Appeal No. 684 of 1992 In Notice of Motion No. 1593 of 1992, In Suit No. 2090 of 1992. Case: Ramesh Narang Vs Rama Narang and others. High Court of Bombay (India)
| Case Number | Appeal No. 684 of 1992 In Notice of Motion No. 1593 of 1992, In Suit No. 2090 of 1992 |
| Counsel | For Appellant: Kapil Sibal with S. H. Doctor, Jogit Singh and Ms. S. Chinoy i/b. M/s. Bachubhai Munim and Co., and For Respondents: K. S. Cooper with R. A. Dada and D. G. Jhangiani, (for Nos. 1, 2 and 3), D. Y. Chandrachud, (for No. 4) |
| Judges | M. L. Pendse and N. D. Vyas , JJ. |
| Issue | Criminal Procedure Code (2 of 1974) - Sections 389(1), 482; Companies Act (1 of 1956) - Section 267 |
| Citation | 1995 CriLJ 1685 |
| Judgement Date | June 08, 1994 |
| Court | High Court of Bombay (India) |
Judgment:
Pendse, J.
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This appeal is preferred by original defendant No. 1 to challenge legality of order dated August 17, 1992 passed by learned Single Judge on Notice of Motion No. 1593 of 1992. By the impugned order, the learned Single Judge has restrained the appellant and respondent No. 5 from in any manner acting upon decisions purported to have been taken at the board meeting of respondent No. 2 company alleged to have been held on July 13, 1992. The Trial Judge also granted injunction restraining the appellant and respondent No. 3 from in any manner obstructing or interfering with functioning of respondent No. 1 as Chairman and Managing Director of respondent No. 2 company. The complaint in this appeal is in respect of grant of injunction restraining the appellant and respondent No. 5 from obstructing respondent No. 1 to function as Chairman and Managing Director of the company.
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The facts which gave rise to the litigation, shorn of details, are not in dispute and are required to be briefly stated to appreciate the grievance of the appellant. Respondent No. 1 Rama Narang is a member of the Narang family which is in possession of several properties including holdings in several companies. The appellant and respondent No. 5 are sons of respondent No. 1 born from the first wife. Respondent No. 1 divorced his first wife and has contracted second marriage and that seems to have led to the disputes between the father and the two sons. Respondent No. 2 is a company which is a deemed public limited company under Section 43-A of the Companies Act and is engaged in the business of hoteliering and flight catering and owns several hotels at Bombay, Madras and Aurangabad. The shares of the company stand in the name of diverse family members of Narang family and a substantial number of shares are held by respondent no. 1. Respondent No. 1 was a Director of the company, so appointed at general meeting held on September 21, 1988. The company, prior to August 1, 1990, had only the business of running the flight kitchen at Delhi and is claimed to be a loss making unit. On June 7, 1990, this Court, in Company Petition No. 593 of 1989, amalgamated Narangs Hotels and Resorts Limited, another concern held by the family, into respondent No. 2 company and all the assets of the transferer company were taken over by respondent no. 2 company.
The scheme of amalgamation was sanctioned by this Court on August 7, 1990 and the appointed day was July 1, 1987. After amalgamation, respondent No. 1 was reappointed as Director of the company. On June 25, 1990, respondent no. 1 was appointed as Managing Director of the company. On the same date, the appellant was appointed as Joint Managing Director of the company while the second wife of respondent no. 1, i.e. Mrs. Mona Rama Narang, was appointed as a whole time Additional Director. On June 29, 1990, at the extraordinary general meeting of the company, the Articles of Association were amended and respondent no. 1 was appointed as Chairman and Director for life of the company.
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On November 14, 1990, the appellant instituted Company Petition No. 681 of 1990 before the Company Judge in this Court in accordance with provisions of Sections 397 and 398 of the Companies Act, 1956. The appellant questioned the validity of the board meeting held on June 25, 1990 and in which the respondent no. 1 was also appointed as Managing Director of the company. The challenge was on the basis that respondent no. 1 was convicted of an offence involving moral turpitude and, therefore, could not hold the office of the Managing Director in accordance with provisions of Section 267 of the Companies Act. The relevant provision reads as under:
"267. No company shall, after the commencement of this Act, appoint or employ, or continue the appointment or employment of any person as its managing or whole-time director who -
(a)..........
(b).........
(c) is, or has at any time been, convicted by a Court of an offence involving moral turpitude."
The respondent no. 1 was tried before the Additional Sessions Judge, Delhi in Case No. 134 of 1985 (State v. Ram Lal Narang and Others) and was convicted on December 22, 1986 for having committed offences punishable under Sections 120B and Section 420 read with Section 114 of Indian Penal Code. The Additional Sessions Judge imposed punishment of rigorous imprisonment for three months for offence under Section 120B and punishment of rigorous imprisonment of 2 1/2 years and a fine of Rs. 5,000/- in respect of offences under Sections 420 and 114 of Indian Penal Code. The substantive sentences of imprisonment were directed to run concurrently and in default of payment of fine respondent no. 1 was directed to undergo further rigorous imprisonment for two months.
Respondent no. 1 preferred Criminal Appeal No. 17 of 1987 in the High Court of Delhi and the appeal was admitted by a learned Single Judge by order dated January 21, 1987. Respondent no. 1 - accused preferred Criminal Miscellaneous Petition No. 15 of 1987 seeking release on bail pending the disposal of the appeal. Respondent no. 1 also sought suspension of the operation of the impugned order. The learned Judge directed respondent no. 1 to be released on bail on furnishing a personal bond in the sum of Rs. 10,000/- with one surety in the like amount. The learned Judge also directed that the operation of the impugned order shall be stayed.
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In Company Petition No. 681 of 1990 filed by the appellant in this Court, by order dated December 6, 1990, the Company Judge restrained the company from holding any board meeting or general body meeting. It appears that certain settlement was reached between the members of Narang family on July 12, 1990 and to which not only respondent no. 1 but his two brothers were also parties. On July 5, 1991, the appellant applied for withdrawal of the company petition. The permission was granted. Thereupon Sanjay Narang, nephew of respondent no. 1, applied for transposition as petitioner, but his application was turned down.
Sanjay Narang thereafter preferred Petition No. 10 of 1991 on July 12, 1991 before Company Law Board, Principal Bench, New Delhi under Sections 397 and 398 of the Companies Act, inter alia, challenging appointment of respondent no. 1 as Managing Director of the company. The appointment was challenged on the identical grounds raised in Company petition filed in this Court, being that respondent no. 1 was convicted by a Criminal Court and could not have been appointed or continue to hold the office of Managing Director in accordance with provisions of Section 267 of the Companies Act. To this petition filed before Company Law Board, the appellant and respondent No. 5 were made respondents alongwith respondent no. 1. The appellant had filed affidavit-in-reply to the petition and in which the claim made by Sanjay Narang was denied. During the pendency of this petition, another family settlement was arrived at between the members of the Narang family including the appellant, respondent no. 1, respondent no. 5 and the second wife of respondent no. 1. The settlement, inter alia, provided that respondent no. 1 is validly appointed and continued to be Chairman and Managing Director of the company and has not ceased to be so or has not been disqualified to act as the Managing Director. In pursuance of the family settlement, consent terms signed by the parties were tendered before the Company Law Board and the petition was disposed of in accordance with the consent terms.
On June 30, 1992, the appellant instituted Petition No. 28 of 1992 before the Company Law Board at New Delhi complaining oppression and mismanagement of the company at the hands of respondent no. 1 who is the Chairman and the Managing Director. In this petition, the appellant claimed that the Board of Directors should be reconstituted and suggested that respondent no. 1 be continued as Chairman and Managing Director. This Petition is pending.
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On July 9, 1992, respondent no. 1, in his capacity as Chairman and Managing Director, issued notice to convene meeting of the Board of Directors on July 13, 1992. By this time it is clear that respondent no. 1 had fallen apart from his two sons. On July 10, 1992, respondent no. 1 informed respondent no. 5 that he has ceased to be a Director of the company. The claim was disputed and the appellant and respondent no. 5 claimed that respondent no. 1 could not continue as Managing Director in violation of provisions of Section 267 of...
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