Calcutta High Court
Industrial Investment Bank Of India … vs Smt. Persis A. Khambatta & Another on 12 March, 2026
Author: Debangsu Basak
Bench: Debangsu Basak
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IN THE HIGH COURT AT CALCUTTA
CIVIL APPELLATE JURISDICTION
ORIGINAL SIDE
Present:
The Hon'ble Justice Debangsu Basak
And
The Hon'ble Justice Md. Shabbar Rashidi
APO No. 339 of 2017
GA No. 3 of 2025
Industrial Investment Bank of India Limited (In Voluntary Liqn.)
Vs.
Smt. Persis A. Khambatta & Another
For the appellant : Mr. Abhrajit Mitra, Sr. Adv.
Mr. Chayan Gupta, Adv.
Mr. S. Pal Choudhuri, Adv.
Mrs. Tithi Paul, Adv.
Ms. Shilpi Paul, Adv.
Mrs. Sudha Adak, Adv.
Ms. Baisali Saha, Adv.
For the respondents : Mr. Sakya Sen, Sr. Adv.
Mr. Sourojit Dasgupta, Adv.
Mr. Aasish Chaudhury, Adv.
Mrs. Uma Bagree, Adv.
Hearing concluded on : 30.01.2026
Judgment on : 12.03.2026
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Md. Shabbar Rashidi, J.:-
1. The appeal is in assailment of an order dated November 21,
2016 passed in GA No. 2899 of 2013 arising out of CS No. 324 of
2013.
2. By the impugned order, the learned Single Judge allowed GA
No. 2899 of 2013 confirming the subsisting interim order. By an order
passed on December 11, 2013, a Coordinate Bench had directed the
petitioner Bank to set apart properties valued at ₹ 2 crores, to satisfy
the claim of the petitioners in GA 2899 of 2013, i.e. respondents
herein, in case, they succeed in the application.
3. Learned Senior Advocate appearing for the appellant
submitted that the learned Single Judge erred in holding that the
notice issued on the part of the appellant with regard to convening the
13th Annual General Meeting was devoid of any explanatory note and
for that reason, convening of the meeting was illegal. Learned Single
Judge was also not justified in his conclusion that consent letter
showing consent of more than 75% preference shareholders for
redemption of preference shares at 20% of its face value was not
appended to the record placed before learned Single Judge.
4. Learned Senior Advocate for the appellant also contended
that the learned Single Judge was not justified in holding that the
resolution adopted in 13th Annual General Meeting was not in
consonance with the provisions of Section 106 of the Companies Act,
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1956 and hence, the same was bad in law. In support of his
contention, learned Senior Advocate for the appellant relied upon
2018 SCC OnLine Cal 5878 (Sri Milon Roy Chowdhury vs. Ashish
Kumar Saha) and 1975 SCC OnLine Cal 321 (State of West
Bengal and Others vs. Pranjiban Deay and Others).
5. Learned Senior Advocate for the appellant also contended
that certain issues were deliberated for the first time at the time of
hearing on November 21, 2016 i.e. the date of the impugned order,
though, such issues were never raised either in the pleadings or at the
time of hearing of the application. It was submitted that the learned
Single Judge passed the impugned order without affording the
appellant an opportunity to disclose documents with regard to the
issues deliberated on November 21, 2016.
6. Learned Senior Advocate further submitted that the learned
Single Judge erred in holding that there was no evidence of consent of
more than 75% preference shareholders having been obtained in
writing and therefore the second limb of Section 106 of the Act of
1956 was not complied with. No opportunity was afforded by the
learned Single Judge for producing the consent letters. It was further
contended that the learned Single Judge was not justified in holding
that the appellant, even in final hearing did not attempt to
demonstrate that it had complied with the conditions enumerated in
Section 106 of the Act of 1956. In fact, the appellant had no
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opportunity to demonstrate such facts as such issue was never raised
either in the pleading or in course of advancing submissions on or
before November 21, 2016. It was submitted that the learned Single
Judge ought to have provided the appellant an opportunity to produce
documents in support of its pleadings in affidavit in opposition to the
effect that consent of more than 75% preference shareholders were
obtained in writing.
7. Similarly, learned Senior Advocate also submitted that the
learned Single Judge failed to appreciate that since the issue of
accompanying explanatory statement was never raised, the appellant
had no opportunity to disclose the explanatory statement to the notice
convening the AGM in its affidavit in opposition. The learned Single
Judge was not justified in passing the impugned order without
providing an opportunity to the appellant to disclose whether there
was any explanatory statement appended to the notice convening the
13th Annual General Meeting, which according to the learned Senior
Advocate was manifest violation of the principles of natural justice. It
was also contended that the impugned order was passed overlooking
the statements made by the appellant in its affidavit in opposition.
8. Learned Senior Advocate also contended that the learned
Single Judge was not justified in refusing to grant the appellant an
opportunity to produce the minutes of the Annual General Meeting
held on September 20, 2010 with the specific recording that consent
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of more than 75% of the preference shareholders were obtained in
writing. According to learned Senior Advocate, the respondents never
made out a case that there was no written consent of more than 75%
preference shareholders and that the recordings in the minutes of the
Annual General Meeting dated September 20, 2010 was incorrect. He
further contended that the learned Single Judge was not justified in
holding that the special resolution passed in the 13th AGM cannot, in
any manner affect the rights of any class of shareholders of the C –
Series preferential shareholders to which the plaintiff/respondent
belonged. Learned Senior Advocate further submitted that the learned
Single Judge erred in coming to the conclusion that the resolution
passed at the 13th AGM dated September 20, 2010, was not a special
resolution recognized under the provisions of Section 106 of the Act of
1956.
9. Relying upon (2007) SCC OnLine Bom 427 (Mather and
Platt Fire System Ltd., In re), learned Senior Advocate for the
appellant submitted that a class consists of homogenous group with a
common interest whose rights are similar in terms of the compromise
which is offered to others by the company.
10. Per contra, learned Senior Advocate for the respondents
submitted that the original Civil Suit was itself filed challenging the
resolution adopted in 13th AGM dated September 20, 2010 on the
parameters, specifically of Section 80 and Section 106 of the
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Companies Act, 1956. In such suit, a declaration was sought to the
effect that the resolution adopted in the 13th AGM dated September
20, 2010 was illegal. In that view of the facts, learned advocate for the
respondents argued that it does not fit in the mouth of the appellants
to say that the challenge to such resolution was taken into
consideration by the learned Single Judge instantly and the
appellants were not afforded with the opportunity to deal with such
issue or produce documents in support of their contention over such
issue.
11. Learned Senior Advocate for the respondent also submitted
that the respondents held redeemable preferential C-class share in the
respondent appellant company. No special meeting of exclusive C-
class preference shareholders was ever convened. The appellant also
never published or served specific explanatory note appended to the
notice of meeting, specifying the issues likely to be taken up in such
meeting. The alleged 13th AGM dated September 20, 2010 was a
general meeting of all the preference shareholders which could not
have been imposed explicitly upon the C-class preference
shareholders. The learned Single Judge was quite justified in deciding
such issue in favour of the respondents/plaintiffs.
12. Learned Senior Advocate for the respondents further
submitted that since they held specific C-class preference shares of
the appellant bank, the terms and conditions of shareholding could
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not have been changed without calling for special meeting of C-class
shareholders and that too, with the express consent in writing of the
requisite majority of such class of shareholders. The appellant bank
illegally changed such conditions in the 13th AGM held on September
20, 2010 which is in violation of the provisions of Section 106 of the
Act of 1956. The learned Senior Advocate stood by the impugned
judgment and order.
13. The respondents/plaintiffs invested ₹1 Crore in the appellant
bank by purchasing C-class preference shares of such bank in 1998
anticipating a fair dividend profit and bounty return of their
investment. The representatives of the appellant bank persuaded the
plaintiffs/respondents that the appellant was a financial institution
wholly owned by the Government of India. According to the
prospectus issued by the bank, it was admitted that the preference
shares would result in attractive returns to the subscribers on its
redemption on its due date irrespective of the fact whether the
company earned benefit or not. It was also represented that there was
no risk involved at all in investing in the preference shares of the
appellant bank. The preference shares were to be redeemed on the
maturity date which was 61 months from the deemed date of
allotment with an upfront incentive of 0.4% of the subscribed amount
was said to be given.
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14. Relying upon such representation made in the prospectus,
the respondent invested an amount of ₹1 crore on December 3, 1998
and applied for ₹1 lakh redeemable cumulative nonconvertible
preference shares of C series of the appellant bank. By a letter dated
December 17, 1998, the petitioners were intimated that by a letter
dated the December 4, 1998, 1 lakh preference shares for a value of
₹1 crore was issued in favour of the respondents along with 20
preference shares certificates which were to be redeemed on the expiry
of 61 months from the date of allotment. The appellant bank also
made upfront payment of the interest on the application money that
was to remain with the appellant company from the date of actual
payment by the petitioners.
15. It was further case of the respondents/plaintiffs that by letter
dated June 28, 2002, the appellant bank intimated the present
respondents that in an Extra Ordinary General Meeting of the
appellant bank held on June 27, 2002, wherein decision of the board
taken on June 11, 2002 proposing redemption of preference share on
due date of maturity or prior to the date of redemption was approved
by the shareholders. The respondents by their later dated July 3,
2002, intimated the appellant bank that they were not in India and
were also not interested in prior redemption of the shares. They
requested the appellant bank not to proceed with the proposed
redemption until the respondents returned back to India.
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16. By another letter dated July 9, 2002, the appellant bank
intimated the respondents that it intended to proceed with the
redemption of preference shares prior to the due date of redemption
and sought their approval in this regard. The respondents by their
letter dated August 10, 2002 intimated the appellant their disapproval
to the proposal for premature redemption. According to the
respondents, by a letter dated December 11, 2003, the appellant bank
intimated the respondents that due to unfavourable financial position
of the respondent bank, it would not be in a position to redeem the
preference shares held by the petitioners on the due date of maturity
i.e. January 3, 2004. The letter also requested the respondents to roll
over the investment for a further period of 20 years with cumulative
dividend. Such proposal of the appellant bank was rejected by the
respondents, which was intimated by their letter dated December 23,
2003. The respondents also called upon the appellants to comply with
their obligations to redeem the respondent’s redeemable cumulative
non-convertible preference shares within the due date i.e. January 3,
2004 and to pay the preference dividend due on such date.
17. In terms of a letter dated March 25, 2003, the appellant bank
forwarded a cheque dated March 27, 2003 drawn in favour of the
petitioners for a sum of ₹9,57,650/- towards interim dividend for the
year ending March 31, 2003 over the preference shares amount of ₹ 1
crore in terms of the decision of the board taken in its 67th meeting
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dated March 20, 2003. The respondents also made out a case that the
conduct on the part of the appellant bank all along exhibited that the
bank was in a sound financial position. By its letter dated December
23, 2003, the respondents/plaintiffs also requested the appellant
bank to provide the details of the persons/entities who had opted for
premature redemption of the preference shares. However such request
of the respondents was never responded to. According to the
respondents/plaintiffs, the appellant bank was under obligation to
pay the respondents the redemption value of their preference shares.
18. By a letter dated March 18, 2004, through their advocate, the
respondents called upon the appellant bank to pay off the redemption
value as well as the dividend payable on the date of redemption to the
petitioner. Such legal notice was responded by the appellant by its
letter dated September 2, 2004 stating interalia that in the absence of
profit and accumulated wealth, the appellants were not in a position
to pay the accumulated dividend until its financial position improved.
The respondents also lodged a criminal case under Section
406/409/420 of the Indian Penal Code against the appellant and its
directors.
19. It was further contended by the respondents/plaintiffs that by
several letters they called upon the appellants to redeem the
preference shares and pay the arrears of dividend. By a letter dated
April 18, 2005, the respondents were intimated that board of directors
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of the company in its meeting dated March 20, 2005 decided against
making payment towards dividend to the preference shares in
consideration of the downward trend in operating results. Similar
communications were issued with regard to interim dividend for the
year 2004 – 2005 and 2006 – 2007 as well as for the succeeding
years. The respondents also filed a Summary Suit No. 23 of 2007 in
2007 which is still pending.
20. It was further case of the respondents/plaintiffs that on May
17, 2010, the respondents received a letter from the appellant bank
communicating a decision taken by the board to redeem the
preference shares held by them by offering 20% of the principal
amount of the preference capital subscribed by all the preference
shareholders as full and final satisfaction of hundred percent of their
preference share holding in the appellant bank. It also communicated
that the board had decided that no dividend would be payable to the
shareholders. The letter also required the respondents to convey their
consent of the aforesaid proposal within 15 days failing which; it
would be assumed that such proposal has been accepted. The
respondents rejected such proposal by a letter dated June 3, 2010.
They also called upon the appellant bank to disclose the source of
funds for redeeming the shares by paying 20% as full and final
settlement.
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21. The respondents received another letter on October 26, 2010
from the appellants herein intimating that in accordance with the
Special Resolution adopted by the shareholders of the respondent
bank in its 13th Annual General Meeting held on September 20, 2010
which was subsequently approved by the Ministry of Finance,
Government of India to the effect that the appellant bank was required
to redeem the preference share capital of the shareholders at 20% of
the principal amount as full and final settlement thereof. By the said
letter, the respondents were requested to surrender their share
certificates. The said letter was responded by the respondents by its
letter dated November 4, 2010. In such letter the respondents
questioned the validity of such a resolution passed in respect of
redemption of preference shares at 20% of principal amount as full
and final settlement. They also sought specific details in respect of the
number of preference shareholders and other persons who consented
for or against the Special Resolution adopted in 13th AGM.
22. The respondents made out a case that the Special Resolution
adopted in the 13th AGM was wholly illegal and its decision was null
and void in violation of the provisions of the Act of 1956. The
respondents herein, in the original suit contended that the rights of
different classes of preference shareholders could not be decided upon
by all other classes of preference shareholders in a meeting convened
for all classes of preference shareholders. It was also contended that a
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separate meeting of each class of preference shareholders ought to
have been convened to decide on the redemption of each separate
class of preference shares.
23. Later on, the respondents came to know by a newspaper
advertisement that an Extraordinary General Meeting of the appellant
bank was held on September 5, 2012 wherein voluntarily winding up
of the appellant bank was decided. Such meeting, according to the
respondents, was held behind the back of the respondents. In the
backdrop of the aforesaid facts, the respondents filed C. S. No. 324 of
2013 seeking following reliefs, namely: –
a) Decree declaring the 13th Annual General Meeting held by
the defendant, to be void ab-initio being in violation of the
provisions of Section 80, 106 as well as the regulations to
be followed under the Companies Act, 1956.
b) Decree for permanent injunction against the defendant
restraining them from enforcing the special resolution,
adopted by the defendant in its 13th Annual General
Meeting held on 20. 09. 2010, redeeming the preference
share capital of the shareholders at 20% of the principal
amount in full and final settlement, being void ab-initio.
c) Decree for mandatory injunction for redemption of
preference shares of the defendant bank at its full value
along with the outstanding areas of dividend payable to
the plaintiff’s.
d) Injunction;
e) Receiver/special officer;
f) Attachment/attachment before judgment;
g) Costs;
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h) For such other reliefs or reliefs as the plaintiff may be
entitled to equity and justice.
24. In such suit, the respondents herein, filed an application
being GA No. 2899 of 2013, seeking the following reliefs, that is to say:
a) An order of injunction restraining the respondent from
taking any steps or any further steps on the basis of the
purported meeting dated 20th September, 2010 and 5
September 2012 being Annexures ‘Q’ and ‘R’ respectively;
b) An order of injunction restraining the respondent and its
men, agents, servants and/or assigns from alienating,
transferring, removing and/or parting with the assets
and/or properties of the respondent bank;
c) An order of injunction restraining respondent and its men,
agents, servants and/or assigns from changing the nature
and character of the assets and/or properties of the
respondent bank;
d) A fit and proper person to be appointed a Receiver in
respect of the properties and/or assets of the respondent
and the Receiver so appointed be directed to make
inventory and take inspection of the said assets and
properties of the respondent bank and asserting the true
value of the said properties and/or assets;
e) The respondent bank be directed to keep apart a sum of ₹1
Crore in a separate account;
f) Ad interim orders in terms of prayers above;
g) Costs of and incidental to this application be paid by the
respondent;
h) Such further or other order or orders the past and/or
direction or directions be given as to this Hon’ble Court
may deem fit and proper.
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25. Such GA No. 2899 of 2013 was heard and initially, by an
order passed on December 11, 2013, interim relief was granted
therein which directed the petitioner Bank to set apart properties
valued at ₹2 crores, to satisfy the claim of the petitioners in GA 2899
of 2013, i.e. respondents herein, in case, they succeed in the
application. It was finally heard by learned Single Judge which
resulted in the impugned order, confirming the interim order.
26. According to the case made out by the respondents/plaintiffs,
the decision to redeem the preference shares held by C class
shareholders was unilateral by the appellant bank. No notice of the
meeting for the class of shareholders to which the respondents
belonged was ever issued. The matter was allegedly decided in Annual
General Meeting covering all the classes of shareholders. According to
the respondents, such move on the part of the appellant bank was in
violation of Section 106 of the Companies Act, 1956. It was the further
case of the respondents that the notice of AGM issued by the
appellant bank did not contain the necessary explanatory notes with
regard to the consideration of the agenda likely to be taken up in such
meeting, concerning the interest of C-class of preference shareholders.
Such resolution was adopted in the AGM behind the back of the
respondents and all others who held C – class of preference shares in
the appellant bank.
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27. On the contrary, the appellants came up with a case that the
resolution in the 13th AGM was adopted in accordance with the
provisions of Section 106 of the Act of 1956. It was alleged that all the
preference shareholders including that of C – class of preference
shareholders attended the meeting and consented to such resolution
being adopted. Not only that, according to the appellant, the
representative of the respondents also attended such meeting in the
category of preference shareholders when the impugned resolution
was adopted.
28. In order to appreciate the issue, it would be appropriate to set
out the provisions of Section 106 of the Companies Act, 1956 which
read as follows: –
“106. ALTERATION OF RIGHTS OF HOLDERS OF SPECIAL
CLASSES OF SHARES
a) Where the share capital of a company is divided into
different classes of shares, the rights attached to the
shares of any class may be varied with the consent in
writing of the holders of not less than three-fourths of the
issued shares of that class or with the sanction of a special
resolution passed at a separate meeting of the holders of
the issued shares of that class –
b) (a) If provision with respect to such variation is contained
in the memorandum or articles of the company, or
c) (b) In the absence of any such provision in the
memorandum or articles, if such variation is not prohibited
by the terms of issue of the shares of that class.”
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29. It was the specific case of the appellant that notice of the
Annual General Meeting was duly served upon the shareholders.
Although, initially a point was raised on behalf of the respondents that
the notice of the meeting did not contain the explanatory notes as
required under the provisions of the Act of 1956, however, at the time
of hearing the appeal such issue was not raised and pressed. The
appellants relied upon the copy of notice, attendance sheet and the
minutes of the meeting of 13th AGM which establishes that notice of
the meeting was duly served upon the shareholders before the
meeting. It also establishes that the notice dated August 23, 2010
contained sufficient explanatory notes with regard to modification in
the terms of issue of redeemable cumulative preference shares at
serial No. 6. The relevant extract of such notice runs to the following: –
“Special Business
6) to consider and if thought fit, passed with or without
modifications, the following resolution as Special Resolution
(by preference Shareholders only)
Resolved
that person to Sec. 106 and other applicable provisions of the
Companies Act, 1956 (including any amendment to or re-
enactment thereof), if any, and in accordance with the
provisions of the Memorandum & Articles of Association of the
company and subject to such other approvals, permissions
and sanctions as may be necessary, consent of the preference
shareholders, be and is hereby accorded to the modifications
in the terms of issue of Redeemable Cumulative Preference
shares of ₹. to 221.08 crore (Series C, D, DD, G, H, capital H1,
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H1H1, K-option B, L, LL, N, O, Q and Y) raised by IIBI on
private placement basis for redemption of such shares at 20%
of the principal paid up capital and state of “at par” without
accruing any dividend since 1 April 2003 at the specified rate
(s) thereon, till the date of redemption, in full and final
settlement of such preference shares, in accordance with the
consent in writing given by the concerned preference
shareholders, as per the prescribed format, in response to the
letter of offer made by IIBI on 17th May, 2010 to all the
preference shareholders and as recommended by the Board of
Directors at its meeting held on 14.8.2010.”
30. Accordingly, the 13th AGM was held on September 20, 2010.
The respondents were represented by their proxy. In such meeting,
Agenda Item No. 6 was decided to the following terms: –
“Agenda Item No. 6-Special Business
Modification to the Terms of issue of Preference Shares
at 20% of the Principal Amount, instead of “at par” (By
Preference Shareholders only)
Chairman informed the members that pursuant to the offer
made by II BI to all the preference shareholders for
redemption of preference shares at 20% of the principal
amount in full and final settlement of the paid up preference
share capital without accruing any dividend since 1.4.2003 at
the specified rate, preference shareholders holding paid up
capital to the extent of 85.5% have already conveyed their
consent to the said proposal. Since the requisite consent
already received by IIBI is more than the 75% of the paid up
share capital, the following Special Resolution was
recommended by the Board for adoption by the preference
shareholders.
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During deliberation, some of the preference shareholders have
requested for improvement of the settlement. It was clarified
by CMD that since there cannot be any discrepancy in the
redemption of such preference shares to any preference
shareholders, they are request cannot be acceded to.
Thereafter, Ms. Sunanda Lahiri, Member, proposed the
following resolution as ordinary resolution and Shri Amrik
Sinigh, Member, seconded the same.
Resolved
that pursuant to Sec. 106 and other applicable provisions of
the Companies Act, 1956 (including any amendments to or re-
enactment thereof), if any, and in accordance with the
provisions of the Memorandum & Articles of association of the
company and subject to such other approvals, permissions
and sanction as may be necessary, consent of the preference
shareholders, be and is hereby accorded to the modification in
the Terms of Issue of the redeemable cumulative preference
shares of ₹.221.08 crore (Series C, D, DD, G, H, capital H1,
H1H1, K-option B, L, LL, N, O, Q and Y) raised by IIBI on
private placement basis for redemption of such shares at 20%
of the principal paid up capital and state of “at par” without
accruing any dividend since 1 April 2003 at the specified rate
(s) thereon, till the date of redemption, in full and final
settlement of such preference shares, in accordance with the
consent in writing given by the concerned preference
shareholders, as per the prescribed format, in response to the
letter of offer made by II BI on 17th May, 2010 to all the
preference shareholders and as recommended by the Board of
Directors at its meeting held on 14. 8. 2010.
The above special resolution, as proposed, was adopted with
more than requisite majority of 75%.”
[Emphasis supplied]
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31. The appellant also relied upon the consent letters obtained by
the appellant in writing from the preference shareholders prior to such
meeting which was brought into the notice of the shareholders by the
Chairman, in the meeting that consent for proposed alteration was
already received from the requisite 75% shareholders. The materials
placed before us also demonstrated that the preference shareholders
who did not consent to alteration of the terms of redemption including
the respondents/plaintiffs constituted only 0.9% of the total paid up
Preference Capital of ₹221.08 crore whereas those who consented,
constituted 99.1% thereof. In such view of the facts, it seems that the
allegation that the terms were altered in violation of the provisions
contained in Section 106 of the Act of 1956 does not stand.
32. As it transpires, the impugned order is premised on the
ground that the alteration of the rights of preference shareholders was
done in complete violation of the provisions of Section 106 of the Act of
1956 and that too, the appellant had not placed anything to establish
that the appellant bank had obtained prior consent of the C-class
preference shareholders. The relevant observation in the impugned
order stated thus:
“A challenge has been scraggly made in the present suit and
the instant petition to the validity of the resolution or the
legality of the decision that the company sought to impose on
the plaintiff and the class of preference shareholders to which
the plaintiffs belong. In the light of such challenge, it was
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incumbent on the defendant company to demonstrate that the
decision to alter the rights of the relevant class of
shareholders was binding on the plaintiffs. Towards such
and, assertions have been made in the defendant’s affidavit
that it obtained the consent of holders representing more than
75% of the issued share in the relevant class; but there is no
evidence of such consent in writing having been obtained. It is
not necessary to repeat that the second limb of the opening
part of Section 106 was not complied with by the defendant
company and, as such, they completely flawed special
resolution passed at the 13th AGM of the company held on
September 20, 2010 is not of special resolution recognized by
Section 106 of the Act of 1950.”
33. In Mather and Platt fire Systems Ltd. (supra), noting the
authority in Miheer H. Mafatlal V. Mafatlal Industries Ltd. (1996) 87
Comp Cas 792, the Hon’ble Supreme Court observed that,
“26. The interpretation which has to be placed on the
provisions of sub- section (1) of section 391 is no longer race
Integra and has been dealt with in several reported cases.
The leading judgement of the Supreme Court on the subject is
in Miheer H. Mafatlal V. Mafatlal Industries Ltd. (1996) 87
Comp Cas 792. The judgement of the Supreme Court is an
authority for the proposition that a separate meeting of the
class of members or a class of creditors is required to be
convened were a compromise or arrangement is proposed
between the company and that class of members or creditors.
Where the same terms of compromise are offered to a class of
members or creditors, no separate meeting of a sub-class
among them is required. The Supreme Court….”
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34. In the case before us, same terms of compromise were offered
to a class i.e. preference shareholders of the appellant bank in terms
of resolution adopted in 13th AGM which apparently was accepted by
the majority of such class. In such circumstances, the submission
made on behalf of respondents/plaintiffs to the effect that separate
meeting confined only to C – class of preference shareholders ought to
have been convened in order to make its resolution applicable and
binding upon the plaintiffs/respondents cannot be accepted.
35. The appellant bank has come up with a definite case that it
was not afforded the opportunity to deal with the allegations made on
the part of the respondents/plaintiffs. As noted hereinbefore, the
appellant has produced the relevant documents including the
attendance sheet, minutes of the meeting and copy of the consent
letters showing previous consent obtained in writing, of the preference
shareholders which constitutes more than 75% of such shareholders.
An unambiguous statement to such effect, was made by the appellant
in their affidavit is evident from the impugned order itself. Such
evidence has been brought on record by the appellant supported by an
application under Order XLI Rule 27 of the Civil Procedure Code. We
find no reason to disallow such prayer and discard the evidence so
produced.
36. The original suit being CS No. 324 of 2013 was filed by the
respondents seeking a decree of declaration that the 13th Annual
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General Meeting held by the defendant, as ab initio void with a decree
of permanent injunction restraining the defendants from enforcing the
resolution is adopted in such meeting coupled with a mandatory
injunction for redemption of preference shares of the appellant bank
at its full value. By filing the impugned application, the respondents
prayed for an order of injunction restraining the appellant from taking
any steps on the basis of meeting dated September 20, 2010 and
September 5, 2012. The respondents also sought an order of
injunction restraining the appellant from, transferring or parting with
its assets and also for restraining the appellant from changing the
nature and character of its assets. The nature of reliefs sought in the
original suit seems to be quite at variance with that in the application
seeking injunction.
37. In Pranjiban Dey (supra), a coordinate bench held that,
“31. In 1964, therefore, the Supreme Court once again
affirmed the principle that an interim relief can be granted
only in aid of an as auxiliary to the main reliefs which may be
available to the party on final determination of his rights in a
proceeding under Article 226 and not otherwise. In the instant
case the relief that was granted by the learned trial judge was
not in aid of or auxiliary to the main relief that the petitioners
were entitled to in the application under Article 226. In these
circumstances, ………..”.
38. Similarly, in Sri. Milon Roy Chaudhury (supra), another
coordinate bench observed to the following,
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“18. It is settled law that breach of contract must ordinarily
found in damages. The grant of a specific performance being
discretionary, the same may be refused if the ends of justice
do not so warrant. It is equally well settled that no interim
relief can be granted unless it is in aid of final/substantial
relief claimed in the suit. Now, if at the interim stage it is
doubtful as to whether the court would be in a position to
grant the final relief in terms, as claimed, grant of an interim
order which is not in aid of the final relief would be beyond
the court’s jurisdiction. This aspect of the matter has to be
borne in mind while proceeding to decide this appeal.”
39. In the case at hand, as noted, the main relief in the suit is
centred around the legality and validity of the resolution adopted in
13th AGM. It has got no relation with the reliefs claimed in the
application for injunction. At no stretch of imagination, the relief
sought in the application for injunction can be said to be in aid of final
or substantial relief sought in the CS No. 324 of 2013. More so, the
order impugned itself notes that a separate action with regard to
realization of the money due against the appellant bank is being
pursued by the respondents and is pending before a competent Court.
Therefore, in view of the ratio laid down in Pranjiban Dey (supra) and
Sri. Milon Roy Chaudhury (supra), the impugned order cannot be
sustained.
40. So far as the plea of res judicata raised by the respondents is
concerned, as noted above, by an order passed on December 11, 2013
in connection with GA 2899 of 2013, the appellant bank was directed
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to set apart properties valued at ₹ 2 crores, to satisfy the claim of the
petitioners (respondents herein), in case they succeed in the
application. It would be apposite to set out the relevant portion of
such order for convenience, that is to say;
“………… I do not pass any interim order save and except that
the Bank will set apart properties valued at ₹ 2 Crores, to
satisfy the claim of the petitioners, in case they succeed in this
application. The claim of the petitioners is that they are
preference shareholders of the Bank for a very long time and
that the Bank cannot be permitted to go into involuntary
liquidation without securing their claim.
Learned counsel for the Bank submits that the petitioners
have agreed to only 20% of the amount being paid to them
which is denied by the learned counsel for the petitioners. The
Bank should have brought the necessary documents on record
in an affidavit. They have not done so. That is why an
extension of time is granted to them today to file such
affidavit. No prejudice would be caused if ₹ 2 Crores is set
aside for the time being. ……..”
41. In an order passed on March 11, 2014 in GA 610 of 2014
arising out of CS No. 324 of 2013, a coordinate bench noted that the
appellant (IIBI) had already offered 20% of the value of the shares. The
order allowed them to pay the said amount along with interest @ 9%
P.A. on and from the date of offer being made on 20.9.2010 till the
date of payment. Such order also directed the appellant to deposit
further sum of ₹80 lakh with the Registrar, Original Side to be kept in
a suitable interest bearing fixed deposit account in any nationalized
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bank within two weeks from the date of the order. The order impugned
in GA No. 610 of 2014 was directed to be stayed on such payment.
42. It is submitted on behalf of the respondents that the order
dated September 10, 2015 passed in APO 86 of 2014 operates as res
judicata in the present appeal. Such order reads to the following:
“The appeal is directed against an interlocutory order dated
11.9.2013, whereby the appellant bank was directed to set
apart properties valued at ₹. 2 Crores to satisfy the claim of
the respondents/petitioners, who were preferential
shareholders of the bank. It appears that the bank had
applied for voluntary liquidation and it is the concern of the
respondent shareholders that their interest was not
adequately secured. In appeal, by order dated 11.3.2014 the
impugned order was stayed on the condition that the
appellant has offered 20% of the value of the shares along
with interest of 9% per annum from the date of the offer i.e.
20.9.2010. They were further directed to pay a deposit of ₹ 80
lakh with the Registrar, O. S., Which was to be kept in a
interest bearing fixed deposit account with any Nationalized
Bank. We are of the opinion that the aforesaid arrangement
may continue subject to the result of the application by the
learned Single Judge. Observations made by the learned
Single Judge in the order impugned or the orders in appeal
shall not have any binding effect and all issues are kept open
to be decided by affidavits. ……………”
43. The purport of the aforesaid orders including the order dated
September 10, 2015 demonstrates that the arrangements made by
order dated September 11, 2013 and March 11, 2014 was directed to
continue subject to the result of the application by the learned Single
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Judge. The said order dated September 10, 2015 clarified that the
observations made by the learned Single Judge, in the order impugned
or the orders in appeal shall not have any binding effect and all issues
were directed to be kept open, to be decided by affidavits. In view of
such explicit observations, since all issues were kept open to be
decided, anything contained in such orders cannot be construed to
invite the principles of res judicata in the given facts of the case at
hand.
44. Therefore, on the basis of discussions made hereinbefore, we
are of the opinion that the impugned order confirming the order dated
December 11, 2013 cannot be sustained. Accordingly, the impugned
order is hereby set aside.
45. Consequently, the appeal being APO 339 of 2017 is allowed.
Connected application(s), if any, stands disposed of.
46. Urgent photostat certified copy of this judgment, if applied
for, be supplied to the parties on priority basis upon compliance of all
formalities.
[MD. SHABBAR RASHIDI, J.]
47. I agree.
[DEBANGSU BASAK, J.]
