Century Flour Mills Ltd. vs S. Suppiah and Others

Veeraswami, C.J.—An extraordinary general body meeting of the shareholders of the Century Flour Mills Ltd., Madras, was fixed for 14-

9-1974. The appellants in the Original Side Appeal applied u/s 186 of the Companies Act for naming an Advocate-Chairman and fixing the venue

of the meeting. Though it was contended that the court had no power to appoint an Advocate-Chairman, the learned Judge sitting on the company

side declined to appoint an advocate on the ground that there was no need therefor. The appeal is from that order. Pending the appeal, a Division

Bench of this court, by an order dated 12-9-1974, on a relative application, directed ''that the convening of the General Body meeting of the

respondent herein on 14-9-1974, be and is hereby stayed pending further orders on this petition''. A certified copy of this order, as we find from

the record of evidence, was served at the registered office of the company on 30-9--1974. Nevertheless, the meeting as notified was allowed to

take place the next day. An application for contempt was taken out in consequence against one of the Managing Directors and another. But, on

their tendering apology, which the Division Bench accepted since it was unqualified, the contempt petition was closed.

C. M. P. No. 10935 of 1974 has been taken out in the form of a Judge''s summons under Rule 9 of the Company Court Rules, 1959 read with

Section 151, C, P. Code, to declare as void, illegal End inoperative the resolutions passed at the meeting of 14-9-1974. On the other hand, an

application has been taken out by the respondents to dismiss the appeal itself on the ground that it has become infructuous since the meeting had

already taken place.

In the first instance, these matters were heard by a Division Bench, to which two of us were parties, but because of one or two decisions of this

court, rendered by Division Benches, it was considered necessary to refer the matters to a fuller Bench and that is how these matters have come

before us.

The only question for decision in these matters is whether the resolutions passed at the meeting on 14-9-1974, can validly stand, notwithstanding

the fact that the meeting was held in violation of the inhibitory order aforesaid. What the appellants contend is that, since the meeting was held in

violation of the inhibitory order, no wrong doer in respect thereof should be allowed to derive any benefit out of his own wrong. Alternatively, it is

also put that in exercise of the inherent powers of this court u/s 151, C.P.C., this court, should in such circumstances, and in order to meet the ends

of justice, put back the parties in the same position as they had been immediately before the order staying the proposed meeting was issued. We

shall first examine whether in such circumstances this court can invoke its inherent power u/s 151, C.P.C.

Since the matter is not res integra, the best way to approach the question is to refer to the decided cases and in the light of it, to come to a

conclusion. Cases are all agreed that, whether it is a stay order, or an injunction, essentially, there is no difference between them except that in the

case of a stay order, it is addressed to the court concerned, and in the other, to the person inhibited from doing a certain thing. There is also no

difference that, so far as Order XXXIX, C.P.C. is concerned, it confers only limited powers and would not be of assistance in circumstances as in

the present case.

In Mulraj Vs. Murti Raghonathji Maharaj, , the Supreme Court observed-

As we have already indicated, an order of stay is as much a prohibitory order as an injunction order and unless the court to which it is addressed

has knowledge of it, it cannot deprive that court of the jurisdiction to proceed with the execution before it. But there is one difference between an

order of injunction and an order of stay arising out of the fact that an injunction order is usually passed against a party while a stay order is

addressed to the court. As the stay order is addressed to the court, as soon as the court has knowledge of it, it must stay its hand; if it does not to

so, it acts illegally. Therefore in the case of a stay order .as opposed to an order of injunction, as soon as the court has knowledge of it. it must stay

its hand and further proceedings are illegal, but so long as the court has no knowledge of the stay order, it does not lose the jurisdiction to deal with

the execution which it has under the Civil Procedure Code.

It went on to observe that, though the court to which the stay order was addressed, when it had no knowledge of the stay order, could not be said

to be acting without jurisdiction in making an order contrary to the stay order, nevertheless, it is not powerless to undo any possible injustice that

might have been caused to the party in whose favour the stay order was passed during the period till the court had knowledge of the stay order.

The Supreme Court went on-

We are of opinion that Section 151, C.P.C. would always be available to the court executing the decree, for in such a case, when the stay order

is brought to its notice, it can always act u/s 151 and set aside steps taken between the time the stay order was passed and the time it was brought

to its notice, if that is necessary in the ends of justice and the party concerned asks it be do so.

On facts, that was, a case of stay.

In Manohar Lal Chopra Vs. Rai Bahadur Rao Raja Seth Hiralal, , the view was expressed that Section 151, C.P.C. itself said that nothing in the

Code should be deemed to limit or otherwise affect the inherent power of the court to make orders necessary for the ends of justice. It, therefore,

follows that Order XXXIX, C.P.C. should not be considered as placing any limit on the scope of the inherent power u/s 151. In Nalla Senapathi

Sarkarai Manradiar. Vs. Sri Ambal Mills (P) Ltd. and Others, , which was quite akin to the circumstances in the instant case, a Division Bench

consisting of Anantanarayanan, Offg. C. J. and Natesan J., after accepting the apology and dismissing petition for contempt for violating an

injunction prohibiting the holding of a meeting, observed-

most certainly the proceedings of the meeting were void, the meeting itself having been conducted in disobedience of the interim injunction, and

that will equally apply to the resolution or resolutions passed therein. We make a record to that effect. This situation at law has not been disputed

by any of the learned counsel.

Though the learned Judges did not give the reason for their view, we are inclined to think, with respect, that the conclusion so drawn is

unexceptionable, as we shall show presently.

Subodh Gopal Bose Vs. State of Bihar, and Hari Nandan Agrawal and Another Vs. S.N. Pandita and Others, , are cases of injunction against

parties. In the earlier case, the lesse deed executed was in violation of an injunction. After holding that Order XXXIX did not provide for relief, the

court was of opinion that, in exercise of its inherent power, it could set aside the lease deed, as it was violative of the injunction order. In Hari

Nandan Agrawal and Another Vs. S.N. Pandita and Others, a similar view was held and it was said that in such circumstances the parties in the

interests of justice should be put back in the same position as they stood prior to the issuance of the order of injunction. This is what the Allahabad

High Court said-

So far as F. A. F. O. No. 251 of 1973 and C. R. 875 of 1972 are concerned, it may be pointed out that the mere fact that the applicants had

been dispossessed after the interim injunction order had been issued would not be enough to treat the chapter in regard to possession over the

house as closed. If a person had been dispossessed by wilfully disobeying an order of injunction the court which issued the order of injunction can

after considering the circumstances of each case and the conduct of the parties always pass such an order in the ends of justice as would undo the

wrong done to the party in whose favour the order of injunction had been issued. The exercise of this inherent power vested in the court is based

on the principle that no party can be allowed to take advantage of his own wrong in spite of the order to the contrary passed by the court, see The

State of Bihar Vs. Usha Devi and Another, and Magna and Another Vs. Rustam and Another, .

In our opinion, the inherent powers of this court u/s 151 C.P.C. are wide and are not subject to any limitation. Where in violation of a stay order

or injunction against a party, something has been done in disobedience, it will be the duty of the court as a policy to set the wrong right and not

allow the perpetuation of the wrong doing. In our view, the inherent power will not only be available in such a case, but it is bound to be exercised

in that manner in the interests of justice. Even apart from Section 151, we should observe that as a matter of judicial policy, the court should guard

against itself being stultified in circumstances like this by holding that it is powerless to undo a wrong done in disobedience of the court''s orders.

But in this case it is not necessary to so to that extent as we hold that the power is available u/s 151. C.P.C.

Mr. Panchapakesa Iyer, for the respondent, however, contends that our view, as indicated above, would prevail only as between the parties in

court, but when third parties have acquired rights by reason of something happening though it is in contravention or in disobedience of the order of

court, the legal position would be different. He says that, since the resolutions had been passed at the meeting on 14-9-1974, which had vested

rights in third parties, it would be beyond the power of this court to make an order, which will have the effect of affecting or interfering with or

setting aside such rights in third parties. In our opinion, the question of third parties'' rights being affected does not arise in the context. We are

concerned with a meeting which had been prohibited and not with what happened at the meeting. If the meeting held was in violation of the court''s

order and the parties affected approach this court and ask for relief on the ground that what happened at the meeting would be destructive of their

standpoint; this court on a consideration of the entire circumstances and facts will have to put back the parties in the same position as they stood

prior to the holding of the meeting. That is not to say that, in doing so, the court interferes with third parties'' rights, All that this court would do in

such circumstances is that, since the meeting was prohibited, but all the same it was held, in violation of the order of this court, it would refuse to

recognise the holding of the meeting as a legal one,

Our attention has been invited for the respondents to Puzhakkal v. Mahadeva Pattar AIR 1919 Mad 772. That was an extreme case where a

Karnavan was held to be liable to repay the debt which he had incurred for necessity of the tarwad in contravention of an order forbidding him

from incurring debts. The defence in the suit to enforce the debt was that the incurring of the debt was in violation of a prohibitory order. The court

declined to accept the defence. It may be seen at once that the justice of the case demanded that the Karnavan was made liable to the debt, more

especially when it was incurred for necessity of the tarwad. In that case, the learned Judges confined themselves to a consideration of Order

XXXIX and their attention was not drawn to their inherent power u/s 151, C.P.C. Even if their powers u/s 151 had been invoked, in that case too,

we have no doubt that the court would have come to the same conclusion because of the exigencies of justice in that case. In Sukhdeo Rai and

Others Vs. Ram Narain Rai and Another the court was concerned with an alienation made contrary to the order of injunction. It was no doubt held

that the alienation could not be held to be invalid. But that was solely on the basis of the provisions of Order XXXIX, Lord Krishna Sugar Mills

Ltd. v. Abanash Kaur, (1974) 44 Comp Cas 210 = 1972 Tax LR 1667, which was cited for the respondents, was concerned with a different

situation and we do not think it is of assistance in the present case. We are of the view that none of these cases cited for the respondents, which we

have referred to above, leads us to the conclusion that this court cannot legitimately invoke its inherent powers in the present circumstances.

Another contention for the respondents was that the conduct of the appellants and the circumstances of the case showed culpable negligence

on their part and on that basis they should ,be regarded also as wrongdoers and should be prevented from deriving a benefit out of their own

wrong conduct. We think that this argument is adding insult to injury because, having obtained an interim order of stay of the meeting, and also

having served a copy of the order at the registered office, they could not be expected, as the respondents would have it, to attend the meeting and

then warn the shareholder at the meeting against passing any resolution contravening the order of this court. We do not think that there is any

substance in this contention of the respondents.

On the above view of the matter, we are of opinion that C. M. P. No. 10935 of 1974 should be allowed. Accordingly we declare that the

parties are put back in the same position as they stood immediately prior to the service of the stay order of this court, which means that the meeting

on 14-9-1974, and the resolutions passed at that meeting, would have no effect whatsoever.

C. M. P. Nos. 10347, 13355 and 13856 of 1974 will stand dismissed. No costs.