Union of India vs Company Law Board, Mumbai Bench and Others

S.J. Kathawalla, J.—The appellant--Union of India, represented by the Ministry of Corporate Affairs, through the Regional Director, Western Region, has filed the present appeal u/s 10F of the Companies Act, 1956 ("the Act") seeking to set aside the order dated March 28, 2013, passed by respondent No. 1--the Company Law Board, Mumbai Bench, disposing of Company Petition No. 62 of 2009 under sections 397, 398 and 402 of the Act, chiefly on the ground that notice u/s 400 of the Act was not served by the Company Law Board on the appellant. The above appeal was admitted on June 11, 2013 and is now taken up for final hearing.

The following questions of law are framed for consideration in the present appeal :

(a) Whether the order passed by the Company Law Board, Mumbai Bench, dated March 28, 2013, is non est, ex facie not valid and the entire proceedings in Company Petition No. 62 of 2009, stand vitiated since the notice of the application/petition made by the original petitioner (respondent No. 2) to the Company Law Board under sections 397 and 398 of the Act was not served on the Central Government by the Company Law Board itself under the provisions of section 400 of the Act ?

(b) Whether the Company Law Board, whilst passing a final order in the petition alleging oppression and mismanagement, can by exercising its powers u/s 402 of the Act, remove the auditor duly appointed by respondent No. 3 company, in view of the provisions contained in section 224(7) of the Act which stipulates that: "... any auditor appointed u/s 224(7) of the Act may be removed from office before expiry of his term only by the company in general meeting, after obtaining the previous approval of the Central Government in that behalf".

The relevant facts in brief are as set out hereunder :

Respondent No. 3--M/s. SAF Yeast Co. P. Ltd. ("M/s. Saf Yeast") is incorporated under the Companies Act 1956 ("the Act"), having its registered office at Mumbai. It is a joint venture company between respondent No. 2, a foreign shareholder and respondents Nos. 4 to 8 being the Indian shareholders holding approximately 49 per cent. of the total shareholding of respondent No. 3. Respondent No. 2--Nafan B.V. ("original petitioner") is a company incorporated under the laws of Netherlands. Respondent No. 2 owns 80,772 equity shares of respondent No. 3, which constitutes approximately 51 per cent. of the total shareholding of respondent No. 3. Respondent No. 2 is a subsidiary of respondent No. 10--M/s. LESAFFRE ET CIE ("M/s. Lesaffre group") which is incorporated in France. The entire shareholding of respondent No. 3 is therefore held between respondent No. 2 and respondents Nos. 4 to 8.

The main grievance of respondent No. 2 in Company Petition No. 62 of 2009 is that respondents Nos. 4 to 8 have transferred the shares of respondent No. 2 in the board meetings of respondent No. 3 held on May 23, 2009 and May 25, 2009. According to respondent No. 2, the said board meetings were held without issuing notices to respondent No. 2 and therefore are non est, illegal and unlawful and the resolutions passed thereat are invalid and ineffective, and thus liable to be set aside. According to respondent No. 2, in an earlier meeting held on January 29, 2009, again without giving notice to respondent No. 2, a decision was taken to appoint respondent No. 9--Sharp & Tannan as the statutory auditor for determining the fair value of the equity shares of respondent No. 3 and forwarding the valuation report to the Lesaffre group. According to respondent No. 2, this meeting was also illegal for want of notice upon the directors of respondent No. 2 and for non-circulation of agenda, etc. According to respondent No. 2, the valuation report obtained by M/s. Saf Yeast is also not based on the recognised principles for the valuation of a company and the duplicate shares issued by respondents Nos. 3 to 6 are illegal, being issued in contravention of the statutory provisions. Therefore, respondent No. 2 submitted in Company Petition No. 62 of 2009 that the entire shareholding of respondent No. 2 transferred in favour of respondents Nos. 4 to 8, deserved to be set aside and respondents Nos. 3 to 8 be directed to rectify the register of members of respondent No. 3 by inserting the name of respondent No. 2 in relation to 80,722 shares held by respondent No. 2.

The said Petition No. 62 of 2009 was filed by respondent No. 2 before the Company Law Board, Mumbai Bench, on June 17, 2009. On June 18, 2009, the advocate for respondent No. 2 forwarded a copy of the petition to the Regional Director, Western Region, Ministry of Company Affairs, by hand delivery, informing the Regional Director, mat the said company petition will be before the Company Law Board, Mumbai Bench, for hearing on Monday June 22, 2009, at 11.00 a.m. at which time he was requested to remain present. By a letter dated June 19, 2009, the advocate for respondent No. 2, informed the Company Law Board that a copy of the Company Petition No. 62 of 2009 was, inter alia, served on the Regional Director with an intimation that the matter would be before the Company Law Board, Mumbai Bench on June 22, 2009, at 11.00 a.m. or thereabout. A copy of the letter dated June 18, 2009, addressed to the Regional Director was also forwarded to the Company Law Board along with the said letter dated June 19, 2009.

The stand taken by respondents Nos. 3 to 8 before the Company Law Board was that respondent No. 2 did in fact enter into a memorandum of understanding dated January 23, 2009 and agreed to transfer its shares in favour of respondents Nos. 4 to 8 for consideration as determined by the statutory auditors under article 17 of the articles of association. Respondents Nos. 3 to 8 denied and disputed all the allegations made by respondent No. 2 against them, including the allegation that the valuation report obtained by respondent No. 3 from respondent No. 9 was not based on recognised principles for the valuation of a company.

From time to time, the Company Law Board heard the parties to Petition No. 62 of 2009, over a span of four years and finally disposed of the same by its order dated March 28, 2009. However, the Central Government did not appear before the Company Law Board in the said span of four years and thereby chose not to make any representation in the said matter before the Company Law Board.

The learned Member of the Company Law Board by his impugned order dated March 28, 2013, decided that respondent No. 2 did in fact enter into a memorandum of understanding dated January 23, 2009 and agreed to transfer its shares in favour of respondents Nos. 4 to 8 for consideration as determined by the statutory auditors under article 17 of the articles of association. However, the learned Member came to the conclusion that the valuation report of respondent No. 9 was in contravention of the statutory guidelines and was not based on recognised principles for the valuation of a company and therefore deserved to be set aside. The learned Member also came to the conclusion that the meetings in which the shares were transferred from the name of respondent No. 2 in favour of respondent No. 6 were not valid since the notices for such meetings were not given to respondent No. 2 and therefore the resolutions passed at the said meetings also deserved to be set aside. The learned Member therefore passed a composite order whereunder, after holding that the memorandum of understanding to sell the shares of respondent No. 2 to respondents Nos. 4 to 8 was a valid and enforceable document and the Company Law Board was competent to enforce the said memorandum of understanding for sale, in the exercise of the rights and powers u/s 402 of the Act, the valuation report prepared by respondent No. 9 was set aside. After setting aside the resolutions pertaining to transfer of snares of respondent No. 2 in favour of respondent No. 6, and directing the shares to be once again shown in the name of respondent No. 2 in the register of shares of respondent No. 3, the learned Member ordered a fresh valuation of shares with a direction to respondent No. 2 to transfer its shares in favour of respondents Nos. 3 to 8 as per the valuation determined through fresh valuation. The learned Member has in exercise of his powers u/s 402 of the Act also removed respondent No. 9--Sharp & Tanan as auditors of respondent No. 3 company.

A copy of the impugned order dated March 28, 2013, was forwarded by the Company Law Board, Mumbai Bench, to the Ministry of Corporate Affairs under cover of its letter dated April 2, 2013, which was received by the Ministry of Corporate Affairs on April 9, 2013. Thereafter, the Ministry of Corporate Affairs by its e-mail dated April 10, 2013, enquired with the Company Law Board whether a copy of the petition was served on it. The Bench Officer of the Company Law Board by his letter dated April 12, 2013, addressed to the Joint Director (Inspection), Ministry of Corporate Affairs, inter alia, recorded that since the service proof was not filed by respondent No. 2, an enquiry should be made with the Regional Director, Western Region, as regards service of copy of the petition by respondent No. 2. It was further recorded in the said letter by the Bench Officer, Company Law Board, Mumbai Bench, that as per the available record it appeared that no notice was sent to the Central Government through the Regional Director (Western Region) by the Company Law Board, Mumbai Bench, nor has there been any practice to serve the notice upon the Regional Director, Western Region. However, the Board had started sending notice to the Regional Director, Western Region, with immediate effect as required u/s 400 of the Act.

The Union of India, through the Ministry of Corporate Affairs, therefore filed the above appeal, inter alia, on the ground that the impugned order dated March 28, 2013, is passed by the Company Law Board, Mumbai Bench, without giving notice to the Central Government as required u/s 400 of the Act and moreover as per regulation 14(3) of the Company Law Board Regulations, 1991, respondent No. 2 was required to serve a copy of the application to the Central Government which in the present case has not been done by respondent No. 2 and therefore the impugned order was liable to be set aside on this ground also. The appellant also contended that the Company Law Board, in view of the provisions contained in section 224(7) of the Act, had no power or jurisdiction to remove respondent No. 9, who was duly appointed by respondent No. 3. However, when the advocates for respondent No. 2 produced a copy of the letter bearing the acknowledgment of the Regional Director, Western Region, dated June 18, 2009, acknowledging the receipt of a copy of the petition along with the notice that the hearing would take place before the Company Law Board, Mumbai Bench on June 22, 2009, at 11.00 a.m. and with a request to the Regional Director to remain present, the Union of India filed an additional affidavit of the appellant admitting that the office of the Regional Director had indeed received the notice dated June 18, 2009, from the advocates for respondent No. 2 along with a copy of the petition. However, owing to the manner in which the entry was made in the register of the Regional Director, the office of the Regional Director could not trace the same and therefore incorrectly stated in the appeal that they had not received a copy of the petition even from the original petitioner, i.e., respondent No. 2 herein. According to the appellant, at this stage they are unable to trace either the letter dated June 18, 2009, received from the advocate for respondent No, 2 or the copy of the petition in their office.

Respondent No. 2, respondents Nos. 4 to 8--Mr. Amnachalam Muthu and others, respondent No. 9--Sharp & Tannan and respondent No. 10--Lesaffre group have all filed their respective appeals impugning certain directions contained in the impugned order by which they are aggrieved. However all the respondents including respondent No. 9--Sharp & Tannan who are removed by the Company Law Board as auditors of respondent No. 3, have submitted that they do not support the stand taken in the above appeal by the appellant--Union of India, viz., that the final order passed by the Company Law Board after hearing Company Petition No. 62 of 2009 over a period of four years stands vitiated because the notice of filing of the petition was not given to the Central Government by the Company Law Board itself u/s 400 of the Act.

Mr. Shyam Mehta, the learned senior advocate appearing for the appellant-Union of India, has submitted that the impugned order dated March 28, 2013, passed by the Company Law Board is non est and ex facie not valid, inter alia, having been passed without complying with the mandatory provisions of section 400 of the Act. It is submitted that a plain reading of section 400 of the Act makes it clear that the Company Law Board is statutorily bound to give notice to the Central Government of every application under sections 397 and 398 of the Act and must mandatorily consider the Government''s submissions, if any, before passing of the final orders. It is submitted that since in the present case there is absolutely no compliance with the statute by the Company Law Board, the impugned order is non est and invalid. In support of its submission that it is obligatory for the Company Law Board to give notice of the petition to the Central Government and the Company Law Board should exercise its powers under sections 397, 398 and 402 of the Act after hearing the Central Government, the appellant has relied on the decision of the hon''ble Supreme Court in the case of Cosmosteels Private Ltd. and Others Vs. Jairam Das Gupta and Others, and the decision of the Delhi High Court in the case of Shakti Trading Co. P. Ltd. and another Vs. Union of India and another, . In support of its contention that the provisions of section 394A are in consonance with section 400 of the Act and therefore as a necessary corollary, section 400 of the Act must be provided the same recognition and interpretation as provided to section 394A in the said case, the appellant has also relied on a decision of the Delhi High Court YKM Holdings P. Ltd., In re [2001] 105 Comp Cas 249 (Del).

The learned senior advocate appearing for the appellant has further submitted that the compliance with the Company Law Board regulation 14(3) are procedural acts performed by the party in the process of filing the petition before the Company Law Board. The requirements of the Company Law Board under regulation 14(3) are procedural requirement of attaching and presenting the acknowledgment of service with the application filed with the Company Law Board. The obligations cast on the party by virtue of regulation 14(3) are distinct and separate from what has been cast on the Company Law Board by the Legislature as contained in the statute. It is submitted that in the present case respondent No. 2 submitted a copy of the petition to the office of the Regional Director, Western Region, on June 18, 2009, which has been recorded in the inward register as a letter received from the attorneys of respondent No. 2 pertaining to Company Petition No. 62 of 2009. Regulation 14(3) requires respondent No. 2 to serve a copy of the petition on the concerned Registrar of Companies and file the acknowledgment proof with the Company Law Board at the time of filing the petition. Regulation 14(3) further requires respondent No. 2 to serve a copy of the petition on the Central Government. However, the petition was already filed with the Company Law Board on June 17, 2009 and therefore there was no compliance by respondent No. 2 and by the Company Law Board with regulation 14(3), as the acknowledgment was not attached and presented with the petition to the Company Law Board, as required for filing and prescribed in the said regulation. However, it is submitted that even assuming that regulation 14(3) had been complied with, the mere procedural act in complying with the Company Law Board Regulations does not absolve the Company Law Board from its obligation to separately give notice of the petition as mandated u/s 400 of the Act. It is further submitted that the procedure prescribed in regulation 14(3) by the Company Law Board is required to be followed for filing a petition, prior to the same even being accepted/admitted and prior to any hearing by the Company Law Board and passing of any order by the Company Law Board. Therefore, the requirements contained in regulation 14(3) are not a substitute for the notice as mandated by the Act u/s 400 before the passing of final orders. It is submitted that regulation 14(3) is relevant at the pre-hearing stage, i.e., at the time when the petition is filed. This pre-hearing stage requirement cannot be equated with the statutory duty cast upon the Company Law Board for issuance of notice u/s 400 of the Act.

It is further submitted on behalf of the appellant that even if regulation 14(3) has been followed while filing the petition with the Company Law Board, there can be no question of deemed or substantial compliance with section 400 of the Act. Section 400 of the Act is a distinct requirement under the Act and requires the Company Law Board to issue notice prior to passing the final orders, whereas regulation 14(3) has no effect once a petition is filed. It is further submitted that a conjoint reading of section 400 with regulation 21 would show that a notice to the Central Government issued by the Company Law Board u/s 400 of the Act will have to comply with the service provisions in regulation 21. In support of its submission that the mandatory requirement to issue notice cannot be implied but must be strictly complied with and that there is no substitute to the specific provision in a statute which requires the court to issue notice, the appellant has relied on the decisions of the hon''ble Supreme Court in the cases of Secretary to Government of Karnataka and another Vs. V. Harishbabu, and Indian Rayon Corporation Ltd. Vs. Raunaq and Company Pvt. Ltd., . Relying on the decision of the hon''ble Supreme Court in the case of Raghunath Rai Bareja and Another Vs. Punjab National Bank and Others, , the learned senior advocate appearing for the appellant submitted that the statute must be interpreted literally and where the words of the statute are unequivocal, there is no scope for importing any rule of interpretation.

The learned senior advocate appearing for the appellant also submitted that the powers of the Central Government have been further impinged by the Company Law Board by removing the statutory auditor in the impugned order. Section 224(7) of the Act provides that the only mechanism for removal of a statutory auditor appointed under the said section before expiry of the term, except as provided in the proviso to sub-section (5), requires the prior approval of the Central Government in this behalf. It is submitted that in the cases of Basant Ram and Sons and Anrs. Vs. Union of India and Others, and Sh. Devinder K. Jain Vs. Union of India (UOI) and Others, , which concerned the removal of statutory auditors u/s 224(7) of the Act, the same was challenged by filing writ petitions before the Delhi High Court and the Company Law Board was not approached for redressal u/s 224(7) of the Act. It is therefore submitted that in the public interest the Central Government has to protect the powers given to it by the Legislature under the provisions of the Act. The non-compliance of statutory provisions of section 400 of the Act and the encroachment of the Central Government''s powers u/s 224(7) of the Act, renders the impugned order redundant.

The appellants have therefore prayed that the impugned order dated March 28, 2013, passed by the Company Law Board, Mumbai Bench, be quashed and set aside.

Mr. De''vitre, the learned senior advocate appearing for respondent No. 2--the original petitioner, has submitted that the above appeal is filed by the appellant--Union of India on an incorrect fact, i.e., the appellant has wrongly alleged that it had not been served with a copy of the petition. He submitted that a copy of the petition was served on the Regional Director, Western Region, Ministry of Company Affairs by the advocates for the original petitioner (respondent No. 2 herein) on June 18, 2009, who was also informed that the petition would be the Company Law Board on June 22, 2009. By a praecipe dated June 19, 2009, the advocates for respondent No. 2 also forwarded a copy of the said letter dated June 18, 2009, addressed to the Regional Director to the Company Law Board, Mumbai informing that the copy of the captioned petition had been served upon the Regional Director.

Mr. De''vitre further submitted that in response to a query raised by the Ministry of Corporate Affairs qua the service of Company Petition No. 62 of 2009 on the Central Government by the Company Law Board, the Bench Officer of the Company Law Board by his letter dated April 12, 2013, proceeded on the basis that service of notice of the petition under sections 397 and 398 was to be effected by respondent No. 2. This is consistent with the manner of service provided for in regulation 14(3) of the Company Law Board Regulations, 1991. Mr. De''vitre therefore submitted that it is clear that there has been substantial compliance with the requirement of law. The object of section 400 of the Act is to enable the Central Government to make representations, if any, before the passing of a final order in a petition under sections 397 and 398 of the Act. In the present case, the Central Government did not file any representation nor did it appear before the Company Law Board though the petition was heard for an extended period between July, 2010 and April, 2012 and again from January to March, 2013, for a total of more than 30 days, spread over a period of four years. Mr. De''vitre also submitted that the Company Law Board has wide powers u/s 402 of the Act and the appellant cannot be heard to say that in view of section 224(7) of the Act, the Company Law Board does not have the power or jurisdiction to remove the statutory auditor whilst deciding a petition under sections 397 and 398 of the Act. Mr. De''vitre submitted that this submission is not even supported by respondent No. 9, the auditors who are aggrieved by their removal and have filed a separate appeal impugning their removal as auditors of respondent No. 3 company on the grounds stated therein.

Mr. De''vitre submitted that therefore the appeal be dismissed with costs.

Mr. Dwarkadas, the learned senior advocate appearing for respondents Nos. 4 to 6 and 8, submitted that the primary ground of challenge made out in the captioned appeal relates to the alleged failure of the Company Law Board in giving notice as mandated u/s 400 of the Act. The powers and functions of the Central Government u/s 400 of the Act have been delegated to the relevant Regional Director under notification dated May 31, 1991. The second ground of challenge made out in the captioned appeal relates to the alleged failure of respondent No. 2 in serving a copy of the petition as mandated by regulation 14(3) of the Company Law Board Regulations, 1991.

As regards the first ground, i.e., the alleged failure to serve the notice on the Central Government by the Company Law Board, Mr. Dwarkadas submitted that prior to the amendment to the Act in 1991, the jurisdiction, inter alia, under sections 397 and 398 of the Act vested with this court, and the same was shifted to the Company Law Board only after the said amendment to the Act. In relation thereto the hon''ble Supreme Court of India has, in exercise of the powers conferred by sub-sections (1) and (2) of section 643 of the Act and of all other powers conferred, in consultation with the High Courts framed the Companies (Court) Rules, 1959 ("the Rules"). The Rules have been published vide Notification No. G. S. R. 950 in the Gazette of India on August 17, 1959. Rule 89 of the said Rules deals with the requirement of notice to the Central Government plausibly u/s 400 of the Act. Rule 89 reads as follows :

Notice to Central Government.--Save where a petition is presented by or on behalf of the Central Government u/s 401, notice shall be given to the Central Government of every petition u/s 397 or 398, and a copy of the petition shall be served on the Central Government along with the notice of the date of hearing, not less than 14 clear days before the date fixed for the hearing of the petition.

Mr. Dwarkadas submitted that the said rule 89 is framed in order to ensure compliance with section 400 of the Act which is demonstrable by virtue of the fact that the heading of the Chapter in which rule 89 is contained reads as "Relief in case of oppression or mismanagement (sections 397 to 407)" which is clearly indicative of the fact that the rules in this section have been framed in pursuance of sections 397 to 407 of the Act. Mr. Dwarkadas submitted that it is further relevant that while section 400 of the Act specifies that the court is required to give notice to the Central Government (through its Regional Director), rule 89 does not make any specific mention as to who is required to give such notice. In Hungerford Investment Trust Ltd., Hungerford Investment Trust Ltd., Re (in Voluntary Liquidation) Vs. Turner Morrison and Co. Ltd., , the Calcutta High Court observed that a notice as required u/s 400 of the Act when given by the petitioner was in compliance with the requirement of the Act.

Mr. Dwarkadas submitted that after the jurisdiction to hear matters, inter alia, under sections 397, 398 and 402 of the Act was transferred to the Company Law Board, the Company Law Board framed the said Regulations. Respondent No. 2 has through its advocates'' letter dated June 18, 2009, forwarded a copy of the petition to the Central Government through the office of the Regional Director and hence the requirement under regulation 14(3) was expressly complied with. It is submitted that since under the Regulations as framed by the Company Law Board, the requirement of serving the petition on the Central Government, has by an express delegation made by the Company Law Board, been delegated to the petitioner, the submission on behalf of the Central Government that the petition should be served by the Company Law Board alone is not sustainable. In any event, it is submitted that the object and purpose u/s 400 of the Act is to notify the Central Government of the filing of the petition under sections 397 and/or 398 of the Act. Mr. Dwarkadas has relied on the decision in the case of Ghanshyam Dass and Others Vs. Dominion of India and Others, , wherein the hon''ble Supreme Court has, inter alia, held that the notice u/s 80 of the Code should be held to be sufficient if it substantially fulfils its object of informing the parties concerned about the nature of the suit to be filed. Mr. Dwarkadas submitted that the ratio of the said decision is squarely applicable to section 400 of the Act as well. Mr. Dwarkadas also relied on the decision of the hon''ble Supreme Court in the case of Jang Singh Vs. Brijlal and Others, wherein it is held that no act of courts should harm a litigant.

Mr. Dwarkadas submitted that there is no inconsistency between regulation 14(3) and regulation 21, inasmuch as regulation 21 itself contemplates that one of the modes of giving notice by the Board could be by the party itself. Without prejudice to the submissions that the mandate of section 400 of the Act has been fully complied with, it is submitted by Mr. Dwarkadas that in any event since respondent No. 2 has given notice of the filing of the petition to the Central Government, as is now the admitted position, there is substantial compliance with the requirements of section 400 of the Act and the order of the Company Law Board cannot be said to be without jurisdiction. It is submitted that it is trite law that so long as there is identity between the cause of action and the reliefs claimed in the notice and the petition, the principle of substantial compliance would apply.

Mr. Dwarkadas submitted that in so far as the ground raised by the appellant that the Company Law Board does not have jurisdiction to remove the statutory auditors without prior approval of the Central Government, the powers of the Company Law Board u/s 402 of the Act are not constrained by the provisions of section 224(7) of the Act, which apply in a different context. The wide powers of the Company Law Board u/s 402 of the Act and in particular u/s 402(g) of the Act have been recognised by the decision of this court in the case of Bennet Coleman and Co. Vs. Union of India and Others, . Mr. Dwarkadas clarified that the submissions made by him on behalf of his clients are without prejudice to the contention of his clients that the Company Law Board ought not to have removed the statutory auditors in exercise of its powers u/s 402 of the Act.

Mr. Dwarkadas submitted that the appeal therefore be dismissed with costs.

Mr. Khambata, the learned senior advocate appearing for respondent No. 10--Lesaffre group, has repeated and reiterated the submissions made on behalf of respondent No. 2. He submitted that by virtue of the petition being served on the Central Government through the Regional Director by respondent No. 2, section 400 of the Act has been strictly complied with. He has submitted that the distinction sought to be drawn by the appellant in paragraph 1 of the memorandum of appeal between notice given by the Company Law Board and service of a copy of the petition by respondent No. 2 as per the Company Law Board Regulations, is a distinction without a difference. Mr. Khambata submitted that relying upon regulation 21(1), it was contended by the appellant that the obligation to issue notice is that of the Company Law Board and that no notice was issued by the Company Law Board in the present case and that the failure is fatal in terms of section 400 of the Act. Mr. Khambata submitted that regulation 21 has no application to the facts of the present case. Without prejudice to the said contention, Mr. Khambata submitted that regulation 21(1)(i) contemplates service by the party itself. In the alternative, Mr. Khambata submitted that in the event that this court is pleased to hold that service by respondent No. 2 under the Company Law Board Regulations does not amount to strict compliance of section 400 of the Act, it is submitted that the provisions of section 400 of the Act are not mandatory in so far as the identity of the person or body giving the notice is concerned. What is mandatory is that notice of every application u/s 397 and/or section 398 has to be given to the Central Government. The form of the notice, the manner of its service and the identity of the server is not mandatory. In support of his contention, Mr. Khambata has relied on the decisions of the hon''ble Supreme Court in the case of K. Kamaraja Nadar Vs. Kunju Thevar and Others, and M.Y. Ghorpade Vs. Shivaji Rao M. Poal and Others, , wherein the hon''ble Supreme Court whilst construing section 117 of the Representation of the Peoples Act, 1951, held that whereas the deposit was mandatory, the mode of deposit as well as the person who could make a deposit has to be in compliance with the rules of the High Court and as such has been held to be directory in several decisions of this court.

Mr. Khambata has also relied on the decision of the Marble City Hospital and Research Centre P. Ltd. and Others Vs. Sarabjeet Singh Mokha, , wherein it was held that noncompliance with the provisions of section 400 of the Act did not vitiate the proceedings. Mr. Khambata therefore submitted that by virtue of service of the proceedings by respondent No. 2 upon the appellant on June 18, 2009, section 400 of the Act in any event stands substantially complied with.

As regards the contention of the appellant that in view of section 224(7) of the Act, the Company Law Board does not have the power or jurisdiction to remove the statutory auditor whilst deciding a petition under sections 397 and 398 of the Act, Mr. Khambata has submitted that such an objection is completely misconceived and without substance. He has submitted that from a reading of section 224(7) of the Act it is clear that the said section prohibits a company in a general meeting from removing a statutory auditor before the expiry of his term, if the previous approval of the Central Government in that behalf has not been obtained. Section 224(7) cannot be interpreted to mean that the Company Law Board has no jurisdiction to remove a statutory auditor before the expiry of his term unless the Company Law Board first obtains the approval of the Central Government. There is nothing in sections 397 and 398 which indicates either expressly or by necessary implication that the power of the Company Law Board is circumscribed in any manner by section 224(7) of the Act. Relying on the decisions in Cosmosteels Private Ltd. and Others Vs. Jairam Das Gupta and Others, , Bennet Coleman and Co. Vs. Union of India and Others, and Shanti Prasad Jain v. Union of India [1973] 75 BLR 778. Mr. Khambata submitted that it is well-settled that the Company Law Board has the widest power under sections 402 and 403 of the Act to pass such orders as it thinks fit to bring about the desired results in the management of the affairs of the company and that the exercise of such power is not subject to the other provisions of the Act.

Mr. Khambata submitted that therefore, none of the contentions of the appellant have any merit and the present appeal ought to be dismissed with costs.

I have considered the aforestated submissions advanced on behalf of the parties as well as the case law cited by them.

Section 400 of the Companies Act, 1956, requires that: "the Company Law Board shall give notice of every application made to it u/s 397 or 398 to the Central Government, and shall take into consideration the representations, if any, made to it by that Government before passing a final order under that section". As submitted by the respondents, the term "give notice" indicates that the notice is one by way of service of proceedings rather than a notice from a court or tribunal issued to a respondent/defendant, on the basis that the court/tribunal is satisfied that there is a case to be answered or that there is a prima facie case in the matter. It is therefore merely a means of giving the Central Government an opportunity of making representations for consideration by the Company Law Board before passing final orders. Therefore, even if section 400 of the Act makes it mandatory for the Company Law Board to give such notice to the Central Government, the section stands complied with once notice is given either by the Company Law Board itself or through its agent or other person authorised to give such notice.

The Company Law Board has made the Company Law Board Regulations, 1991. Regulation 14(3) of the Company Law Board Regulations, 1991, reads thus :

The petitioner shall serve a copy of the reference or petition other than a petition, under sections 49, 79, 80A, 111, 111A, 113, 118, 144, 163, 188, 196, 219, 225, 284, 304 and 307 of the Act, upon the concerned Registrar of Companies having jurisdiction over the Company and shall attach to and present with his petition, reference an acknowledgment from the office of the Registrar of Companies receiving a copy of the petition, reference, so served :

Provided that...

Provided further that, in case of a petition or complaint under sections 235, 237, 250, 397, 398, 408 and 409 of the Act, a copy thereof shall also be served upon the Central Government.

It is clear that the Company Law Board therefore framed regulation 14(3) requiring the petitioner to serve a copy of any petition, inter alia, under sections 397 and 398 of the Act upon both, the concerned Registrar of Companies as well as the Central Government. The Company Law Board by virtue of the second proviso to regulation 14(3) of the Company Law Board Regulations, authorised the petitioner as its agent or delegate to serve the petition u/s 397/398 on the Central Government. Such service by the agent is therefore service by its principal (viz., the Company Law Board), for the purpose of service. The Company Law Board itself has till date treated the service by the petitioner as service by the Company Law Board, as can be seen from its letter addressed to the Department of Company Affairs dated April 12, 2013, wherein it is, inter alia, admitted that the Company Law Board, Western Region has itself not given any notice of any application u/s 397/398 of the Act to the Central Government through the Regional Director, Western Region, till date. Over the years, the Central Government, through the Regional Director, Western Region, has also not raised any objection for receiving the notice of an application filed under sections 397 and 398 of the Act from the petitioner and not the Company Law Board itself. This is obviously so because the object of giving notice to the Central Government of an application filed before the Company Law Board under sections 397 and 398 of the Act, thereby giving an opportunity to the Central Government to make its representations before the final orders are passed in the petition, is complied with/achieved by service of the petition on the Central Government by the petitioner as directed by the Company Law Board Regulations, 1991. In the instant case, admittedly, the advocates for respondent No. 2 (original petitioner) had served a copy of the petition on the Regional Director, Western Region on June 18, 2009 and has also put the Regional Director, Western Region to notice of the fact that the hearing of the said petition would take place before the Company Law Board on June 22, 2009, and the Regional Director was requested to remain present at the said hearing. In fact, the petition was served on the Central Government through the Regional Director, Western Region, after the petition was numbered on the next day of its filing and therefore the question of such service being treated as a pre-acceptance/admission or pre-hearing notice does not arise. In fact, as stated hereinabove, the object of section 400 of the Act as well as regulation 14(3) is to give notice to the Central Government about the petition having been filed under sections 397 and 398 of the Act before the Company Law Board, to enable the Central Government to make its representations if any before the Company Law Board, which the Company Law Board would take into consideration before passing its final order on the petition. However, the Central Government through the Regional Director, Western Region did not choose to appear before the Company Law Board on June 22, 2009, or on any other date of hearing which took place on about 30 occasions over a span of four years.

The appellants have contended that the notice required to be given by the Company Law Board u/s 400 of the Act is one under regulation 21(1) of the Company Law Board Regulations which reads as follows :

Service of notice and process issued by the Bench.--(1) Any notice or process to be issued by the Bench may be served by any of the following modes directed by the Bench :

(i) service by the party itself;

(ii) by hand delivery (dasti) through a messenger of the office of the Bench;

(iii) under certificate of posting;

(iv) by registered post with acknowledgment due if so required by an order of the Bench;

(v) where the Central Government is a party, through the Secretary of the concerned Ministry or Department or through Branch Secretariat of the Ministry of Law or through Standing Counsel of the Central Government;

(vi) where the State Government is a party, through the Chief Secretary or the Standing Counsel of the State Government.

In the first place, whilst regulation 21 of the Company Law Board Regulations, speaks of a notice or process issued by the Bench generally, regulation 14(3) speaks of a specific notice having reference to proceeding u/s 397/398 of the Act. Regulation 14(3) being a specific provision delegating the authority to give notice of a petition u/s 397/398 by a petitioner to the Central Government ought to apply to a notice u/s 400 of the Act. Secondly, there is nothing special about the Company Law Board itself giving a notice. Even regulation 21 admits of service by a party as a permissible mode of service by the Company Law Board.

In my view the object of section 400 of the Act, viz., "to give notice" by way of service of the proceedings to the Central Government, is to enable the Central Government to make any representation in the matter which would be considered by the Company Law Board before passing a final order under sections 397 and 398 of the Act is strictly complied with. In view thereof, the decision of the hon''ble Supreme Court in the case of Cosmosteels Private Ltd. and Others Vs. Jairam Das Gupta and Others, and the decision of the Delhi High Court in the case of Shakti Trading Co. P. Ltd. and another Vs. Union of India and another, (relied upon by the appellant in support of their case that it is obligatory on the Company Law Board to give notice of the petition to the Central Government and the Company Law Board should exercise its powers under sections 397, 398 and 402 of the Act after hearing the Central Government) does not render assistance to the appellant. The appellant has also relied on the decision of the hon''ble Delhi High Court YKM Holdings P. Ltd., In re [2001] 105 Comp Cas 249 (Del). Section 391 of the Act allows an application to be filed for a proposed compromise or arrangement between a company and its creditors and members. Sub-section (2) of section 391 of the Act provides for sanction by the court to the proposed compromise/arrangement between a company and its creditors and members, if a majority in number representing three-fourths in value of the creditors or class of creditors or members or class of members, as the case may be, present and voting at the meeting agree to such compromise or arrangement. Since the issue as to whether a meeting of the creditors or members is to be held or not, or the manner in which it should be held to consider a compromise or proposed arrangement cannot be of any concern to the Central Government and the court would sanction a compromise only after perusing the result of the meeting, the hon''ble Delhi High Court YKM Holdings P. Ltd., In re [2001] 105 Comp Cas 249 (Del) held that the notice which is required to be served on the Central Government u/s 391 of the Act has to be of an application under sub-section (2) of section 391 of the Act or section 394 of the Act and not at the initial stage of an application under sub-section (1) of section 391 of the Act for calling of meeting of the creditors and members of the company for considering the scheme of arrangement or compromise. The same is not the case in a petition u/s 397/398 of the Act. In the case of a petition filed u/s 397/398 of the Act, a notice is given to the Central Government of the filing of the petition to enable the Central Government to make its representations if any, which could then be taken into consideration by the Company Law Board before passing the final order under the said sections. The Company Law Board may hear the petition at any time. Thus, having regard to the object of such notice/service u/s 400 of the Act and under regulation 14(3) of the Company Law Board Regulations, the reasoning of the hon''ble Delhi High Court YKM Holdings P. Ltd., In re [2001] 105 Comp Cas 249 (Del) in connection with a notice to the Central Government u/s 391 of the Act cannot be made applicable to the notice for the purposes of section 397/398 of the Act.

In any event, as submitted by the respondents, even if it is held that the service of the petition on the Central Government under the Company Law Board Regulations, 1991, does not amount to strict compliance of section 400 of the Act, there is a substantial compliance of section 400 of the Act in this case by reason of the notice given by the advocates for the petitioner to the Central Government. The provisions of section 400 of the Act are not mandatory in so far as the identity of the person or body giving the notice. What is mandatory is that notice of every application u/s 397/398 of the Act has to be given to the Central Government. The form of the notice, the manner of its service and the identity of the server are not of mandatory nature but are directory. The hon''ble Supreme Court in K. Kamaraja Nadar Vs. Kunju Thevar and Others, and M.Y. Ghorpade Vs. Shivaji Rao M. Poal and Others, had the occasion to decide whether section 117 of the Representation of the Peoples Act 1951 (which required the deposit by the petitioner of Rs. 1,000 as security for costs of an election petition) is mandatory or not. The hon''ble Supreme Court held that the requirement of deposit was mandatory but the manner of deposit was not. The hon''ble Supreme Court whilst construing section 117 held that whereas the deposit was mandatory (page of M.Y. Ghorpade Vs. Shivaji Rao M. Poal and Others, ) : "... the mode of deposit as well as the person who could make a deposit has to be complied with in accordance with the rules of the High Court in question and, as such has been held to be directory in several decisions of this court".

The hon''ble Supreme Court has in the context of notice to the Central Government u/s 80 of the CPC in the case of Ghanshyam Dass and Others Vs. Dominion of India and Others, held at paragraph 14 of the judgment thus (page 1009) :

... the question as to whether a notice u/s 80 of the Code is valid or not is a question of judicial construction... and... that this court has... adopted the rule of substantial compliance in dealing with the requirement that there must be identity between the cause of action and the reliefs claimed in the notice as well as in the plaint... the court has held that notice under this section should be held to be sufficient if it substantially fulfils its object of informing the parties concerned of the nature of the suit to be filed. On this principle, it has been held that though the terms of the section have to be strictly complied with, that does not mean that the notice should be scrutinised in a pedantic manner divorced from common sense. The point to be considered is whether the notice gives sufficient information as to the nature of the claim such as would enable the recipient to avert the litigation.

The court further held as follows (page 1010) :

Our laws of procedure are based on the principle that ''as far as possible, no proceeding in a court of law should be allowed to be defecated on mere technicalities''. Here, all the requirements of section 80 of the Code were fulfilled. Before the suit was brought, the Dominion of India received a notice of claim from Seth Lachman Dass. The whole object of serving a notice u/s 80 is to give the Government sufficient warning of the case which is going to be instituted against it was that the Government, if it so wished, settle the claim without litigation or afford restitution without recourse to a court of law. That requirement of section 80 was clearly fulfilled in the facts and circumstances of the present case.

It is a matter of common experience that in a large majority of cases the Government or the public officer concerned make no use of the opportunity afforded by the section. In most cases the notice given u/s 80 remains unanswered till the expiration of two months provided by the section. It is also clear that in a large number of cases, as here, the Government or the public officer utilised the section merely to raise technical defences contending either that no notice had been given or that the notice actually given did not comply with the requirements of the section.

The appellant has placed reliance on the decisions of the Indian Rayon Corporation Ltd. Vs. Raunaq and Company Pvt. Ltd., and Secretary to Government of Karnataka and another Vs. V. Harishbabu, , wherein it is held that the issuance of a notice u/s 14(2) of the Arbitration Act, 1940, by the court is a mandatory requirement Relying on the said judgments, the appellant submits that the respondents cannot be heard to say that section 400 of the Act has been substantially complied with in the case at hand.

Sub-sections (1) and (2) of section 14 of the Arbitration Act, 1940, read as under :

(1) When the arbitrators or umpire have made their award, they shall sign it, and shall give notice in writing to the parties of the making and signing thereof and of the amount of fees and charges payable in respect of the arbitration and award.

(2) The arbitrators or umpire shall, at the request of any party to the arbitration agreement or any person claiming under such party or if so directed by the court and upon payment of the fees and charges due in respect of the arbitration and award and of the costs and charges of filing the award, cause the award or a signed copy of it, together with any depositions and documents which may have been taken and proved before them, to be filed in court, and the court shall thereupon give notice to the parties of the filing of the award.

Article 119 of the Limitation Act, 1963, provides for the period of limitation and the same reads thus :

(b) for setting aside an award or getting an award remitted for reconsideration thirty days from the date of service of the notice of the filing of the award.

Therefore, sub-section (1) of section 14 requires the arbitrator to give notice in writing to the parties of the making and signing of the award. Sub-section (2) of section 14 provides for filing of the award by the arbitrators or umpire in court and the court thereupon shall give notice to the parties of the filing of the award. This notice by the court is of extreme relevance/importance to the parties, since the right of a party to get the award set aside or to get an award remitted for reconsideration is barred under article 119(b) after thirty days from the date of service of the notice of the filing of the award. The issuance of such notice by the court would therefore certainly be a mandatory requirement. However, it is pertinent to note that though sub-section (2) of section 14 of the Arbitration Act, 1940, states that the notice should be by the court to the parties, the hon''ble Supreme Court has clarified in its decision in Secretary to Government of Karnataka and another Vs. V. Harishbabu, that the notice to the pleaders of the parties who are representing the parties before the court, would be sufficient compliance with the requirements of sub-section (2) of section 14 of the Arbitration Act, 1940, and further that in a case where a party has knowledge aliunde of the filing of the award and seeks time to file objections to the Award, absence of a formal notice from the court would be rendered immaterial and in such a case the date when the party enters its appearance and either through an application in writing or orally seeks time to file objections to the award, shall be deemed to be the date of service of the notice within the meaning of article 119(b) of the Limitation Act, 1963, read with section 14(2) of the Arbitration Act, 1940.

As mentioned hereinabove, since section 400 of the Act contemplates giving notice to the Central Government by way of service of the proceedings thereby giving an opportunity to the Central Government to make representations, if any, to the Company Law Board, which the Company Law Board would consider before passing final orders u/s 397/398 of the Act, the notice contemplated u/s 400 of the Act cannot be compared to the notice required to be given u/s 14(2) of the Arbitration Act, 1940. The appellant therefore cannot draw support from the decisions in Indian Rayon Corporation Ltd. Vs. Raunaq and Company Pvt. Ltd., and Secretary to Government of Karnataka and another Vs. V. Harishbabu, . Therefore, in the instant case, the respondents are correct in contending that even if it is held that section 400 of the Act has not been strictly complied with, the same is substantially complied with in the case at hand.

In fact, a learned single judge of the Madhya Pradesh High Court in the case of Marble City Hospital and Research Centre P. Ltd. and Others Vs. Sarabjeet Singh Mokha, has in paragraph 42 held as follows (page 40) :

Even though by placing reliance on the judgment in the case of Bilasarai Joharmal Vs. Akola Electric Supply Co. Private Ltd., : Bilasrai Joharmal and Others Vs. Akola Electric Supply Co. Private Ltd., , Shri P.R. Bhave, learned senior advocate, contended that issuance of notice to the Central Government was necessary, but there is nothing in the said judgment to indicate that non-issuance of notice would render the entire proceedings to be null and void. When the provision is to be complied with by the Company Law Board, the company petitioner cannot be made to suffer for non-compliance. In the said judgment, there is nothing to indicate that non-compliance of this provision renders the entire proceeding vitiated. On the contrary, the principles which had weighed with the law-makers for incorporating section 400 would indicate that the provision was incorporated for protecting the interest of minority shareholders or a class of members in minority, who have interest in a company and to safeguard their rights and interest, the provision for notice to the Central Government is incorporated. Consideration of the representation contemplated is for obtaining the views of the Central Government in order to protect the right of the unrepresented minority shareholders, whose interest is to be seen in a proceedings pertaining to winding up of a company or other matters where public interest is involved. There is nothing under law to indicate that non-compliance with the aforesaid provision renders the proceeding vitiated in all cases, even when no public interest or right of any other member of the company, unrepresented, is involved (Ref. : C.R. Datta on the Company Law, Sixth edition 2008; pages 5700 to 5702).

In the present case, the shareholders holding almost 100 per cent. of the shareholding in respondent No. 3 company have already represented themselves before the Company Law Board. All of them are also represented in the present appeal and as recorded hereinabove all of them including the auditors Sharp and Tannan have submitted before this court that without prejudice to the contentions raised by them in their respective appeals they do not support the contention of the appellant in the present appeal, viz., that the impugned order of the Company Law Board be quashed and set aside because the notice required to be served on the Central Government u/s 400 of the Act was not served by the Company Law Board itself, though the petition was served on the Central Government by the original petitioner and in fact the Central Government was also informed of the hearing of the petition. In fact, in the instant case the appellant has in the memo of appeal or in its written submissions not even mentioned what representation it was desirous of making before the Company Law Board before the final orders were passed and how the impugned order passed is against public interest and/or the minority shareholders.

As submitted by the respondents, the appeal by the present appellant must also be viewed in the context of the undisputed position that the Central Government almost without exception never responds to any notice of proceedings before the Company Law Board u/s 397/398 of the Act and has never appeared before the Company Law Board in such proceedings. The consequence of the Company Law Board''s failure to give notice to the appellant cannot be visited upon the litigants. It is a well-settled principle that parties cannot suffer due to an act of the court. The hon''ble Supreme Court has in the case of Jang Singh Vs. Brijlal and Others, held that (page 1633): "There is no higher principle for the guidance of the court than the one that no act of courts should harm a litigant and it is the bounden duty of courts to see that if a person is harmed by a mistake of the court he should be restored to the position he would have occupied but for that mistake. This is aptly summed up in the maxim : ''Actus curiae neminem gravabit''." By analogy, the same rule ought to apply in this case.

The Privy Council has in the case of Montreal Street Railway Co. v. Normandin, AIR 1917 PC 142, at 144 held that when a provision relating to public duty is mandatory, holding acts done in neglect of such duty to be null and void, would cause serious inconvenience or injustice to innocent parties who have no control over those entrusted with the duty and at the same time would not promote the main object of the Legislature. Such provision should be construed to be directory and the neglect of such provisions would not affect the validity of the acts done.

As submitted by the respondents, if the interpretation of section 400 of the Act canvassed by the appellant is accepted, it will have the consequence of affecting each and every order passed by the Company Law Board u/s 397/398 of the Act, since it is now an undisputed position on record that the Company Law Board never used to serve any notice upon the Regional Director in any matter prior to April 2013, and the Central Government has never objected to the same. In view of the facts and circumstances of the present case, the decision of the hon''ble Supreme Court in the case of Raghunath Rai Bareja and Another Vs. Punjab National Bank and Others, is of no assistance to the appellant.

In the circumstances, the question of quashing and setting aside the order dated March 28, 2013, passed by the Company Law Board does not arise and question No. 1 framed above is answered in the negative. However, this court has noted that the Company Law Board has in its letter to the Central Government dated April 12, 2013, inter alia, recorded that the Company Law Board itself has forthwith started giving notice to the Central Government u/s 400 of the Act which the Company Law Board will surely adhere to. This court also grants liberty to the appellant to make its representations (other than the submissions made and decided herein) in the appeals filed by the respondents herein impugning the order of the Company Law Board dated March 28, 2013, which representations shall be considered by the company court before passing final orders in those appeals.

The next objection sought to be raised on merits by the appellant is that the Company Law Board has no power or jurisdiction to remove an auditor duly appointed by respondent No. 3 in view of the provisions contained in section 224(7) of the Act.

Section 224(7) provides as follows :

(7) Except as provided in the proviso to sub-section (5), any auditor appointed under this section may be removed from office before the expiry of his term only by the company in general meeting after obtaining the previous approval of the Central Government in that behalf.

From a plain reading of the section it is clear that it prohibits a company in its general meeting from removing a statutory auditor before the expiry of his term if the previous approval of the Central Government in that behalf has not been obtained. As submitted by the respondents, it would defy logic to interpret section 224(7) of the Act as meaning that even a court or Tribunal such as the Company Law Board has no jurisdiction to remove a statutory auditor before the expiry of his term unless such court/Tribunal first obtained the approval of the Central Government. Sections 397 and 398 of the Companies Act, 1956, confer jurisdiction upon the Company Law Board in respect of the matters stated therein. There is nothing in these sections which indicate either expressly or by necessary implication that the powers of the Company Law Board are circumscribed in any manner by section 224(7) of the Act. In any event it is well-settled that the Company Law Board has the widest powers under sections 402 and 403 of the Act to pass such orders as it thinks fit to bring about the desired result in the management of the affairs of a company and that the exercise of such powers is not subject to the other provisions of the Act. In Bennet Coleman and Co. Vs. Union of India and Others, , the hon''ble Division Bench of this court has drawn a distinction between the powers of the Central Government under Chapter IVA of the Act and powers of the court under Chapter VI (which powers have been subsequently vested in the Company Law Board) as follows (page 114) :

It is in view of this scheme which is very apparent on a fair reading of the arrangement of chapters and the sections contained in each chapter which are all grouped under Part VI of the Act that the question will have to be answered as to whether the powers of the court under Chapter VI (which includes sections 397, 398 and 402) should be read as subject to the provisions contained in the other chapters which deal with normal corporate management of a company and, in our view, in the context of this scheme having regard to the object that is sought to be achieved by sections 397 and 398 read with section 402, the powers of the court thereunder cannot be so read. Further, an analysis of the sections contained in Chapter VI of Part VI of the Act will also indicate that the powers of the court u/s 397 or 398 read with section 402 cannot be read as being subject to the other provisions contained in sections dealing with usual corporate management of a company in normal circumstances. As stated earlier. Chapter VI deals with the prevention of oppression and mismanagement and the provisions therein have been divided under two heads under head A powers have been conferred upon the court to deal with cases of oppression and mismanagement in a company falling under sections 397 and 398 of the Act while under head B similar powers have been given to the Central Government to deal with cases of oppression and mismanagement in a company but it will be clear that some limitations have been placed on the Government''s powers while there are no limitations or restrictions on the court''s powers to pass orders mat may be required for bringing to an end the oppression or mismanagement complained of and to prevent further oppression or mismanagement in future or to see that the affairs of the company are not being conducted in a manner prejudicial to public interest. In other words, whenever the Legislature wanted to do so it has made a distinction between powers conferred on the Government (vide section 408) and powers conferred on the court (vide section 402) while dealing with similar emergent situations or extraordinary circumstances arising in the management of a company and in the case of the Government it has placed restrictions or limitations on the Government''s powers but no restrictions or limitations of anything have been prescribed on the court''s powers.

The hon''ble Division Bench of this court whilst laying emphasis on the widest powers of the Company Law Board under sections 402 and 403 of the Act, has observed as under (page 116 of 47 Comp Cas) : An examination of the aforesaid sections clearly brings out two aspects, first, the very wide nature of the power conferred on the court, and, secondly, the object that is sought to be achieved by the exercise of such power with the result that the only limitation that could be impliedly read on the exercise of the power would be that nexus must exist between the order that may be passed thereunder and the object sought to be achieved by these sections and beyond this limitation which arises by necessary implication it is difficult to read any other restriction or limitation on the exercise of the court''s power. We are, therefore, unable to accept Mr. Sen''s contention that the court''s powers u/s 398 read with section 402 should be read as subject to the other provisions of the Act dealing with normal corporate management or that the court''s orders and directions issued thereunder must be in consonance with the other provisions of the Act.

In view of the above, the objection of the appellant based on section 224(7) of the Act is completely misconceived and without substance. The case law cited by the appellant in this regard lends no assistance to the appellant in the facts and circumstances of the present case. The aforestated question No. 2 is therefore answered in the affirmative. Under the circumstances, the above appeal is dismissed.