn. Interpretation of statutes; Statement by the law Minister made on the floor of the House or the E letter of the Law Minister-Held: change the words and intendment of a Statute which is borne out from the words and the same has to be given its natural meaning. F The Companies Act, 1956; Sections 397 & 398-0ppression and mismanagement-Held, on facts, clear case of oppression and mismanagement made out. The respondent company was promoted by two non-resident Indian Doctors, the appellants (holding 52. 74% of the equity shares in the said company) along with respondent no.2, who is the younger brother of appellant G no.I who were first directors of the company. Appellant no.I contributed Rs. 4.26 crore out of which equipments worth Rs. 3.5 crore were brought from USA for which he was to be allotted shares. Though the Reserve Bank of India granted permission on 22.3.1997 to allot shares in favour of appellant no. I but the same was withdrawn on 20.5.1998 at the instance of the company. The H 462 KAMAL KUMAR DUTT Av. RUBY GENERAL HOSPITAL LTD. 463 company filed a writ petition challenging the said approval by the Reserve A Bank of India before the High Court of Calcutta. The High Court directed to give personal hearing to the parties and the Reserve Bank of ,India once granted approval for allotment of shares in favour of appellant no. 1. The said approval was again challenged by the company by filing a writ petition before the High Court. Then again some directions were not properly followed and another B writ petition was filed by the company. In compliance to the directions issued by the High Court, the Reserve Bank of India after hearing the parties passed an order granting permission to allot shares to the appellant no.I against supp)y of second hand medical equipment as capital contribution. Subsequently, a writ petition was filed by the company in 2004 before the High Court of Calcutta and the same is said to be still pending. The main grievance of C appellant no.I was denial of his shares for supply of medical equipments worth Rs. 3.5. crore and consequential ousting from the chairman and directorship of the company for which an 11pplication under Sections 397 & 398 of the Companies Act, I956 (hereinafter to be referred to as the Act) was filed alleging various acts and oppression and mismanagement in the affairs of the company before the CLB and inter alia praying that necessary directions D may be given to relieve the company from mismanagement of the respondents and to relieve the oppressive, harsh and unreasonable conduct of the respondents on the appellants and other members of the company and to stop such acts or conducts of the respondents which are prejudicial to the interest of the shareholders of the company and the public at large; to direct the E respondents to comply with the statutory provisions of the Act to serve the notice of the Board of Directors meetings of the company and the meetings of the shareholders of the company on the appellants and other shareholders; the appellants should be involved in the effective management of the affairs of the company; to remove the Managing Director (respondent no.2) from the company and to prohibit him from interfering with the effective management F of the company; to quash the allotment and issue of the shares of the value of Rs. 42, I0,000/- allotted illegally and unlawfully by the respondents to corporate shareholders, to direct the respondents to restore the shares of the appellants which are shown as share application money by illegal and unlawful entries, to direct the respondents for allotment of shares for the G sum of Rs. 3,05,53,290/- to appellant no.I being the value of the goods already supplied and to appoint an independent observer to attended the meetings of the board of Directors and the meeting of the shareholders of the company. The CLB heard the parties at length and after considering the matter found various omissions and commissions in conduct of the Board meetings and in a detailed order discussed the whole issue and gave certain directions. This H 464 SUPREME COURT REPORTS (2006] SUPP. 4 S.C.R. A was contested by the respondents by denying the allegations. It was alleged that all the notices of the meetings were given to the Board of Directors and the meetings were conducted whenever required according to law. Aggrieved against that direction issued by the CLB both the parties approached the High Court of Calcutta. The appeal filed by respondent no.2 and the cross-appeal filed by appellant no.I were clubbed together and decided by the Company B Judge by the order impugned herein. Single Judge set aside the order of the CLB and left the appellants to any appropriate remedy by way of company suit which can give the terminated director every relief. It was also observed that he can file a suit for injunctions and declaration and get himself reinstated as a director or if he has been removed from a directorship, he could have C filed a suit for declaration. It was contended by appellant No.I that the minutes of the meeting dated 19.4.1995 were fabricated and manipulated to the advantage of respondent no.2 for being ap;>ointed as Managing Director of the company so that he can succeed in his design of usurping the company. It was also alleged that the D allotment of shares was bad. This resolution, according to the appellants, was totally farbricated though no such allegation was made before the CLB. It was further contended by the appellant that the Single Judge of the High Court has gone wrong in holding that no case is made out under Sections 397 & 398 of the Act as necessary ingredients of the said sections are not present E in this case. To the preliminary objection raised by the respondent that the appellants have alternative remedy of approaching the Division Bench of the Calcutta High Court under Clause 15 of the Letters Patent it was contended by the appellant that after the amendment (w.e.f. 31.5.1991), the Company Law Board p was created under Section IOE of the Act which deals with application under Sections 397 & 398 of the Act. The Single Judge, therefore, has not exercised original jurisdiction and as such the appeal contemplated under clause 15 of the Letters Patent is not maintainable. Moreover after coming into force (w.e.f. 1.7.2002) of Section IOOA of the Code of Civil Procedure where any appeal from an original or appellate decree or order is heard and decided by a single G Judge of a High Court, no further appeal shall lie from the judgment and decree of such single Judge. H The stand of the respondent was denial of allegations made against him by the appellant. 4.llowing the appeal, the court KAMAL KUMAR DUTIA v. RUBY GENERAL HOSPITAL LTD. 465 HELD 1.1. The vested right of appeal can be taken away by a subsequent A enactment either expressly or by necessary intendment After the amendment to the Code of Civil Procedure and insertion of section IOOA (wef 1.7.2002) where appeal has been decided from an original order by a single Judge, no further appeal has been provided and that power which used to be there under the Letters Patent of the High Court has been subsequently withdrawn. When the CLB exercises its power under Sections 397 & 398 of the Act, it exercises B its quasi-judicial power as original authority. It may not be a court but it has all the trapping of a court. Therefore, the CLB while exercising its' original jurisdiction under Sections 397 & 398 of the Act passed the order and the challenge to the order passed by the CLB before the High Court, under Section IOF of the Act, is an appeal from the original order. Then in that C case no further Letters patent appeal shall lie to the Division Bench of the same Higt. Court (478-C-H; 479-A, BJ Garikapatti Veeraya v. N. Subbiah Choudhry, (1957] SCR 488, referred to. Arati Dutta v. Mis. Eastern Tea Estate (P) Ltd, 11988] 1 SCC 532, distinguished. Maharashtra Power Development Corporation Limited v. Dabhol Power Company and Ors., (2003) 117 Company Cases 651, overruled. D E P.S. Sathappan (dead) by LRs. v. Andhra Bank Ltd and Ors., (2004] 11 SCC 672; Subal Paul v. Malina Paul and Ors., (2003) 10 SCC 361; Gandia Pannala Bhulaxmi v. Managing Director, APSRTC and Anr., AIR (2003) AP 458; Rev. C.S. Joseph and Ors. v. T.J. Thomas and Ors., (1987) 62 Company Cases 504 and Kesava Pillai Sreedharan Pillai and Etc. v. State of Kera/a and Ors., AIR (2004) Ker. 111, relied upon. F 2.1. When the statute is very clear, whatever statement by the Law Minister made in the floor of the House, cannnot change the words and· intendment which is borne out from the words. The letter of the Law Minister cannot be read to interpret the provisions of Section IOOA. The intendment G of the Legislature is more than clear in the words alid the same has to given its natural and cannot be subject to any statement made by the Law Minister in any communication, The words speak for itself. It does not require any further interpretation by any statement made in any manner. (479-C-D) 3.1. The crucial resolution that gave rise to strained relationship H 466 SUPREME COURT REPORTS [2006] SUPP. 4 S.C.R. A between the two brothers was to issue and allot not exceeding 40,00,000 (forty lacs) equity shares of Rs. 10/- each at par was alleged to have been fabricated and appellant no.I came to know about it only on a later date when he was said to be thrown out from the Managing Directorship. Though an omnibus objection was taken in the rejoinder but there is no specific finding with B regard to the fabrication of the resolution by the CLB. It is manifest that on the basis of this resolution an attempt was made to oust the person who held the majority of shares to be reduced to minority. 1489-D-H; 490-EJ c Dale & Carrington Investment (P) Ltd v. P.K. Parthapan and Ors., 12005) 1 SCC 212, relied upon. 3.2. No proper notice was served on appellant No.1 who is a major shareholder of the company or to appellant No.2. lf the Board meeting had been convened without proper service of notice on the appellants by respondent No.2 then such Board meeting cannot be said to be valid. [490-F, GI D 1Hls. Madhusoodhanan and Anr. v. Kera/a Kaumudi (P) Ltd. and Ors., [2004) 9 sec 204, referred to. 3.3. When another meeting was scheduled to be held on 16.2.1996 and it was within the knowledge of respondent that appellant no.I was likely to attend the meeting but suddenly the meeting was held on 7.2.1996 and the E appellant No.I was stripped off his chair as the Managing Director of the company and the respondent no.2 became the Managing Director, taking such an important decision in the absence of the main promoter of the company is the grossest act ofoppression by the Board of Directors. [491-E, F, GJ Sangramsinh P. Gaekwad and Ors. v. Shantadevi P. Gaekwad (Dead) F through LRs and Ors .. [2005) l I SCC 314, referred to. 3.4. When a material change is brought about in the management to the detriment of the interest of the main promoter it is squarely covered under section 398 (l)(b) of the Act. Ousting the Managing Director and cornering shares substantially to wrest full control of the company, is oppression being G squarely covered by section 397(1)(b) of the Act. [492-A-B] S.P. Jain v. Kalinga Tubes Ltd., [1965] 2 SCR 720; Needle Industries (India) Ltd. and Ors. v. Needle Industries Newey (India) Holding Ltd. and Ors., [1981] 3 SCC 333, Kilpest Pvt. ltd. and Ors. v. Shekhar Mehra, [1996) H 10 SCC 696, Hanuman Prasad Bagri and Ors. v. Bagress Cereals Pvt. Ltd. KAMAL KUMAR DUTT Av. RUBY GENERAL HOS PIT ALL TD. [A.K. MA THUR,J .] 467 and Ors., 120011 4 SCC 420 and Tea Brokers (P) Ltd. and Ors. v. Hemendra A Prasad Barooah, (1998) 5 Comp. LJ 463 (Cal.) referred to. 3.5. The permission granted by RBI for allotment of 30,55,329 equity shares of Rs. 10/- each to the appellant No.1 towards capitalization of second hand medical equipments supplied by appellant No.1 was unilaterally withdrawn by respondent no.2 which could be restored pursuant to orders passed by the B CLB against which persistent effort was made by respondent no.2 by filing one after another writ petition before the High Court which speak volumes .. about the subtle design on the part of respondent No.2 to somehow see that • the holding of appellant No.1 is reduced and the management is passed on to his hands. The filing of repeated writ petitions in the High Court at the expense c of the company adversely affected the interest of the company. If this is not oppression of the member under section 397 and bringing material change in the management under section 398 then what could be the better case than this. It clearly is the case of oppression of the member as well as would amount to bringing about material change in the management off the company. 1492-C, D; 493-C-F] D Halsbury's Laws of England, 4th Edn., Vol. 7, para 1011; Palmer's Company Law, 23rd Edn; Pennington's Company Law, 6th Edn. referred to. CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3471 of2006. From the Judgment and Order dated 31.3.2005 of the High Court Calcutta E in A.P.O. Nos. 746 and 759/1999. Dr. A.M. Singhvi, M.L. Lahoty, Amit Bhandari, Yogesh Jagia, Paban K. Sharma, Hetu Arora and Poonam Lahoty for the Appellants. F.S. Nariman (N.P.), T.R. Andhyarujina, S.N. Mookerjee, Pallav Sishodia, F Tarun Aicha, Raj Rattan Sen, Meghalee Barthakur, Nupur Singh, Kanika Gomber and Rajan Narain for the Respondents. The Judgment of the Court was delivered by A.K. MATHUR, J. Leave granted. G ' These appeals are directed against the order dated 31.3.2005 passed by learned Company Judge, Calcutta High Court in APO No.746 of 1999 and APO No.759of1999 whereby learned Single Judge has disposed of the appeal and the cross-appeal arising out of the order dated 29.10.1999 passed by the ... Company Law Board (hereinafter to be referred to as CLB ) . H 468 SUPREME COURT REPORTS [2006) SUPP. 4 S.C.R. A Brief facts which are necessary for disposal of these appeals are that an application under Sections 397 & 398 of the Companies Act, 1956 (hereinafter to be referred to as the Act ) was filed by Dr.Kamal Kumar Dutta and Dr. Binod Prasad Sinha alleging various acts and oppression and mismanagement in the affairs of the company before the CLB. Ruby General Hospital Limited, a company was incorporated in the year 1991 by two nonB resident Indian Doctors i.e. Dr.Kamal Kumar Dutta and Dr.Binod Prasad Sinha along with Indian enterprenuor, Shri Sajal Kumar Dutta, who is the younger brother of Dr.Kamal Kumar Dutta. The Company took up the project to establish a Hospital-cum-Advance Diagnostic facility at Calcutta. The cost of the project was about Rs. I I crore out of which the share capital would be Rs.9 C crore and Rs.8 crore out of the said share capital would be by way of NRJ participation. Therefore, 88.88% of the project was NRI shares and the balance by resident Indians. Jn the year 1991, the Department of Industrial Development, Government of India, Secretariat of Industrial Approval, ( for short SIA) approved the NRI investments in the said company. D Dr. Kamal Kumar Dutta was one of the first Directors of the said company and with Dr.Binod Prasad Sinha held 52.74 % of the equity shares in the said company. Apart from that Dr. Kumar Kumar Dutta contributed Rs.3 crore for the purpose of importing second-hand medical equipments and the shares towards the said investments, being the value of the equipments, E should be allotted to Dr.Dutta. A loan was granted for a sum of Rs.4.6 crore by the Industrial Development Bank of India for the said project. The Hospital was inaugurated by the Chief Minister of West Bengal on 25.4.1995. Dr.Kamal Kumar Dutta contributed Rs.4.26 crore out of which equipments worth Rs.3.5 crore were brought from USA and Rs.1.23 crore was F contributed by Sajal Kumar Dutta. The grievance of Dr.Kamal Kumar Dutta was that he was denied shares of the company for the equipments brought by him by his younger brother Sajal Kumar Dutta. Though the Reserve Bank of India granted permission to allot shares in favour of Dr.Dutta on 22.3.1997 but the same was withdrawn on 20.5.1998 at the instance of the company. The company filed a writ petition challenging the said approval by the Reserve G Bank of India before the High Court of Calcutta. The High Court directed to give personal hearing to the parties and the Reserve Bank of India once again granted approval for allotment of shares in favour of Dr.Kamal Kumar Dutta. The said approval was again challenged by the company by filing a writ petition before the High Court. Then again some directions were not properly H followed and another writ petition was filed by the company. In compliance ... • .. KAMAL KUMAR DUIT A'" RUBY GENERAL HOS PIT ALL TD. [A.K. MA THUR, J.] 469 to the directions issued by the High Court, the Reserve Bank of India after A hearing the parties passed an order granting permission to allot shares to Dr.Dutta against supply of second hand medical equipment as capital contribution. Subsequently, a writ petition was filed by the company in 2004 before the High Court of Calcutta and the same is said to be still pending. In fact, this Ruby General Hospital Limited was established in memory B of late wife of Dr.Kamal Kumar Dutta. Since Dr.Dutta and Dr.Binod Prasad Sinha were both NRls, the company was being looked after by Sajal Kumar Dutta. No problem arose for some time till the hospital was in a struggling t"' stage. But it appears that soon after the hospital started showing the sign of prosperity, the chord of discord grew between the brothers and attempt was c made by the younger brother to oust the elder brother by denying him his shares for the medical equipment worth Rs.3.5 crore supplied by him fro:n USA. Thus, ultim~tely the appellants filed a petition under Sections 397 & 398 of the Act before the CLB. The stand of the company was that Dr.Kamal Kumar Dutta and Dr.Binod Prasad Sinha who alleged to have had 88.88% shares in the company discontinued themselves as Directors and refusal of D the company to allot shares to them worth the value of second hand equipments was justified. The CLB heard the parties at length and passed a detailed order giving certain directions which will be referred to hereinafter. Aggrieved against that direction issued by the. CLB on 29.10.1999 both the parties approached the High Court of Calcutta. The appeal filed by Sajal Dutta and E the cross-appeal filed by Dr.K.K.Dutta were clubbed together and taken together by learned Company Judge for disposal. . The main grievance of Dr.Dutta was denial of his shares for supply of medical equipments worth Rs.3.5 crore and consequential ousting from the chairman and directorship of the company which led to filing of a petition F before the CLB in 1997.The appellants prayed before the CLB that necessary directions may be given to relieve the company from the mis-management of the respondents and to relieve the oppressive, harsh and unreasonable conduct of the respondents on the appellants and other members of the company and to stop such acts or conducts of the respondents which are prejudicial to the G interest of the shareholders of the company and the public at large; to direct the respondents to comply with the statutory provisions of the Act to serve the notice of the Board of Directors meetings of the company and the meetings of the shareholders of the company on the appellants and other shareholders; the appellants should be involved in the effective management of the affairs ... of the company; to remove the Managing Director (Sajal Dutta) from the H 470 SUPREME COURT REPORTS (2006) SUPP. 4 S.C.R. A company and to prohibit him from interfering with the effective management of the company; to quash the allotment and issue of the shares of the value of Rs.42, I 0,000/- allotted illegally and unlawfully by the respondents to corporate shareholders, to direct the respondents to restore the shares of the appellants which are shown as share application money by illegal and unlawful entries to direct the respondents for allotment of shares for the sum of B Rs.3,05,53.290/- to the appellant No.1 being the value of the goods already supplied as the proposal has been duly approved by the Reserve Bank of India and to appoint an independent observer to attend the meetings of the Board of Directors and the meetings of the shareholders of the company. This was contested by the respondents by filing counter affidavit and the allegations C were denied. It was alleged that all the notices of the meetings were given to the Board of Directors and the meetings were conducted whenever required according to law. It was alleged that in the meeting dated 19.4.1995 the appellant No. I was present when the resolution was passed to raise the funds as he declined to give any fresh funds. This was denied by the appellant No. I in the rejoinder filed before the CLB and it was pointed out that the minutes D of the meeting dated 19.4.1995 were fabricated and manipulated to the advantage of the respondent for being appointed as Managing Director of the company so that he can succeed in his design of usurping the company. It was also alleged that the allotment of shares was bad. It was also pointed out that the resolution dated 19.4.1995 in which the appellant No. I was alleged to be E present, would indicate that the decision to convene the extraordinary general meeting and to pass a resolution under Section 81 (I A) was considered and approved. But no details were furnished of such a decision. It was also alleged that the respondent No.2 using the old minutes to gain illegal and unlawful majority by hiding the contents of the resolution tried to justify his action. It was alleged that the answering respondent deliberately and knowingly F did not annex the copies of such minutes of resolutions. It was specifically asserted that the respondents have withheld the copies of the resolutions passed on 12.3.1996, 17.2.1996, 19.4.1995, 9.2.1996 and 16.2.1996. In fact from the records it transpires that the main issue is with regard to the resolution passed on 19.4.1995, though according to Dr. Kamal Kumar Dutta, copies of G the resolution were not supplied along with the counter affidavit. It was only the records were placed before the CLB during the course of proceedings. The main crux of the problem arose on account of the resolution passed by the Board of Directors on 19.4.1995. That resolution is crucial because in that resolution it was passed to raise funds and to issue and allot not exceeding 40 lacs equity share for Rs. I 0/- each at par to such persons or corporate H bodies, banks, mutual funds or other financial institutions whether or not they .. - -'. KAMAL KUMAR DUTI Av. RUBY GENERAL HOSPITAL LTD. [A.K. MA THUR, J.] 4 7J are the existing shareholders of the company, and in such manner as may be A decided by the Board. This resolution, according to the appellants, was totally fabricated though no such allegation was made before the CLB. But the core issue is whether this resolution was at all passed in that meeting or not because the whole trouble seems to have started from this and thereafter further resolutions have been passed in order to reduce the shareholding of B the appellants and the whole design was to reduce the appellant No. I to minority. In fact, the Reserve Bank of India has already granted permission to allot share to the appellant No. I for the equipments supplied by him to the extent of Rs.3.5 crore and. that permission was challenged by one way or the other so that the permission is not granted and the share to the extent of Rs.3.5 crore is denied to the appellant Dr.Kamal Kumar Dutta and he looses C the majority thereby the younger brother Sajal Dutta who has made total investment of Rs.1.3 crore will get majority and oust the appellant No. I from the chairmanship and reduce him to nothing. This was the core issue. The CLB after considering the matter found various omissions and commissions in conduct of the Board meetings and in a detailed order discussed the whole issue. The CLB discussed the memorandum and articles of association of the D company to which the appellants and Sajal Kumar Dutta are the signatories. This document is of 1991. It was resolved that the hospital was to be established with the participation of the appellants and that imported equipments worth Rs.420 lakhs would be purchased from the foreign exchange provided by the NRI doctor. The cost of the project was indicated as Rs.1100 E lakhs with Rs.900 lakhs as the authorized capital out of which Rs.800 lakhs would be by NRI participation. Under the heading 'foreign investment- financial collaborator', the name of the appellant is mentioned. It was mentioned that the appellant was the principal promoter and the other promoter being the respondent No.2 - a resident Indian. Under 'Means of Finance' it is mentioned that NRI investment would be Rs.800 lakhs comprising of Rs.400 lakhs as F equity and Rs.400 lakhs as preference shares. It was mentioned that from various records of the company and approval given by the SIA, it is apparently clear that the appellant i~ the chief principal promoter of the company. In this connection CLB discussed the notices of the Board of Directors meetings because all the issues arose from the resolutions passed by the Board of G Directors. The CLB recorded that the notices issued at the local address in India cannot be considered to meet with the provisions of Article 12l(b) of the Memorandum arid Articles of Association. It was also observed that the notices in respect of appellant No.2 the address shown was "P.O.Hirapur, District Dhanbad, Bihar" and in respect of most of the meetings, the time gap of alleged date of posting and the meeting did not exceed 3 days excluding H 472 SUPREME COURT REPORTS [2006] SUPP. 4 S.C.R. A the dates of posting and the dates of the meetings. In respect of the appellant No. I the notices were addressed to a local address notwithstanding the fact that the company itself has attached various documents indicating that the appellant No. I used to stay in some hotel or guest house during his visit to Calcutta. It was observed that adequate time was not given and notices were not sent at the correct address. The CLB observed that the action of the B company to have posted notices for the meetings to the local addresses of the NRI directors lacked in probity and fair play as the appellants being not only the first directors of the company but also substantial holders of the shares, they should have been given notices to their address in the USA. Accordingly, the CLB held that notices for the Board meetings cannot be C deemed to have been given to the appellants. Ultimately the CLB held as follows: " In view of our finding that no notices should be deemed to have been served on the petitioner directors for the Board Meetings, the decisions taken in these Board Meetings, granting that they had taken D place, should be declared to be null and void, as the general proposition of law is that proceedings of Board meetings without notices to a director cannot be recognized." E F G With regard to the letter received by Dr.Dutta that the matter has been amicably settled, the CLB recorded as follows: "Even assuming that the petitioner had authorized this advocate to send that letter (which is disputed by the petitioner), the circumstances have been changed afterwards. Further additional shares were issued, the petitioner directors were declared to have vacated their offices and allotment of shares against the cost of imported equipments denied. In the changed circumstances, by which the petitioners have been completely ousted from the company, which was not the position when the letter from the advocate of the petitioner was written, we do not think that it would be right to bind the petitioner to the terms of the said letter." Similarly, with regard to the second appellant, Dr.Binod Prasad Sinha, it was also held that no proper notices were given. Therefore, he cannot be deemed to have vacated the Office of Director. The notice for the AGM convened on 30.12.1996 was issued wherein re-election of this appellant was an item in the agenda, wherein it was stated " to appoint directors in place of Dr.Binod Sinha H and Dr. S.K.Ghosal who retire by rotation and being eligible offer themselves - KAMAL KUMAR DUTT Av. RUBY GENERAL HOSPITAL LTD. [A.K MA THUR,!.] 4 73 - for re-appointment. The resolution passed in that meeting was that Dr.Binod A Sinha retired by rotation is not being reappointed because of lack of active interest and the CLB recorded that such resolution was very doubtful and whether such a resolution was at all passed. The CLB also pointed out certain impropriety in recording the minutes. So far as the vacation of the office by the appellant No. I 4s concerned, B it is mentioned that the appellant No. I vacated the office on 24.2.1997. For ., that purpose, the provisions of Section 283 (I) (g) were invoked. The CLB after going through the records observed that the convening of the Board , meeting on 3.3.1997 at 11 A.M. is very doubtful. It was on 3.3.1997 a letter was issued indicating that the appellant No. I has vacated his office. The CLB c after appreciating the evidence observed that the resolution dated 3.3.1997 cannot be sustained. So far as the allotment of shares was concerned, the CLB after assessing all the materials on record came to the conclusion that the allotment of shares was not completely bona fide and thus deserved to be set aside. Instead of b setting aside the same, the CLB issued certain directions to which we would advert hereinafter. The next question was with regard to the allotment of shares against the value of imported equipments. It was alleged on behalf of the respondents - that this was not approved by the SIA nor the RBI covered the allotment of E •. shares against the imported equipments and it was also pointed out that the company had no knowledge that those were second hand equipments. This aspect was also examined by the CLB at length but the CLB did not make any observation since the matter was pending before the Calcutta High Court. After examining the evidence led by both the sides the CLB recorded F tliat they were not in a position to convince themselves that all the equipments should have become non-functional. It appears that the whole controversy originated somewhere in March, 1997. Prior to that all the equipments were functioning properly. However, no finding was given because the matter was already pending before the Calcutta High Court. The CLB also adversely G observed with regard to the Board meeting dated 7.2.1996 and far reaching -~ decisions were taken by the company when the appellant No. I was not present in the said meeting and especially the respondent No.2 as Managing Director indirectly outstripping the appellant No. I of all his powers. This meeting was held a week before the appellant No. I was scheduled to arrive H from USA on 14.2.1996. In fact, such a final decision was taken in the absence 474 SUPREME COURT REPORTS [2006] SUPP. 4 S.C.R. A of the main promoter of the company and therefore, the CLB concluded that this reflects complete lack of probity on the part of the Directors in passing such a resolution. So far as the meeting of 16.2.1996, the minutes were not properly recorded and it was pointed out by the IDBI nominee that draft minutes of B the meeting qated 7 .2.1996 placed before the meeting should correctly reflect the appointment of respondent No.2 as the Managing Director but such an important item was not included in the draft minutes and whether this item was at all discussed in the meeting dated 7.2.1996 becomes highly doubtful. It was also pointed out that the minutes of the meeting dated 16.2.1996 was C signed by the respondent No.2 though it was presided over by the appellant No. I and such minutes are required to be signed by the chainnan as required under section 193 of the Act. Therefore, the recording of both the minutes cannot be accepted as correct one. Consequently, the CLB also adversely commented on another meeting dated 13.4.1996. It also held that after receipt of the letter elated 4.4.1996 from the IDBI that it cannot fund the s.~cond hand D equipments and the Board decided not to import any second hand equipment for allotment of shares to the appellants, a resolution was passed despite the fact that the company had earlier applied to the Reserve Bank of India for allotment of shares. In the meeting dated 3 .3 .1997 there was a complete chaos. The finding is that the meeting was not properly conducted. The letter from E the IDBI was not brought to the notice of the appellant. Thereafter the following relief was granted by the CLB which can be summed up as follows. That vacation of Office by the Directors cannot be I sustained. It was directed that in future the issue of notices for the Board meetings should be made by registered post before 21 days to the addressees F of the NRI Directors at their usual address in USA. It was further stipulated that NRI directors will have the right to appoint alternative Directors and if the right is exercised, then the alternative directors will also be given notices as stipulated. The shares allotted in the Board Meetings on 12.3.1996 and 24.7.1996 will not have any voting rights till the outcome of the proceedings before the Calcutta litgh Court. No further shares will be allotted against the G share application money with the company either in the names of the NRI investors or in the names of the respondents. Both the parties were permitted to make further investments but the same will be kept as share application money till the disposal of the proceedings before the Calcutta High Court. It was further directed that status quo shall be maintained till the matter is H disposed of by the Calcutta High Court. There will be no change in the KAMAL KUMAR DUTT Av. RUBY GENERAL HOSPITAL LTD. [A.K. MA THUR, J.] 475 composition of the Board other than that the appellants directors will function A as Directors in addition to the Executive Directors. This order was challenged by filing appeal before learned Single Judge of the Calcutta High Court. Learned Single Judge instead of going into minute details, examined the question with regard to the maintainability of the petition under Sections 397 & 398 of the Act before the CLB. Learned Single Judge B after examining all aspects came to the conclusion that the appellants have failed to make out a case under Section 397 of the Act for winding up of the company on the ground of just and equitable. But the learned Single Judge recorded that Dr.Dutta acted prejudicial to the interest of the company and further held that the preconditions to have an order under Section 397/398 of C the Act have not been made out and this aspect was not dealt with by the CLB at all. Therefore, learned Single Judge set aside the order of the CLB relying on a decision in the case of Hanuman Prasad Bagri & Ors vs. Bagree Cereals Pvt. Ltd. & Ors. reported in 1,15 Company Cases "493 and left the appellants to any appropriate remedy by way of company suit which can give the terminated director every relief. It was also observed that he can file a suit D for injunction and declaration and get himself reinstated as a director or if he has been removed from a directorship, he could have filed a suit for declaration. Learned Single Judge accordingly set aside the order of the CLB. Aggrieved against this order passed by the learned Single Judge on 31.3.2005 the present Special Leave Petitions were filed by the appellants. We E have given all necessary ~etails about the whole affairs of the company from the order of the CLB to which we shall hereinafter refer to. At the outset learned senior counsel, Mr.F.S.Nariman, appearing for the respondents has raife