Lalit Mohan Sharma, J.@mdashThis appeal under Clause 10 of the Letters Patent is directed against the order of a learned, single judge of this court rejecting the plea of the appellant (opposite party No. 2) that the application filed u/s 398 of the Companies Act, 1956 (hereinafter referred to as " the Act"), and registered as Company Petition No. of 1974 abated on the death of the original applicant.
2. The application giving rise to Company Petition No. 9 of 1974 was filed on August 24, 1974, by one Banarsi Lall Bhagat who claimed to be a member of Krishak Cold Storage Ltd., incorporated under the provisions of the Indian Companies Act, 1913, and entitled to apply to the court under, Section 398 of the present Act by virtue of Section 399. He complained that the affairs of the company were being conducted in a manner prejudicial to the interest of the members. It was also stated that a sale deed was illegally executed by opposite parties Nos. 1 and 2 in favour of opposite party No. 11. A prayer was made to set aside the transfer.
3. In paragraph. 6 of the application, the applicant stated that he was filing the application on his own behalf as also on behalf of a number of the members of the company entitled to challenge the impugned sale deed. He appended their written authority as annexure '' B ''.
4. The petitioner, Banarsi Lall Bhagat, died on December 24, 1974, and two of the signatories (annexure B) and several other shareholders who were all impleaded in the proceeding as opposite party filed a petition on March 19, 1973, for being transposed to the category pi the applicant for the purpose of prosecuting the proceeding. The present appellant (opposite party No. 2) filed a counter-affidavit objecting to the prayer. The learned single judge overruled the objection and transposed the petitioners to the category of the applicant and allowed them to proceed with the case. The present appeal is directed against this order.
5. Mr. S.C. Ghose, appearing in support of the appeal, contended that on the death of the original applicant, the application abated and since there remained no proceeding in the eye of law, the petitioners could not lawfully be allowed to proceed with the application. Emphasis was laid by the learned counsel on the fact that none of the petitioners is an heir or legal representative of the original applicant, Banarsi Lall Bhagat. The remedy of the petitioners, if at all, was by way of an independent application which, if filed on the date on which the prayer for transposition was made, would have been barred, by limitation. The learned single judge was, therefore, not right in passing the impugned order.
6. It is common ground that the CPC does not apply to the proceeding by virtue of its own force. Section 643 of the Act empowers the Supreme Court to make rules in relation to several matters including the procedure applicable to applications under the Act, and, accordingly, the. Companies (Court) Rules, 1959 (hereinafter referred to as " the Rules "), were framed. The language in the section as also of the Rules indicates that the CPC so far as may be applicable shall be followed. The relevant portion of Section 643 is in the following terms:
" 643. Power of Supreme Court to make rules :--(1) The Supreme Court, after consulting the High Courts,--...
and
(b) may make rules consistent with the Code of Civil Procedure, 1908 (V of 1908)..."
Rule 6 is in the following terms :
"6. Practice and procedure of the Court and provisions oj the Code to apply.--Save as provided by the Act or by these Rules, the practice and procedure of the Court and the provisions of the Code as far as applicable, shall apply to all proceedings under the Act and these Rules. The Registrar may decline to accept any document which is presented otherwise than in accordance with these Rules or the practice and procedure of the court."
As defined in Rule 2(4), "Code" means the Code of Civil Procedure, 1908.
Rule 9 saves the inherent powers of the Court in the same terms as Section 151 of the Code.
Before continuing further, I would like to consider the nature of the proceeding u/s 398. The section provides with a remedy in cases of mismanagement of a company. The right is confined to such members who fulfil the test as laid down in Section 399 which is quoted below:
"399. Right to apply under Sections 397 and 398.--(1) The following members of a company shall have the right to apply u/s 397 or 398-
(a) in the case of a company having a share capital, not less than one hundred members of the Company or not less than one-tenth of the total number of its members, whichever is less, of any member or members holding not less than one-tenth of the issued share capital of the company, provided that the applicant or applicants have paid all calls and other sums due on their shares ;
(b) in the case of a company not having a share capital, not less than one-fifth of the total number of its members.
(2) For the purposes of Sub-section (1), where any share or shares are held by two of more persons jointly, they shall be counted only as one member.
(3) Where any "members of a company are entitled to make an application in virtue of Sub-section (1), any one or more of them having obtained the consent in writing of the rest, may make the application on behalf and for the benefit of all of them.
(4) The Central Government may, if in its opinion circumstances exist which make it just and equitable so to do, authorise any member or members of the company to apply to the court u/s 397 or 398, notwithstanding that the requirements of Clause (a) or Clause (b), as the case may be, of Sub-section (1) are not fulfilled.
(5) The Central Government may, before authorising any member or members as aforesaid, require such member or members to give security for such amount as the Central Government may deem reasonable, for the payment of any costs which the court dealing with the application may order such member or members to pay to any other person or persons who are parties to the application."
The authority under Sub-sections (4) and (5) has been vested in the Central Government presumably for the reason that the power u/s 398 can also be exercised, where the affairs of the company are conducted in a manner prejudicial to public interest. Sub-sections (1), (2) and (3) are attracted where prejudice to the interest of the company is alleged. The entire scheme clearly indicates that the court''s power in. this regard is to be used to protect the interest of the public or a group of shareholders. Sub-section (3) of Section 399 permits an individual member to make an application "on behalf and for the benefit of all" members of a company entitled to move the court. Such a person clearly acts in a representative, capacity and in the present case, Banarsi Lall Bhagat was also representing the inte rest of a group of shareholders including the petitioners. With respect to the representative nature of the proceeding, the provision is similar to those of Order 1, Rule, 8, which states that where there are numerous persons having the same interest in one suit, one or more of such persons with the permission of the court, sue or be sued or may defend in such suit on be half or for the benefit of all persons so interested. It is firmly established that a suit filed tinder Order 1, Rule 8, does not abate on the death of the plain tiff because (i) the persons represented are not " legal representatives " of the deceased within the meaning of the Code, and Order 22, Rules 3 and 4, do not apply to such a case, and (ii) the persons represented are already parties to the suit constructively though the conduct of the suit is in the hands of a particular person to whom leave has been given. Any one of the persons represented, therefore, can continue the suit after the plaintiff''s death. Any such person is entitled to apply to the court to be made a party under Sub-rule 1 of Order 1, Rule 8, (if not named as a party either as the plaintiff or defendant) and a person arrayed as a defendant (as in the case before us) may apply to be transposed under Order 1, Rule 10. In view of Rule 6 of the Companies (Court) Rules, 1959, there does not appear any reason not to apply these provisions in the present case.
7. Even assuming that the provisions of Order 1, Rule 10 of the CPC are not applicable, Rule 9 of the Companies (Court) Rules declaring inherent powers of the court gives the court authority to transpose the opposite party as applicants in the interest of justice.
8. For the reasons mentioned above, I am of the view that the transposed petitioners, although named as opposite parties in the case, were represented by Banarsi Lall Bhagat and by their transposition, the court has merely permitted them to proceed with the case as their representative is dead. Mr. Goose relied on the decision in
9. Mr. Ghose faintly suggested that by the amendment of the original application, the court has illegally deprived the appellant of the benefit of the law of limitation as on the date of the application for transposition a fresh application would have been barred. There is no force in this argu ment. It is that very old case which had been initially filed by Banarsi Lall Bhagat in a representative capacity which continues and a fresh question of limitation, therefore, does not arise.
10. In the result, I do not find any merit in the point raised on behalf of the appellant and the appeal is, therefore, dismissed with costs. Hearing fee is assessed at Rs. 250.
S.S. Sandhawalia, C.J.
11. I agree.
