# ARJUN PRASAD v. SHANTILAL SHANKARLAL SHAH AND OTHERS

- **Citation:** [1962] Supp. 2 S.C.R. 402
- **Court:** Supreme Court of India
- **Decided:** 1962
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/arjun-prasad-v-shantilal-shankarlal-shah-and-others-2615
- **Pages:** 10

## Headnote

IHI
s1.,, of Oriu•
••
B/,upnidra Kumor
Bou
IHI
402 SUPREME OOURT REPORTS [1962] SUPP.
qrdinan:e arc, in our opinion, very similar to the
rights with which the court was dealing in the case
of Steavenson and they must be held to endure and
last even after the expiry of the Ordinan~e. The
Ordinance has in terms provided that the Order of
Court declaring the elections to the Cuttack Muni·
cipality t-0 be invalid shall be deemed to be and
always to havo been of no legal effect whatever and
that the sa.id elections are thereby validated. That
being so, the said elections must be deemed to have
been validly held under the Aot and the. life of the
newly elected Municipality would be governed by
the relevant provisions of the Act and would not
come to an end as soon as the Ordinance expires.
Therefore, we do not think that the preliminary
objection raised by Mr. Chetty against the compe·
tence of the appeals can be upheld.
The result is that tho appeals are allowed, the
Order passed by the High Court is set. aside, and
the Writ Petition filed by Mr. Bose is di8missed
with costs throughout.
Appeals allowed.
ARJUN PRASAD
v.
SHANTILAL SHANKARLAL SHAH AND OTHERS
(AND CONNOOI'ED APPEAL)
(K.C. DAS G(T}'TA AND RAOHUBAR D~Y.AL, JJ:l
om
n -If caa be preaen.t "in ptraon
in mtth~-
M
.c
pa Y ,.,~ • Pera.....mai<d
to rtpruent cr•d1tor
eet"'g of creatwr -
_,.
,,,,--
1·a·
,r
•·
n -l'eraon t'Oli11!/ on bt.11111/ of compally-Va' "11 o, ~~
come pa y
I ~" • order-If 4~nl liu to Jligh Courl-lnd1a"
-
ompany. """' •
,,,,.....
,. "
IC'"
. A t
1"13 (7 o' 1913' •• 3 ld;>-V<,..,.a
.,.,.. ..
Oompan1u
r,,
. .,
'J
.,
•
1
I JO
Ar.t, 1897 (10 of 1897), •· 3(42)-LeU.ra Paten'., c..
.
S bs
t
to an order rr.ade for the wmdmg up of a
u equen
d'
.
,
·
h
Co pany Judge made a
1tCCll' n aor acuon to
company, tde
m. iollll ofs. 153 of the Indian Companies
l>C" taken un er provts
2 s.c.R.
SUPREME COURT REPORTS
403
Act, 1913. At the meeting of the unsecured creditors of
the company a resolution was pa8'ed by the creditors present,
either in person or through proxy, by majority in number as
well as three.fourths in value. At this meeting the appel·
lant claiming to represent two of the creditor companies cast
his votes on behalf of the said companies in support of the
resolution. No objection wa• taken at the meeting to the
validity of the votes by any of the creditors who opposed the
resolution. When the m liter came up for orders before the
Company Judge an objection was raised that the votes cast by
the appellant on behalf of the two creditor companits were
not valid, inasmuch ass. 153(2) of the Act requires that the
creditors should be present either in
pe~son or by proxy at the
meeting and that, in the present case, the two creditor
companies, being corporations, could
not be
considered to
have been present at the meeting "in person".
1'he Company
Judge overruled the objection on the grounds that it was
raised at a late
stage and that, in any case, the votes were
valid because the appellant's attendance at the meeting
amounted to the attendance of the
companies "in person".
On appeal, a Division Bench of the Patna High Court
rejected the contention that no appeal Jay to the High Court
from the order of the Company Judge but only
to the
Supreme Court and, on the merits, set aside hi! order.
Held, that:
(I) the.word "Court" ins. 153(7) of the
Tndian Companies Act, 1913, meam the Court exercising
original jurhdiction, and. therefore, an appeal from the order
of the Company Judge lay to the High Court under cl. IO of
the Letters Patent;
(2)
though under the General Clauses Act, 1897 a
company is a "perso·nu so that whenever the word "pers~n"
is used in any statute a
company would be included thereunder, unleiS there is some special provision by a
law a
company which is not a physical person cannot "be prese~t"
at any place "in penon"; and
(3) in the present case the votes cast by the appellant
wcte not valid in law and it being admitted that if the votes
were invalid
th.e req

## Text

IHI
s1.,, of Oriu•
••
B/,upnidra Kumor
Bou
IHI
402 SUPREME OOURT REPORTS [1962] SUPP.
qrdinan:e arc, in our opinion, very similar to the
rights with which the court was dealing in the case
of Steavenson and they must be held to endure and
last even after the expiry of the Ordinan~e. The
Ordinance has in terms provided that the Order of
Court declaring the elections to the Cuttack Muni·
cipality t-0 be invalid shall be deemed to be and
always to havo been of no legal effect whatever and
that the sa.id elections are thereby validated. That
being so, the said elections must be deemed to have
been validly held under the Aot and the. life of the
newly elected Municipality would be governed by
the relevant provisions of the Act and would not
come to an end as soon as the Ordinance expires.
Therefore, we do not think that the preliminary
objection raised by Mr. Chetty against the compe·
tence of the appeals can be upheld.
The result is that tho appeals are allowed, the
Order passed by the High Court is set. aside, and
the Writ Petition filed by Mr. Bose is di8missed
with costs throughout.
Appeals allowed.
ARJUN PRASAD
v.
SHANTILAL SHANKARLAL SHAH AND OTHERS
(AND CONNOOI'ED APPEAL)
(K.C. DAS G(T}'TA AND RAOHUBAR D~Y.AL, JJ:l
om
n -If caa be preaen.t "in ptraon
in mtth~-
M
.c
pa Y ,.,~ • Pera.....mai<d
to rtpruent cr•d1tor
eet"'g of creatwr -
_,.
,,,,--
1·a·
,r
•·
n -l'eraon t'Oli11!/ on bt.11111/ of compally-Va' "11 o, ~~
come pa y
I ~" • order-If 4~nl liu to Jligh Courl-lnd1a"
-
ompany. """' •
,,,,.....
,. "
IC'"
. A t
1"13 (7 o' 1913' •• 3 ld;>-V<,..,.a
.,.,.. ..
Oompan1u
r,,
. .,
'J
.,
•
1
I JO
Ar.t, 1897 (10 of 1897), •· 3(42)-LeU.ra Paten'., c..
.
S bs
t
to an order rr.ade for the wmdmg up of a
u equen
d'
.
,
·
h
Co pany Judge made a
1tCCll' n aor acuon to
company, tde
m. iollll ofs. 153 of the Indian Companies
l>C" taken un er provts
2 s.c.R.
SUPREME COURT REPORTS
403
Act, 1913. At the meeting of the unsecured creditors of
the company a resolution was pa8'ed by the creditors present,
either in person or through proxy, by majority in number as
well as three.fourths in value. At this meeting the appel·
lant claiming to represent two of the creditor companies cast
his votes on behalf of the said companies in support of the
resolution. No objection wa• taken at the meeting to the
validity of the votes by any of the creditors who opposed the
resolution. When the m liter came up for orders before the
Company Judge an objection was raised that the votes cast by
the appellant on behalf of the two creditor companits were
not valid, inasmuch ass. 153(2) of the Act requires that the
creditors should be present either in
pe~son or by proxy at the
meeting and that, in the present case, the two creditor
companies, being corporations, could
not be
considered to
have been present at the meeting "in person".
1'he Company
Judge overruled the objection on the grounds that it was
raised at a late
stage and that, in any case, the votes were
valid because the appellant's attendance at the meeting
amounted to the attendance of the
companies "in person".
On appeal, a Division Bench of the Patna High Court
rejected the contention that no appeal Jay to the High Court
from the order of the Company Judge but only
to the
Supreme Court and, on the merits, set aside hi! order.
Held, that:
(I) the.word "Court" ins. 153(7) of the
Tndian Companies Act, 1913, meam the Court exercising
original jurhdiction, and. therefore, an appeal from the order
of the Company Judge lay to the High Court under cl. IO of
the Letters Patent;
(2)
though under the General Clauses Act, 1897 a
company is a "perso·nu so that whenever the word "pers~n"
is used in any statute a
company would be included thereunder, unleiS there is some special provision by a
law a
company which is not a physical person cannot "be prese~t"
at any place "in penon"; and
(3) in the present case the votes cast by the appellant
wcte not valid in law and it being admitted that if the votes
were invalid
th.e requisite majority of three-fourths in value
requisite under s. 153(2) of the
Indian Co.mpanies Act, 1913,
would not be obtained and therefore no further action could
be taken by the Court in the matter, the delay in raising the
objection would not entitlo the Court to ignore the legal
defect of the votes.
CIVIL APPELLATE JumsnICTION: Civil Appeals
Nos. 201 and ~02 of 1961.
19~1
.Arjun Pras•d
••
Slumti/al S/iau~rl.Z
SMh
1961
Arjwi Prasad
v,
Slt4nlila/ Shank4Tlol
Shah
404
SUPREME COURT REPORTS [1062] SOPP.
Appeals from the judgment and decree dated
May, Hl, I!l5S of thn Patna High Court in L. P. As.
No8 I::l and 14 of HJ5i.
A. V.
Viswanatha Sastri, R. K. Garg, M. K.
Ramamurthi, D. P. Singh and S. C. Agaru·ala, for
tho appellants.
11!. C. Setalw.d, Attorne11·General for India.
B. P.
Rajyarhia and K. K. Sinha, for tho
respondents.
1961.
December 22.
The Judgment of the
Court was delivered by
D41 J,
DAs Gul'TA, J.-These appeals raison question
as to the manner in which a oreditor compan,v can
Yalidly cast its vote at a meeting of the creditors
held under the provisions of s. J53 of the Indian
Companies Ac't, 1913.
The question
a.riRes in
connection with such a meeting held of th•· rr<'ditors
of the Gaya Sugar
~tills Ltd. On NoYcmbl·r 1-l,
Hliil, an order was made by the Company J udQ'e
in the ·Patna High Court for the windin~ up of the
Gaya Sugar Mills Ltd.
On October 6, l!J!i:!, an
order was made by tho learned Judge for action to
be taken under s. 153 of the Indian Companies Act.
Mr. G. C. Banerjee, who was appointed Chairman
to hold the meeting of the creditors helcl soparnte
meetings of tho ciebenture·holclers, secured cr1:dit.ors
and of the unsecured creditors.
Jn hi>< R<'port he
stated as regards the meeting of the un~ecured
l'reditorH that "thirty unsecured ereclitord <'itlwr in
person or through proxy attended a.nrl took p«rt in
the meetin~." and that ultimately a resoluti0n proposed by one of the creditors. the Stand.irJ V ~cuum
Oil Cornpauy and seconded h,v another creditor Shri
K. C. Agarwal was p~d8Pd "by the creditors prest'rrt
by majority in number as well rui
thre~·f1.,urth iu
,-aluc."
It appears that at this. meeting one Arjun
' Pr.sad chiming to n·present two creditor C(•m·
panics, Yi7.., Bhandani Bros., and the Hindustan
2 S.C.R.
SUPREME COURT REPORTS
405
Coal Company Ltd., cast his votes on behalf of
thPse two companies, in support of the resolution.
No objccticn was taken at the meeting to the validity of these votes by any of the creditors who
opposed the resolution and the Chairman proceeded
on tho basis th'.l.t these votes were validly cast. It
is not 1isputed that if these votes were not validly
cast the requisite majority of three-fourths in value
would not be obtained.
When the application came up for final hearing before the Court an objectio11 was taken on
behalf of C!'editors who opposed the schPme that
the votes cast by, Arjnn Prasad on behalf of the
two creditor companies, viz., Bhandani Brothers and
the Hindustan Coal Company were not valid votes
and so the requisite majority of three-fourths in value
of the creditors had not been obtained. The Comp:iny Judge was of t.he opinion that there was no
sufficient explanation as to why the objection as to
the validity of the votes was not taken earlier and
so the objection raised at the late stage could not
bo entertained. On the merits also he held that
the resolution passed by the creditor companies
authorising Arjun Prasad to attend the meeting of
the unsecured creditors of the Ga.ya Sugar Mills
Ltd., and vote on behalf of the companies, were
sufficient in law to make his attendance at the
meeting the attendance of the companies "in
person" and his voting on behalf of the companies
valid voting of the companies. Accordingly, he
rejected this objection.
On appeal a Division Bench of the Patna High
Court has allowed the objection, bliing of. opinion
that the delay in raising the objection would not
entitle the Court to ignore the legal defect of the
votes and that in law the votes ca.st by Arjun
Prasad were not valid votes of these two creditor
companies, viz., Bhandani Brothers and the Hindustan Coal Company. A contention that no appeal
,
1901
Arjun Prasad
v.
ShanlUal S hankarla1
Shah
Das J,
'
11161
Arj•Pru••
v.
Slialilal 'i•w•rl</
SW
D.,J.
406 SUPREME COURT H.EPOR'.fS [1962) SUPP.
lay to th" High Court from tho order of the Com·
pany Judge was rejected. Therefore, the leurned
Judges set aside the order of the Company Judge as
to this part of the case. They, however, gave a
certificate that as regards the value and nature of
the case, it fulfils the requirements of Art. !33(l}(a)
of the Constitution and is a fit one for appeal to
this Court. On this certificate the present appeals
have been filed.
Three points were raised before us by Mr. Sastri
in support of the appeals. The first is that from
the decision of the Company Judge, an appeal lay
to this Court and not to the High Court.
~ccondly,
it was urged that the objection to the validity of
the votes not having been taken earlier should not
be allowed to be raised for the first time during
arguments at the final hearing of tho application.
Lastly, it was urged that the votes were valid.
As regards the first point it is to Lo noticed
that sub.a. 7 of s. iii3, which was added in 1936
provides that an appeal shdl lie from any order
made by the court exercising original jurisdiction
under the section to the authority authorised to
hear appeals from the decisions of the Court. It
therefore could not be disputed and was not
disputed that an appeal did lie from the order made
by the Cumpany Judge on October 6, 1953. The
controver~y is whether the appeal lay to this Court
or the High Court. In other words, the question
is, which is the authority authorised to bear appeals
from the decisions of the Court ? The "Court" here
cannot but mean the Court exercising original juris·
diction. When the Company Judge exercises the
jurisdiction ne does it und ~r the provisions of s. 3
of the Companies Act which says that the Court
having jurisdiction under this Act shall be the High
Court having jurisdiction in the place at which
the registered office of the company is situate.
The authority authorised to hear appeals from
2 S.C.R.
SUPREME COURT REPORTS
407
appealable deci~ions of a Single Judge of the Pa~na
High Court when exercising original jurisdiction lie
to the High Court and not to this Court.
(Vide
Clause 10 of the Letters Patent). It necessarily
follows that the appeal from the order of the
Company Judge lay to the High Court and not to
this Court. There is, therefore, no substance in the
first point raised on behalf of the appellant.
The next contention that the objection can·
not be entertained for 'the first time at the final
hearing of the application appears to us to be
equally unsound. It is undoubtedly tme that the
opposing creditors were guilty of m gligence in not
drawing the attention of the Chairman to what
they considered to be a defect in the voting on
behalf of the two creditor companies, viz., Bh~n
dani Brothers and the Hindustan Coal Co., and
no less negligence in not bringing this to the Court's
notice at the earliest opportunity. Laches on the
part of some creditors cannot however justify the
Chairman or the Court in disobeying the requirements of the Act. If in ·law the two votes cast
by Arjun Prasad for these two creditor companies
were not validly cast the three-fourth majority
requisite under s. 153, sub-s. 2, would not
be
there and so no further action under s. 153 could
be taken by the Court in the matter. How can the
Court turn a blind eye to the fact, if proved,
that on the basis of valid votes at the meeting
the requisite majority was not obtained, merely
because the Chairman's attention was not drawn to
the defect or it was not brought to the Court's
notice earlier ? In our opinion, the learned Judges
who heard the appeal were right in thinking that
however deplorable the delay by opposing credit01·a
in raising the objection might be, that would not
be a sufficient reason for refusing to entertain the
objection.
This brings us to the main question in contro·
ersy, viz., 'whether the resolutions passed by the
1961
Arjun Pr 8ad
v.
Bhantilal ShankM'lal
Shah
DasJ.
1961
• .frjt111 PraJad
v,
8 ... ti/111 S!i.nk<t</41
Shoh
DasJ.
408
SUPRE~IE COURT REPOl~TS (1962] SUPP.
two creditor companice, viz., Bhandani B~others
and the Hindustan Coal
Company, authorising
Arjun Prasad to attend the meeting on their behalf
and to voto there en their behalf made Arjun
Prasad's voting valid voting. Section lfl3(2J of the
Indian Companies A"t is in t,bese u ords :-
"If a majority in number representing
three-fourths in value of the creditors or class
of creditors, or members or cla88 of members,
as the case may be, present either in person,
or by proxy at the meeting, agree to any
compromise or arrangement, the compromise
or arrangement shall. if sanctioned by the
Court be binding on all the creditors or the
clasi:; of creditors, or on all members or class
of members, as the case may be, and also on
the company, or, in the case of a company in
the course of being wound up, on the liquidator and contributories of tho Company."
The agreement has to be of a majority in
number representing three-fourths in valuo of those
who are preRi>nt either in person or by proxy at the
meeting.
The aprreem•mt of thosc who are not
present at the meeting either in person or by proxy
cannot be taken into consideration.
Any creditor
whether a corporation or a natuml person can be
present at a meeting by proxy. A natural person can
of course be: present at a meeting "in person". Can
a corporatirm OH present at a meeting "in person''?
It appears to us t.h'.lt unless there is some special
provision by a law, a company which is not a
physical person cannot "be present" at any place
"in person.'' It is true that under the General
Clauses Act, 18\li, a company is a "person", so that
whenever the word ''pt•rson" is used in any statute
a compa11y woul<l Le ineluded thereunder. The
definition in the General Cl11.us~s Act can however
be of no assistll.llCe in inforpn·tin~ the words "to be
present in p:,ri;on'', and the diflieutty in the way
of a company L<'ing pt·csent in person can Le .ubviated only by statut•ny provi~ions or rnles havmg the
fore<' of law.
2 s.c.R. SUPREME COURT REPORTS
409
Nor can the appellant derive any assistance
from the English Case In re Kelantan Coco, L.imited
and Reduwl, (') cited by the learned counsel. In
that case; the Court was dealing with a petition for
reduction of capital.
In deciding whether the
speci~l resolution to reduce the capital of the
company had been duly passed, the Court had to
consider whether there was a quorum at the confirmatory meeting, at -which one member of the
company and one representative appointed under
s. 68 of the Companies (Consolidation) Act, 1908,
to represent a sharehold:er of the company, the
Eastern Development Corporation, Limited, were
present.
The articles of Association provided :
"two members personally present shall be a
quorum.''
It was
held that a
representative
appointed under s. 68 should be taken into account
in considering whether there was a quorum. The
provisions of s. 68 were similar to those of s. 80
of the Indhn Coropanies Act, 1913, and there·
under a company which is a member of another
company may, act as its representative at any
me'lting of that other company. The presence of
such a representative was taken in the above case
to amount to personal presence of a member of the
company. The case does not deal with the question
of a creditor company.
Int.he Companies Act, 1956, a provision has
been introduced under which a company which is a
creditor of another company may by resolution of
its directors, authorises such person as it thinks fit
to act its representative at any meeting of any
creditors of the company held in pursuance of the
Act and a person authorised i!l this manner
shall be entitled to exercise the same rights and
powers (including the right to vote by proxy) on
behalf of the company,
\S. 187(l)(b) and 2). No
such provision however is to be found in the Indian
Companies Act, 11113. It is unnecessary for us to
(1)
1920 Weekly Notes, Part I, p. 274.
1961
Ar1un Prasad
v.
Shanti/al Shan/car! • J
Shah
DasJ.
1'61
Atjwa Prosa4
v.
ShmliJ.J SNvikorl•I
Shah
DorJ.
410 SUPREME COURT REPORTS (1962] SUPP.
consider whether under this uew provision
tho
attend~nce of a person authoris£d in this manner
at a. meeting of the creditors will amount to attend·
ance of the creditor company "in person". For,
the present case is governed by the provisions of
the Indian Companies Act, 1913 and not by this
new provision'.
When the Companies Act was amended iu
1936, an addition was ma.de in s. 246 which empowers the High Court to make rules, concerning
the mode of proceedings inter alia "for the holding
of meetings of erec!itors and members in connection
with proceedings under s. 153 of this Act." Accordingly, a number of Rules were framed by tho Patna
High Court in exercise of this additional power.
Rule 144 of the Rules states that a creditor or
contributor may vote either in person or by proxy.
Rules l '15 to 1.53 deal with various questions as
regards proxies. Of these Rule 150 lays down how
a proxy is to be given wherfl a creditor is a corporatiou. Admittedly, no proxy in
accordance
with Ruic 150 was given by the two credit-0r companies, Bhandani Brothers and the Hindustan Coal
Company, in the present case.
There is nothing
in these rules which can assist Mr. Sa.stri's argument that a resolution by the directors of the
company authorising a director or ~ome other person to represent tbP company at the creditors'
meeting ma.be him a "present in person" in law
for that company at the meeting.
Mr. Sa.stri's last argument was that as the
business of the company has to be managed by the
directors and the directors can delegate any of their
powers to any one of themselves, the attendance
of Arjun Prasad at the meeting should reasonably
be cow•trued as the attendance of all the directors
and so the attendance of thP company "in person".
As we have idready indi•:atl'<i it does not apprar to
us that in tin· Act of I !Ha tht·re i~ a11y provi8ion
2 S.C.R.
SUPREME COURT REPORTS
411
for attendance of the company "in person", but
apart from that we wish to point out that the
resolution made by the two companies do
not
appear to us to delegate the powers of the directors
to Arjun Prasad.
The conclusion of the High Court that the
votes cast by Arjun Prasad on behalf of the two
companies.,
viz., Bhandani
Brothers and the
Hindustan Coal Company, were not valid votes is,
in our opinion, correct.
The appeals are accordingly dismis~ed with
costs. One set of hearing fee.
Appeals d;ismisse,d.
MAHARANA SHRI JAYVANTSINGHJI
RANMALSINGHJI
ETC.
v.
THE STATE OF GUJRAT
(B. P. SINHA, c. J., s. K. DAS, A. K. SARKAR,
N. RAJAGOPALA AYYANGAR and
J. R. MUDHOLKAR, JJ.)
Land Tenure, Abolition of-Amendment of enactment-If
creates a new cla.!s of permanenl. tenanl8-0onslitutional
validity-If infringes fundamental rights of erstwhile tenure·
holdera--Bombay Land Tenure Abol-ition Laws (Amendment)
Act, 1958 (Bom. LYII of 1958), ss. 3, 4, 6-0on•titution of
India, Arts. U, 19 (1)(/), 31, 31-A.
The petitioners, who were tenure-holders, challenged
the constitutional validity of the Bombay Land Tenure Abolition Laws (Amendment) Act, 1958 and in.particular ss. 3 and
4 read withs. 6 of that Act, as infringing their fundamental
rights guaranteed by Arts. 14, 19 and 31 of the Constitution.
Their case in brief was that those provisions by making certain
non-permanent tenants permanent as from the commencement
of the Bombay Taluqdari Tenure Abolition Act, 1949,
enabled them to acquire occupancy right by payment of six
times the assessment or the rent under s. 5A of that Act
instead of 20 timea to 200 times the as>essment under s. 32H
of ~e Bombay Tenancy and Agricultural Lands Act, 1948,
1951
.4rjun Prarad
v.
Sha•lital SiuJllkarl•I
Shah
1961
Denmber 32.