Supreme Court of India
PURNIMA MANTHENA AND ANOTHERversusDR. RENUKA DATLA & OTHERS
- Citation
- 2015 INSC 738
- Decided
- 8 October 2015
- Disposal
- Appeal(s) allowed
- Bench
- V GOPALA GOWDA
Holding
An appeal under Section 10F is maintainable only if the CLB order raises a genuine question of law, and a higher court may not substitute the CLB’s order or pass merits‑based findings on an interlocutory order.
Summary
The dispute arose in Biological E. Ltd. after the death of its promoter, when the widow (respondent No.1) and her three daughters were appointed directors. The widow challenged the validity of board meetings held on 9‑4‑2013, 10‑4‑2013 and 11‑4‑2013, the appointment of her daughters as directors and the continuance of Mr. G.V. Rao as director, alleging oppression and mis‑management under the Companies Act. She sought interim relief from the Company Law Board (CLB), which declined to grant it and deferred the matter. The widow appealed the CLB order under Section 10F of the Companies Act. The High Court, however, substituted the CLB order, examined the merits of the case and directed the formation of an ad‑hoc board, despite the absence of pleadings from the appellants. The Supreme Court held that an appeal under Section 10F is maintainable only when the impugned CLB order raises a genuine question of law, and a High Court cannot substitute the CLB’s order or pass merits‑based findings on an interlocutory order. Consequently, the Supreme Court set aside the High Court’s judgment and allowed the appeals, directing the CLB and the civil court to decide the matters on their own merits.
Issues considered
- The scope and maintainability of an appeal under Section 10F of the Companies Act, 1956 against an interim order of the Company Law Board.
- Whether an interlocutory order of the CLB that does not contain a finding of law gives rise to a question of law for appellate review.
- The permissible extent of appellate jurisdiction under Section 1OF (now Section 1) when the appeal is from a discretionary interim order.
- Whether the High Court could substitute the CLB order and adjudicate the merits of the dispute at the stage of mentioning.
- The applicability of the doctrine of necessity to validate board meetings convened by a director who had tendered resignation.
Legislation cited
- Companies Act, 1956s. 10F, s. 111A, s. 1OF, s. 237, s. 391, s. 392, s. 393, s. 394, s. 397, s. 398, s. 402, s. 403, s. 404, s. 406, s. 409, s. 58, s. 59
- Companies Act, 2013s. 58, s. 59
- Foreign Exchange Management Act, 1999s. 35
- Income Tax Act, 1922s. 66(1)
Subjects
Companies ActSection 10FSection 1OFinterim reliefCompany Law Boardappeal jurisdictioninterlocutory orderoppression and mis‑managementboard of directorsdemergerquestion of lawappellate jurisdictiondoctrine of necessity
Judgment
[2015] 11S.C.R.218
A PU RN IMA MANTHENAAND ANOTHER
v.
DR. RENUKA DATLA & OTHERS
(Civil Appeal No. 8275 of 2015)
B
OCTOBER 06, 2015
[V. GO PALA GOWDA AND AMITAVA ROY, JJ.]
Companies Act, 1956:
c s.10F - Appeal under, against interim order - In the
instant case, promoter of a company died leaving behind
respondent no.1-wife and 3 daughters who were appointed
as directors of the company - Dispute arose behtieen them
0 regarding holding of certain board meetings and appointment
of daughters as Directors and continuance of respondent
no. 6 as directOr- Respondent no. 1 moved CLB and sought
interim relief which prayer was declined- On appeal uls. 1OF,
High Court allowed the appeal elaborately delving into factual
E details bearing on all facets of disputes between parties -
Held: High Court being fully conscious that the proceeding
before the CLB was pending for final adjudication, proceeded
to undertake an in-depth exercise to analyse the facts and
the law involved and recorded its decision on merits in total
F substitution of the order of the CLB - This was in absence of
any pleadings by the appellants, the contesting Directors
before the CLB - Having regard to the fact that the appeal
before thf! High Court uls. 1OF of the Act was one from an
interim order passed in exercise of judicial discretion at the
G stage of mentioning, bearing in mind the permissible
parameters of exercise of appellate jurisdiction in such
matters, the elaborate pursuit so undertaken by it, is neither
contemplated nor permissible - High Court, in any view of
the matter, was not dealing with a regular appeal uls. 1OF
H on a question of law from a decision rendered by the CLB
218
PURNIMA MANTHENA v. DR. RENUKADATLA 219
on merits, after a complete adjudication - No final A
determination on merits was warranted as it has the effect of
pre judging disputed questions pending before the CLB.
s. 1OF - Role of appellate forum under - Held: While
the language applied ins. 1OF evinces that all orders, whether B
final or interlocutory, can be.the subject-matter of appeal, ifit
occasions a que$tion of law, the Section per se defines the
perimeters of inquisition by the appellate forum conditioned
by the type of the order under scrutiny- Whereas an appeal
u/s. 1OF from an order granting or refusing interim relief, C
essentially in the exercise of judicial discretion and based
on equity is one on principle and no interference is merited
unless the same suffers from the vice of perversity and
arbitrariness, such constrictions may not necessarily regulate
and/or restrict the domain of examination in a regular appeal D
on facts and law.
s.10-F- Scope.of- Held: s.10F of the· Act engrafts
the requirem.ent of the existence of a question of law.arising
from the decision of.the CLB as an essential pre-condition E
for the maintainability of an appeal thereunder.
Interlocutory order: Scope of - Held: No adjudication
at the preliminary stage of a proceeding in a court of law ought
to have the attributes of a final verdict so as to prejudge the F
issues at that stage, thereby rendering the principal
determination otiose or redundant.
Allowing the appeals, the Court
H.ELD: 1. A question of law, as is comprehended in G
Section 1OF of the Act, would arise, if a decision which
is the foundation thereof, suffers from perversity,
following a patent error on a fundamental principle of
law or disregard to relevant materials or cognizance of H
220 SUPREME COURT REPORTS (2015] 11 S.C.R.
A irrelevant or non-germane determinants. A decision
however, on the issues raised, is a sine qua non for a
question of law to exist. A decision logically per-
supposes an adjudication on the facets of the
controversy involved and mere deferment thereof to a
B future point of time till the completion of the essential
legal formalities would not ipso facto fructify into a
verdict to generate a question of law to be appealed from.
However, an omission to record a finding even on a
conscious scrutiny of the materials bearing on the
C issues involved in a given case, may be termed to be
one. In any view of the matter, the appellate forum
though exercising a jurisdiction which otherwise may
be co-ordinate with that of the lower forum, ought to
confine its judicial audit within the layput of the
0
adjudgment undertaken by the forum of lowe,r tier. This
is imperative, more particularly in the exercise of the
appellate jurisdiction qua a decision on discretion
rendered at an introductory stage of any proceeding,
E otherwise awaiting final adjudication on merit-s following
a full contest. It is settled that no adjudication at the
preliminary stage of a proceeding in a court of law ought
to have the attributes of a final verdict so as to prejudge
the issues at that stage, thereby rendering the principal
F determination otiose or redundant. This is more so, if
the pleadings of the parties are incomplete at the
threshold stage and the lower forum concerned seeks
only to ensure a working arrangement vis-a-vis the
dissension and postpone fuller and consummate
G appreciation of the rival assertions and the recorded
facts and the documents at a later stage. [Paras 45] [249-
D-H; 250-A-C]
2. While the language applied in Section 10F
H evinces that all orders, whether final or interlocutory,
PURNIMA MANTHENA v. DR. RENUKADATLA ·221
can be the subject-matter ·of appeal, if it occasions a A
question of law, the Section per se defines the perimeters
of inquisition by the appellate forum conditioned by the
type of the order under scrutiny. The nature and purport
of the order i.e., interlocutory or final, would thus logically
present varying canvases to traverse and analyse. . B
These too would define the limits of adjudication qua
the appellate forum. Whereas in an appeal under Section
10F from an order granting or refusing interim relief,
being essentially in the exercise of judicial discretion and
based' on equity is an appeal on principle and no C
-interference is merited unless the same suffers from the
vice of perversity and arbitrariness, such constrictions
•
may not necessarily regulate-and/or restrict the domain
. of examination in a regular appeal on facts and law.
0
Section 10F, thus, statutorily demarcates the contours
of the jurisdictional exercise by an appellate forum
depending on the nature of the order impugned i.e.
interlocutory or final and both cannot be equated, lest
the pending proceeding before the lower forum, if the E
order impugned is purely of interlocutory nature, and
does not decide any issue on a consideration of the
rival assertions on merits, stands aborted and is
rendered superfluous for all intents and purposes.
[Para 46] [250-0-H; 251-A] F
'
3. Reverting to the present facts, noticeably the
parties are contentiously locked on several issues, legal
and factual. While seeking the intervention of the CLB
on the key accusation of oppression and mis- G
management as conceptualised in Sections 397 and 399
of the Act, respondent No. 1 had retraced the march of
events from 9.4.2013, the qate on which, according to
her, when the meeting of the Board of Directors, invalid
in law, was convened and conducted by respondent H
222 SUPREME COURT REPORTS [2015] 11 S.C.R
A no.6, who allegedly had no authority to do so, he having
resigned from the company. She had asserted her
express and implicit reservation in this regard and her
disapproval not only of the constitution of the Board of
Directors since then · but also of the decisions taken
B from time to time. After a series of intervening legal
proceedings, she finally did submit a petition before the
CLB amongst other under Sections 397, 398,402/403/404
and 406 of the Act alleging oppression and mis-
management and highlighting in that regard, the
C imminent possibility of alienation of the vital assets of
the company through a purported scheme of demerger
to the undue benefit of other Directors of the Board of ·
the company. In contradiction, the appellants and the
contesting Directors have not only endc>rsed the
0
validity of the meetings on or from 9.4.2013 contending
that respondent No. 1 though intimated thereof, had
opted out therefrom and .on the basis of the record,
have sought to demonstrate her participation in the
E meetings, amongst others on 24.5.2013, 22.8.2013 and
the Annual General Meeting held on 18.12.2013 as
permitted by the CLB, they have also emphatically
adverted to the letter dated 15.4.2013 addressed by
respondent No.1 seemingly acknowledging the lawful
F induction of the appellant as the Managing Director and
her two sisters as the Directors in the Board. The
appellants and other contesting respondents have also
endeavoured to underline that the respondent No.1 has
accepted the distribution of the shares held by VKD in
G the HUF as decided in the meeting dated 24.5.2013 and
also the enhancement in her remuneration as the
Executive Director as minuted in the Annual General
Meeting dated 18.12.2013~ There is no denial by her as
well as of the pendency of the demerger proceeding
H before the High Court. [Para 47] [251-B-H; 252-A-C]
PURNIMA MANTHENA v. DR. RENUKADATLA 223
4. The High Court being fully conscious that the A
proceeding before the CLB was pending for final
adjudication, proceeded to undertake an in-depth
exercise to analyse the facts and the law involved and
has recorded its decision on merits in total substitution
of the order of the CLB. This is in absence of any B
pleadings by the appellants, the contesting Directors
before the CLB. This assum~s importance as the High
Court resorted to a full-fledged ·scrutiny of the factual
and legal aspects, to test the legality and/or validity of
the order dated 6.8.2014 of the CLB at the stage of C
mentioning. Having regard to the fact that the appeal
before the High Court under Section 1OF of the Act was
one from an interim order passed in exercise of judicial
discretion at the stage of mentioning, bearing in mind
0
the permissible parameters of exercise of appellate
jurisdiction in such matters, the elaborate pursuit so
undertaken by it, is neither . contemplated nor
permissible. Keeping in view the stage wise delineation
of the jurisdictional frontiers of the forums in the E
institutional hierarchy as codified by law, the High Court's
quest to unravel the entire gamut of law and facts
involved at the preliminary stage of the proceeding
before the CLB and to record its findings on all issues
involved on merits did amount to prejudging those, F
thereby rendering the petition before the CLB redundant
for all intents and purposes. (Paras 48-49] (252-D-G; 253-
D-E]
\/. S. Krishnan and Others etc. vs. Westfort Hi-tech
G
Hospital Ltd. and Others etc. 2008 (3) SCR 184:
(2008)3 SCC 363; Wander Ltd. and Another vs.
Antox India P. Ltd. 1990 (Suppl.) SCC 727;
Election Commission of India and Another vs. Dr.
Subramaniam Swamy and Another 1996 (1) H
224 SUPREME COURT RE;PORTS ' (2015] 11 S.C.R.
A Suppl. SCR 637: (1996) 4 sec 104; The
Commissioner of Income Tax, Bombay vs. The
Scindia Steam Navigation Co. Ltd. 1962 (1) SCR
788; La/it Kumr Modi vs. Board of Control For
Cricket in India and others 2011 (15) SCR 1004:
B (2011)10 SCC 106; Banku Chandra Bose and
another vs. Marium Begam and another AIR 1917
Cal 546; Gokaraju Rangaraju Vs. State of A.P.
1981 (3) SCR 474: (1981) 3 sec 132; State of
Punjab and others vs. Krishan Niwas 1997 (2)
c SCR 1135: (1997) 9 SCC 31; A.R. Antulay vs.
R.S. Nayak&Another(1988) Suppl.1SCR1; Raj
Kumar Shivhare vs. Assistant Director, Directorate
of Enforcement and Another2010 (4) SCR 608:
(2010) 4 SCC 772; Waman Shriniwas Kini vs.
D
Rafi/al Bhagwandas & Co. (1959) Suppl. 2 SCR
217; V. S. Krishnan and Others etc. vs. Westfort
Hi-tech Hospital Ltd. and Others etc. 2008 (3)
SCR184: (2008) 3 SCC 363; Dale & Carrington
E lnvt. (P) Ltd. and Another vs. P.K. Prathapan and
Others 2004 (4) Suppl. SCR 334: (2005) 1 sec
212; Pankaj Bhargava and Another Vs. Mohinder
Nath and Another 1990 (3) Suppl. SCR 508:
(1991) 1sec556- referred to.
F Case Law Reference
2008 (3) SCR 184 referred to. Para 32
1990 (Suppl.) sec 727
referred to. Para 32
1996 (1) Suppl. SCR 637 referred to. Para 32
G
1962 (1) SCR 788 referred to. Para 32
2011 (15) SCR 1004 referred to. Para 32
AIR 1917 Cal 546 referred to. Para 32
1981 (3) SCR 474 referred to. Para 32
H
1997 (2) SCR 1135 referred to. Para 32
PU RN IMA MANTHENA v. DR RENUKA DATLA 225
(1988) Suppl. 1 SCR1 referred to. Para 32 A
2010 (4) SCR 608 referred to. Para 33
(1959) Suppl. 2 SCR 217 referred to. Para 33
2008 (3) SCR 184 referred to. Para 33
2004 (4) Suppl. SCR 334 referred to. Para 33 B
1990 (3) Suppl. SCR 508 referred to. Para 33
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
8275 of 2015.
From the Judgment and Order dated 15.04.2015 of the
c
High Court of Judicature at Hyderabad for the State of
Telangana and the State of Andhra Pradesh in Company
Appeal No. 17 of 2014
WITH D
C.A. Nos. 8276 and 8277 of 2015
P. S. Raman, Shyam Divan, Yogesh Raavi, Tatini Basu,
Ritu Bhalla; Kumar Shashank, Yajur Mittal, S. S. Shroff,Archana E ,. ·- .
Sahadeva for the Appellants.
Parag P. Tripathi, Sajan Poovaiah, P. P. Rao,Anil Kumar
Tandale,A. V. S. Raju,AnkurChawla, J. Balaji, Rangadas, D.
Pochaiah, M.A. Chinnasamy, V. K. Sidharthan, S. Jain, Ashok
F
Aggarwal, FirasatAli, Adil Sharfuddin, Ujjal Banerjee, Amish
Tandon, A. Sridhar, S. Madhusudhan Babu, Archana
Sahadeva, Swarnendu Chatterjee for the Respondents.
The Judgment of the Court was delivered by
G
AMITAVA ROY, J. 1. Leave granted.
2. The steeled stand off encased in the decision
impugned, projects the members of a family, daughters against
their mother in particular, in a combative formation in their bid H
226 SUPREME COURT REPORTS [2015] 11 S.C.R.
A to wrest the reins of a company, Biological E. Limited (for short,
hereinafter to be referred to as "the company") engaged in
the business of pharmaceutical products and vaccines. The
differences that had surfaced soon after·the demise of Dr.
Vijay Kumar Datla, the predecessor-in-interest of the
B contending family members, who at his death, was the
Managing Director of the company, have grown in acrimonious
content with time, stoked by the intervening events
accompanied by a host of litigation. The present appeals stem
from the judgment and order dated 15.4.2015 rendered by
C the High Court of Judicature at Hyderabad, for the state of
Telangana and state of Andhra Pradesh, in Company Appeal
No. 17 of 2014 preferred by the respondent Nos. 1, 2 and 3
herein, under Section 10F of the Companies Act, 1956 (for
D short hereinafter to be referred to as "the Act") assailing the
order dated 6.8.2014 passed by the Company Law Board,
Chennai Bench (for short, hereinafter to be referred to as
"CLB") in Company Petition No. 36 of 2014 filed by them.
3. While entertaining the instant appeals, this Court by
E order dated 12.5.2015, having regard to the considerations
referred to therein and as aceepted by the learned counsel for
the parties, did make an endeavour to effect an amicable
settlement through mediation which, however, did not fructify.
F The learned counsel forthe parties, as is recorded in the order
dated 21. 7 .2015, on instructions, vouched thatthe day-to-day
functioning of the company, however would be allowed to
continue. The appeals, in this backdrop have, thus, been
analogously heard on merits for disposal.
G 4. We have heard Mr. P.S. Raman, learned senior
counsel for the appellants in Civil Appeal arising out of S.L.P.
(C) No.12831 of2015 (whoarealsorespondentNos.4&5
in SLP (C) No. 12835 of 2015 and 5 & 6 in SLP (C) No.
H 20338 of 2015), Mr. Shyam Divan, learned senior counsel for
PURNIMA MANTHENA v. DR. RENUKADATLA 227
[AMITAVAROY, J.)
the appellant in CivilAppeal arising out of S.L.P. (C) No. 12835 A
of 2015 (who is also respondent No. 5 and 4 in SLP (C) No.
12831 of2015 and SLP (C) No. 20338 of2015 respectively),
Mr. P.P. Rao, learned senior counsel for the appellant in Civil
Appeal arising out of S.L.P. (C) No. 20338 of 2015 (who is
also respondent No. 6 in S.L.P. (C) Nos. 12831 of2015 and B
12835 of 2015) and M/s. Parag P. Tripathi and Sajan
Poovaiah, learned senior counsel for Dr. Renuka Datla (
respondent No. 1 in all the three Appeals).
5. Since the judgment under challenge is same in all the C
appeals, for the sake of convenience, the facts are being
taken from Civil Appeal arising out of S.L.P. (C) No. 12835 of
2015.
6. A skeletal account of the facts in the bare minimum, D
as available presently on the record, would outline the contours
of the respective assertions.
7. The company, which was initially promoted by the
father of respondent No. 1, with time took in its fold, Mr. E
Venkata Krishnam Raju Datla, the father of Dr. Vijay Kumar
Datla (since deceased and husband of respondent No.1 ). After
the demise of the father of respondent No. 1, Dr. Vijay Kumar
Datla, who was inducted as the Chairman and Managing
Director of the company on 1.5.1972 stewarded, nurtured and F
nourished it from strength to strength. The respondent No. 1,
.· his wife, joined him initially as a Medical Director, as she is a
qualified medical professional and w.e.f. 29.8.1991, was
drafted in as the Executive Director of the company. Dr. Vijay
Kumar Dalla, who continued as the Chairman-cum-Managing G
Director of the company over the years, expired on 20.3.2013
and at his death, he, respondent No. 1 and Mr. G.V. Rao
(respondent No. 6) did constitute the Board of Directors of the
company. NoticeablyDr. Vijay Kumar Datla, in his individual
capacity, then did hold 81% of the shares thereof. H
228 SUPREME COURT REPORTS [2015] 11 S.C.R.
A 8. As the facts evince, Mr. G.V. Rao (respondent No. 6)
offered his resignation as a director vide his letter dated
6.4.2013 with immediate effect. It has been pleaded, however,
on behalf of the appellant that Mr. G.V. Rao (respondent No.
6), on being requested by the family not to abandon the
B company at its hour of crisis, its guardian and mentor Dr. Vijay
Kumar Datla having departed, did reconsider his decision and
addressed another letter dated 9.4.2013 to the Board of
Directors expressing his inclination to continue as the Director
of the Board, intimating as well that thereby he was withdrawing
C his resignation letter dated 6.4.2013.
9. On the same day i.e. 9.4.2013, a meeting of the Board
of Directors was convened by Mr. G.V. Rao, in the capacity of
a Director of the company, which was attended amongst others,
D by the three daughters of. the respondent No.1 i.e. Ms.
Purnima Manthena (respondent No. 4), Ms. Indira Pusapati
(respondent no. 5) and Ms. Mahima Dalla (appellant). The
respondent No. 1 did not attend the meeting and as the minutes
of the proceedings would record, leave of absence was granted
E to her. In the same meeting, Mrs. Indira Pusapati (respondent
No. 5) was inducted as the Director of the company to fill up
the casual vacancy caused by the death of Dr. Vijay Kumar
Dalla. Mr. G.V Rao (respondent No. 6), was authorised, inter
F alia, to verify all acts and deeds as would be necessary,
expedient and desirable to give effect to the resolutions
adopted.
10. Thereafter, on 10.4.2013 and 11.4.2013 as well,
meetings of the Board of Directors of the company were held.
G In these meetings also, respondent No. 1 did not attend and
leave of absence was granted. In the meeting dated
10.4.2013, along with two directors namely; Mr. G.V. Rao
(respondent No. 6) and Ms. Indira Pusapati (respondent No.
H 5), Mrs. Purnima Manthena (respondent No. 4) and Ms.
PURNIMA MANTHENA v. DR. RENUKA DATLA 229
[AMITAVAROY, J.]
Mahima Datla (appellant), amongst others, were present. The A
meeting took note of a will dated 14.2.2005, said to be
executed by Dr. Vijay Kumar Datla in favour of Ms. Mahima
Datla (appellant) and resolved to transmit the equity shares
· held by him and as referred to in the aforesaid will, in favour of
Ms. Mahima Datla (appellant).· In the same meeting, it was B
further resolved to appoint Ms. Mahima Datla (appellant) and
Ms. Purnima Manthena (respondent No. 4) as the Additional
Directors of the company, to hold the said office up to the
conclusion of next annual general meeting. Mr. G.V. Rao
(respondent No. 6), Director of the company was authorised C
to verify all acts, deeds as would be necessary, expedient
and desirable to give effect to the resolutions adopted.
11. In its next meeting held on 11.4.2013, in which
respondent No. 1 was absent and leave of absence was D
granted to her, Ms. Mahima Datla (appellant) was appointed
as the Managing Director of the company for a period of three
years w.e.f. 11.4.2013. It was resolved as well to request the
Chairman to advise respondent No. 1 to officially communicate
the appointment of Ms. Mahima batla (appellant) as Managing E
Director of the company.
12. Though the pleaded assertion of respondent No. 1
is tliat she was neither noticed nor informed of the meetings
held on 9.4.2013, 10.4.2013 and 11.4.2013 and that the F
proceedings thereof were a nullity, as the meeting dated
9.4.2013 could not have been validly convened by Mr. G.V.
Rao (respondent No. 6), who had, prior thereto, resigned from
the company and furtherthatthe meeting dated 9.4.2013 was
sans the prescribed quorum, the progression of events attest G
that on 15.4.2013, a letter had been addressed by her
(respondent No. 1) to the constituent fraternity of the company,
conveying the news of appointment of her daughters i.e. Mrs.
Purnima Manthena (respondent No. 4), Mrs. Indira Pusapati H
230 SUPREME COURT REPORTS [2015] 11 S.C.R.
A (respondent No. 5) and Ms. Mahima Datla (appellant) as the
Directors of the Board thereof, with particular reference to the
appointment of Ms. Mahima Datla (appellant) as the Managing
Director, thereby seeking tlie "blessings and guidance" of all
concerned for enabling her to discharge her new responsibility.
B Respondent No. 1, however, at a later point of time, did allege
exertion of pressure and undue influence by the other Directors
to which she wilted, being in an anguished and forsaken state
of mind, still mourning the sudden demise of her husband, Dr.
Vijay Kumar Datla.
c
13. While the matter rested at that, the respondent No.
1, Mrs. Purnima Manthena (respondent No. 4), Mrs. Indira
Pusapati (respondent No. 5) and Ms. Mahima Datla (appellant)
addressed a letter dated 24.5.2013 to the Board of Directors
D conveying the decision of the members of the HUF on
consensus to divide 4594 shares thereof (HUF) held by Dr.
Vijay Kumar Datla, in equal shares. They also appended to
the letter, a Memorandum Of Undertaking to this effect and
requested the company to effect transmission of shares in
E their favour, on the said basis.
14. Incidentally on the same day i.e. 24.5.2013, a meeting
of the Board of Directors was convened in which, as
respondent No. 1 was absent, leave of absence was granted
F to her. In the said meeting, amongst other, taking note of the
Memorandum Of Understanding referred to in the
aforementioned letter dated 24.5.2013 signed by the
respondent No. 1 and Mrs. Purnima Manthena (respondent
No. 4), Mrs. Indira Pusapati (respondent No. 5} and Ms.
G Mahima Datla (appellant), 4594 equity shares held by Dr. Vijay
Kumar Datla (HUF) were transmitted in their favour in equal
shares.
15. A meeting of the Board of Directors was thereafter
H convened on 22.8.2013 of which a notice was served on the
PURNIMA MANTHENA v. DR. RENUKADATLA 231
[AMITAVAROY, J.]
respondent No. 1. She did attend the meeting albeit with A
reservations, whereafter through a host of letters, addressed
to the Board of Directors, she highlighted her objections, inter
alia, to the validity of the meetings held on 9.4.2013, 10.4.2013
and 11.4.2013 in particular and the resolutions ad_opted therein.
B
16. On the receipt of notice of the Annual General Meeting
of the company, which was scheduled to be held on
28.11.2013, respondent No. 1 filed an application under
Section 409 of the Act before the CLB, which was registered
as Company Petition No. 1 of 2013, seeking principally a C
declaration that the appointments of her three daughters
namely; Ms. Pumima Manthena (respondent No. 4), Mrs. Indira
Pusapati (respondent No. 5) and Ms. Mahima Datla (appellant)
as Directors of the company by virtue of the meetings held on
9.4.2013, 10.4.2013 and 11.4.2013 to be a nullity. While D
seeking a further declaration that Mr. G.V. Rao (respondent
No. 6) having resigned from the Board of Directors of the
company on 6.4.2013 with immediate effect, he was neither
entitled to continue as the Director nor did he have any authority
to convene the aforesaid meet\ngs and transact the business E
therein, she also prayed that all acts, deeds and decisions
taken in and pursuant to the resolutions in the said meetings
be adjudged to be void and not binding on the company. Apart
from seeking a permanent injunction restraining her three F
daughters namely; Ms. Purnima Manthena (respondent No.
4), Ms. Indira Pusapati (respondent No. 5), Ms. Mahima Datla
(appellant) and Mr. G.V. Rao (respondent No. 6) from
functioning as Directors of the company, by way of interim relief,
she prayed for a restraint on the ensuing Annual General G
Meeting fixed on 28.11.2013 and to appoint two ad hoc
Directors ·for administering the day-to-day affairs of the
company along with her.
17. By its ruling dated 17.12.2013, the CLB, after H
considering the rival pleadings and the documents laid before
232 SUPREME COURT REPORTS [2015] 11 S.C.R.
A it, observed on a prima facie evaluation of the facts portrayed,
that the respondent No. 1 had recognised her three daughters
Ms. Purnima Manthena (respondent No. 4), Mrs. Indira
Pusapati (respondent No. 5) as the Directors and Ms. Mahima
Dalla (appellant) to be the Managing Director of the company.
B It was of the view that, though she received the letter of
withdrawal of resignation of Mr G.V. Rao-respondent No. 6,
she had not responded thereto either accepting or rejecting
the same. On an appraisal ·of the pleaded facts and the
documents on record, the CLB returned a finding that there
C was neither any change in the Board of Directors nor in the
management of the company nor there was any likelihood of
change in the ownership of the company nor any likelihood of
the new management taking over the company nor any change
D in the shareholding pattern of the company and concluded in
the context of Section 409 of the Act that respondent No. 1
had not made out any ground for grant of any interim relief, as
prayed. Noting the assertion of the respondents therein that
the company had the necessary reserves to meets its debts
E and that Mahima Dalla (appellant herein) had stood as a
guarantor for the loans obtained from the banks, the CLB was,
thus, of the view that the apprehension of the respondent No.
1, as expressed, was not substantiated by any documentary
evidence. Having recorded that the respondent No. 1 was
F continuing as the Executive Director of the company and that
Mahima Dalla (appellant herein) being associated with its
affairs was well acquainted therewith and that in tile proposed
Annual General Meeting to be held on 18.12.2013 (which got
deferred to this date from 28.11.2013), the company was going
G to transact the business, as notified, which did not disclose
any proposed change in the management or the ownership or
taking over by external agency, the CLB declined to grant stay
of the said meeting. This was more so, in view of the statutory
mandate qua Annual General Meeting of a company under
H the Act. The respondent No. 1 was left at liberty to participate
PURNIMA MANTHENA v. DR. RENUKADATLA 233
[AMITAVAROY, J.)
in the said Annual General Meeting and the company was A
permitted to conduct the same and take resolutions as per the
notice. The resolutions to be passed in the Annual General
Meeting were, however, made subject to the outcome of the
Company Petition No.1 of 2013.
B
18. Though the respondent No.1, being aggrieved by this
order, did prefer an appeal under Section 1OF of the Act being
Company Appeal No. 1 of2014, she participated in the Annual
General Meeting held on 18.12.2013 in which, resolutions on
the appointment of the appellants as Directors/Managing C
Director and amongst others, the enhanced remuneration of
respondent No. 1 were adopted. Eventually on 24.2.2014,
the appeal stood disposed of as infructuous on the concurrence
of the parties to join for the necessary endeavours for early
disposal of the Company Petition No. 1 of 2013. ·D
19. Close on the heels of the disposal of aforesaid
Company Appeal No. 1 of 2014, the respondent No. 1 instituted
a suit being O.S. No. 184 of2014 in the Court of Chief Judge,
City Civil Court, Hyderabad substantially traversing the above E
facts and seeking a decree for a declaration to be the absolute
owner of the shares of the company as enumerated in
Schedule A to the plaint, on the strength of a will claimed to
have been executed in her favour by Dr. Vijay Kumar Datla
(since deceased) and a direction to the defendants therein to F
transfer the same by recording her name in relation thereto
and to hand over the possession of the share certificates to
her. Her alternative prayer, without prejudice to this relief, was
for delineating her extent of claim to the shares in the capacity
a
of working spouse/widow of late Dr. Vijay Kumar Datla. ·G
20. As the flow of the developments thereafter would
demonstrate, the respondent No. 1 withdrew the Company
Petition No. 1 of 2013 in July, 2014 with a liberty to approach
the appropriate forum for appropriate reliefs in a manner known H
234 SUPREME COURT REPORTS [2015] 11 S.C.R.
A to law. The Company Petition No.1 of 2013, was, accordingly
closed.
21. The respondent No. 1, in her renewed pursuit for
redressal of her grievances as perceived by her, next instituted
B another petition before the CLB, which was registered as
Company Petition No. 36 of 2014 under Sections 111A, 237,
397,398,402,403,404,406 oftheAct, 1956 and Sections 58
and 59 of the CompaniesAct, 2013. As the pleaded assertions
made therein would attest, those were in substantial reiteration
C of the facts narrated hereinabove, with the added imputation
that the respondents therein were contemplating to transfer
and consign the undertakings of the company ~o other
companies incorporated and managed by the appell~nt herein
and other Directors so as to enable them, to dispose of the
D said assets through their companies and appropriate the
proceeds to their benefits to the irreparable loss and detriment
to the company i.e. Biological E. Limited and its genuine
shareholders. She, however admitted, that the concerned
Directors in the meanwhile, had filed a scheme of arrangement
E under Sections 391to394 of the Act before the High Court of
Andhra Pradesh for demerger of the undertakings of the
company as listed out in the said petition. A copy of the scheme
of arrangement was also appended to the petition alleging
F over all mis-management and oppression by the Directors
therein in particular, consciously driving the company and its
shareholders to a state of ruination chiefly through the process
of demerger. The respondent No.1 prayed for a declaration
of the acts of the said Directors to be oppressive and
G prejudicial to the interest of the company and to appoint an
administrator and/or Special Officer to manage the affairs
thereof by superseding the existing Board of Directors. In the
alternative, she also prayed for constitution of a committee
comprising of her representative to function as the
H administrator and/or Special Officer for the management and
PURNIMA MANTHENA v. DR. RENUKA DATLA 235
[AMITAVAROY, J.]
control of its affairs. She reiterated her prayer for (i) declaring A
the Board meetings held on 9.4.2013, 10.4.2013 and
11.4.2013 as void ab-initio, (ii) removal of the appellant herein
and the other Directors from the office of the Directors of the
company and (iii) adjudging the transmission of 400951 equity
shares held by Dr. Vijay Kumar Dalla (since deceased) to the B
appellant (Ms. Mahima Dalla) as illegal, null and void. A
declaration to adjudge the resolutions passed in the Board
meetings held on or after 20.03.2013 and also the Annual
General Meeting held on 18.12.2013 as non est was also
sought for. By way of interim relief, she prayed for supersession C
of the Board of Directors and appointment of interim
administrator and/or Special Officer to assume the charge of
the affairs of the company and in the alternative, prayed for
constitution of a committee corn prising of her representative D
to discharge the said role.
22. The petition was taken up on 6.8.2014, on being
mentioned. In course of the arguments, though the contesting
respondents could not file their pleadings, un,derstandably,it
being the date of first hearing, the pr[[naryfacts, as adverted E
to hereinabove, having a bearing on•the dissensions were ·
addressed and the CLB, after taking note of the fact that the
meeting of the company for considering the scheme of
demergerwas scheduled to be held on 7.8.2014, as directed F
by the High Court, construed it to be inexpedient to intervene
in that regard. It observed as well, that meanwhile a suit had
been filed by the respondent No.1 on the basis of a will said
to have been executed in her favour and that the same was
pending adjudication and concluded that it would not be G
appropriate to restrain the appellant (Ms. Mahima Dalla) from
exercising her voting right in respect of 400961 equity shares.
Noticeably, in course of the submissions, it was pleaded on
behalf of the respondent No. 1 that the suit would be withdrawn.
Qua the alienation of immovable properties of the company, H
236 SUPREME COURT REPORTS [2015) 11 S.C.R.
A the CLB recorded the submission on behalf of the
respondents therein that there was no intention to do so vis-a-
vis the movable and immovable properties of the company
except that may arise under the scheme of demerger. In
response to the submissions made on behalf of the respondent
B No. 1 that she ought not to be removed from the post of
Executive Director, it was submitted on behalf of the
respondents therein that no step would be taken to dislodge
her without the leave of the CLB. Taking note of these
submissions/undertakings, the CLB ruled that the respondent
C No. 1 had not been able to make out any case for grant of
interim relief "at the time of mentioning of the Company
Petition" and permitted the respondents therein to file their
counter within a period of six weeks and fixed 9.10.2014 to
D be the next date.
23. The respondent No. 1 herein, being aggrieved,
preferred an appeal being Company Appeal No. 17 of 2014
which has since been allowed by the judgment and order dated
15.4.2015 impugned in the instant batch of appeals.
E
24. The High Court, as the decision assailed would
reveal, traversed the entire gamut of the facts involved as
available from the company petition and the documents
appended thereto and recorded its findings on all the aspects
F of the discord and eventually granted the following reliefs.
"1. An ad hoc Board of Directors constituted with
appellant No. 1 as the Executive Director and respondent
Nos. 2 to 4 as the Directors of respondent No. 1-
G companv. Appellant No. 1 shall discharge the functions
of the Managing Director of the company.
2. The ad hoc Board is responsible for the day-to-day
functioning of the company and shall carry out the statutory
obligations under the Act.
H
PURNIMA MANTHENA v. DR. RENUKADATLA 237
[AMITAVAROY, J.]
3. All the decisions sha!I be taken by the Board based A
on unanimity and consensus. If consensus on any aspect
relating to the day-to-day affairs of the company is eluded
among the Board members, appellant No. 1, as the
Managing Director, shall approach the Company Law
Board for appropriate directions. B
4. The Board shall not transfer or deal with 81 % shares
held by late Dr. Vijay Kumar Datla in any manner till the
dispute on the issue of succession is adjudicated in O.S.
No.184of2014.
c
5. The Board shall not take any major policy decisions
unless there is unanimity among all its members and
without the prior approval of the Company Law Board.
6. The ad hoc Board shall continue to function till O.S.
No. 184 of 2014 is disposed of and appropriate orders D
in C.P. No. 36 of2014 are passed thereafter.
7. The Company Law Board shall keep C.P. No. 36 of
2014 pending till O.S. No. 184 of 2014 is finally disposed
E
25. The appeal was allowed and the accompanylng
applications were disposed of as infructuous. In arriving at its
penultimate conclusions, leading to the arrangement
configured by the operative directions, as extracted
hereinabove, the High Court elaborately delved into the factual F
details bearing on all facets of the surging disputes between
the parties, tracing from the issue of validity or otherwise of
the continuance of Mr. G V. Rao as the Director of the company,
to the imputation of mis-management and oppression,
allegedly indulged in by the appellants and other Directors G
including the perceived imminent possibility of slicing off the
assets of the establishment through a process of demerger.
26. En route to the final deductions, the High Court did
dwell upon the validity of the Board meetings held on 9.4.201 ~. H
238 SUPREME COURT REPORTS (2015] 11 S.C.R.
A 10.4.2013 and 11.4.2013 in particular and also of the Annual
General Meeting conducted on 18.12.2013, the claim made
by the respondent No. 1 in her suit based on a will claimed to
be executed in her favour by Dr. Vijay Kumar Datla (since
deceased), the letter dated 15.4.2013 written by the
B respondent No. 1 as well as the accusation of manipulation
of the transfer of the majority of the shares of the company in
favour of Ms. Mahima Datla (appellant). It held in no uncertain
terms, that in fact there was no Board of Directors legally in
existence, thus necessitating a workable arrangement for
C regulating the conduct of the affairs of the company. Having
regard to the contesting claims to the shares on the basis of
two wills and the pendency of the suit instituted by the
respondent No. 1, the High Court construed it to be appropriate
D to proceed on the premise that the appellant, her sisters and
the respondent No. 1 had more or less equal shares. In the
backdrop of this determination, the High Court, being of the
view, that it would be preferable to make an interim
arrangement to conduct the administration of the company,
E without the induction of an outsider as an administrator/
receiver, issued the above-mentioned directions to ensure
the same.
27. As would be evident from the steps enumerated in
F the impugned judgment and order in this regard, an ad hoc
Board of Directors was directed to be constituted with
respondent No. 1 as the Executive Director and her three
daughters as the Directors with the rider that the respondent
No. 1 would discharge the functions of the Managing Director
G of the company. Thereby, the ad hoc Board was allowed to
continue to function till the suit i.e. O.S. No. 284 of 2014 was
disposed of and appropriate orders in the pending Company
Petition No. 36 of 2014 were passed. It was ordered that the
CLB would keep the Company Petition No. 36 of 2014 pending
H till the suit was finally disposed of.
PURNIMA MANTHENA v. DR. RENUKA DATLA 239
[AMITAVA ROY, J ]
28. To put it differently, by the impugned verdict, the A
existing Board of Directors was substituted by an ad hoc body
adverted to hereinabove and the respondent No. 1 was
entrusted with the charge of office of the Managing Director of
the company. Further the arrangement, as directed, was to
continue till the disposal of the suit. The restraint on the CLB B
from proceeding with Company Petition No. 36 of 2014 till
the suit was decided, understanqably was to postpone the
adjudication therein, till after the final determination of the
issues in the suit. For all essential Pl;lrposes, therefore, the
adjudication of Company Petition No. 36 of 2014 was made C
conditional on the disposal of the suit.
29. Sustainability of the extent, propriety and correctness
of the scrutiny undertaken by the High Court on the aspects of
the lis between the parties pending the examination thereof D
by the statutorily prescribed forum of original jurisdiction i.e.
the CLB in an appeal under Section 1OF of the Act and the
decisive bearing thereof, is the focal point of impeachment in
the instant proceedings.
E
30. Learned senior counsel for the appellants in all the
appeals have, at the threshold, urged that as the order dated
6.8.2014 of the CLB did not generate any question of law, as
enjoined by Section 1OF of the Act, the High Court ought to
have summarily dismissed'.!~e appeal. According to the F
learned senior counsel, none of the issues involved had been
considered and decided by the CLB and rightly, in absence
of the pleadings of the appellants and, thus, no appeal under
Section 10F of the Act was contemplated. The CLB vide its
order dated 6.8.2014, having plainly deferred the scrutiny of G
the issues, taking note of the undertaking offered on behalf of
the appellants regarding the alienation of the properties of the
company and the assurance of the office of the Executive
Director of the respondent No. 1, there was no finding based H
240 SUPREME COURT REPORTS [2015] 11 S.C.R.
A on any adjudication and thus no question of law did emanate
to permit an appeal therefrom under Section 1OF of the Act.
31. Without prejudice to these demur, the learned senior
counsel for the appellants emphatically argued that not only in
B the attendant facts and circumstances, Mr. G V. Rao did lawfully
continue as the Director of the company, he having withdrawn
his resignation prior to the date of the meeting on 9.4.2013,
they urged as well that all the meetings of the Board held on
or from 9.4.2013 including the Annual General Meeting were
C to the full knowledge of respondent No. 1 and the contentions
to the contrary, are factually untenable. Referring to the letter
dated 15.4.2013 of the respondent No. 1, whereby she
acknowledged the induction of the Mahima Datla (appellant)
as the Managing Director of the company and her two other
D daughters as the Directors of the company, wishing them
success on the new venture, they maintained that her complaint
qua this letter, after a lapse of one year, being an after thought,
was thus of no relevance or significance. According to the
learned senior counsel, even assuming without admitting that
E the meetings of the Board of Directors held on 9.4.2013,
10.4.2013 and 11.4.2013 and thereafter were invalid as
imputed by respondent No. 1, the same got sanctified in the
Annual General Meeting held on 18.12.2013, in which she
F participated without any cavil. The learned senior counsel
urged, that having regard to the situation eventuated by the
sudden demise of Dr. Vijay Kumar Datla and the urgent need
to attend to the day-to-day affairs of the company, a duly
constituted Board of Directors, was an imperative necessity,
G and thus the steps taken by Mr. G.V. Rao to convene the
meetings dated 9.4.2013, 10.4.2013 and 11.4.2013, to that
effect is even otherwise saved by the doctrine of necessity.
Further the issues raised by her in Company Petition No. 36
of2014 being substantially the same in Company Petition No.
H 1 of2014, in which the CLBdeclined to grant injunction to the
PU RN IMA MANTHENA v. DR. RENUKA DATLA 241
[AMITAVAROY, J.]
conduct of the annual General Meeting which was to be held A
on 18.12.2013, the High Court ought not to have on an
extensive evaluation of the same facts afresh, overhauled the
set-up of the company in the manner done at the preliminary
stage and that too in absence of any tangible and legally
cognizable evidence of oppression and/or mis-management B
of the affairs thereof. They argued as well, that as the suit
filed by the respondent No. 1 was pending adjudication and
the scheme of demerger involving the company was also
subjudice before the High Court in a separate proceeding
being Petition Nos. 721-722 of 2014, the apprehension C
expressed on behalf of the respondent No. 1 of imminent
alienation of the properties of the company at their whims to
irreparably wreck the existence thereof, was grossly belied,
and thus, could not have been a consideration for superseding D
the existing Board of Directors and replacing it by an ad hoc
body with the respondent No. 1 as the Managing Director. They
urged that the interim arrangement modelled by the High Court
making it co-terminus with the suit tantamounts to grant of
reliefs claimed in the Company Petition No. 36 of 2014 finally, E
pending disposal of the proceeding before the Board and on
this count alone, the impugned decision is liable to be
interfered with.
32. To endorse the above pleas, the following decisions F
were pressed into service:
1. If. S. Krishnan and Others etc. vs. Westfort Hi-
tech Hospital Ltd. and Others etc. (2008)3 SCC 363
2. Wander Ltd. and Another vs. Antox India P. Ltd. G
1990 (suppl.) sec 727,
3. Election Commission of India and Another vs.
Dr. Subramaniam Swamy and Another (1996) 4 SCC
104
H
242 SUPREME COURT REPORTS [2015) 11 S.C.R.
A 4. The Commissioner of Income Tax, Bombay vs.
The Scindia Steam Navigation Co. Ltd. 1962(1) SCR
788
5. La/it Kumr Modi vs. Board of Control For Cricket
in India and others (2011)10 SCC 106
B
6. Banku Chandra Bose and another vs. Marium
BegamandanotherAIR 1917 Cal 546
7. Gokaraju Rangaraju Vs. State ofA.P. ( 1981 )3SCC
132
c 8. State of Punjab and others vs. Krishan Niwas
(1997) 9 sec 31.
9. A.R. Antu/ay vs. R.S. Nayak & Another (1988)
Suppl. 1 SCR1
o 33. In emphatic repudiation, the learned senior counsel
for Mrs. Renuka Datla (respondent No. 1) assiduously insisted
in favour of the maintainability of the appeal before the High
Court under Section 1OF of the Act. They urged, ihat the denial
of interim relief by the CLB in the attendant factual conspectus,
E was not only in disregard to the relevant provisions of the Act
and the Articles of Association of the Company but also did
adversely impact upon the legal right of the respondent No. 1
justifying the intervention of the High Court under Section 10F
of the Act. While questioning the locus and competence of
F Mr. G V. Rao as the Director ofthe company, consequent upon
his resignation and reiterating the invalidity of the meetings of
9.4.2013, 10.4.2013 and 11.4.2013, they urged that not only
the respondent No. 1 was unaware thereof, but also there was
no such pressing urgency to rush through such steps for her
G exclusion and that too while she was in the state of mourning,
having lost her husband. They repudiated as well, the validity
of the said meetings for want of quorum and due notice and
assailed also the Annual General Meeting to be a nullity as the
H same could not have been convened by or on behalf of the
Board of Directors which was non est in law for all intents and
PURNIMA MANTHENA v. DR. RENUKA DATLA 243
[AMITAVA ROY, J.]
purposes. According to the learned senior counsel, in any view A
of the matter, if such meetings were in fact necessitated by the
prevailing exigencies, resortoughtto have been taken of the
relevant provisions of the Act as well as Articles of Association.
In this context, they assertively dismissed the plea based on
the doctrine of necessity. They maintained that these meetings, B
having regard to the manner in which the same were convened
and conducted, smacked of the intention to deprive the
respondent No. 1 of her legitimate dues. They assertively
pleaded thatthe letter dated 15.4.2013 of the respondent No.
1, purportedly accepting the induction of her daughters in the C
Board of Directors, was not issued on her volition, and thus
was wholly inconsequential. As the progression of events from
9.4.2013 did irrefutably demonstrate, the endeavours of the
appellant and the other Directors of the Board to cast aside D
the respondent No. 1 and assume the absolute charge of the
company to its detriment and prejudice of its constituents,
resulting in oppression and mis-management of its affairs, the
High Court was eminently justified for its remedial intervention
in the overall well-being of the company, they pleaded. The E
learned senior counsel argued that the rejection by the CLB
of the interim reliefs sought for by the respondent No. 1 did
give rise to a question of law, and thus the appeal under
Section 10F of the Act was unquestionably maintainable.
According to the learned senior counsel, the contemplation of F
the demerger of the company did signal imminent cleavage of
its vital assets to reduce it to a carcass for the unlawful gain of
a selected few though unauthorisedly at the helm of affairs,
warranting the substitution of Board of Directors by the ad hoc
body as effected by the impugned order. The following G
decisions were cited in buttressal:
1. Raj Kumar Shivhare vs. Assistant Director,
Directorate of Enforcement and Another
(2010)4SCC 772,
H
244 SUPREME COURT REPORTS (2015] 11 S.C.R.
A 2. Waman Shriniwas Kini vs. Ratilal Bhagwandas
& Co. (1959) Suppl. 2 SCR 217.
3. II. S. Krishnan and Others etc. vs. Westfort Hi-
tech Hospital Ltd. and Others etc. (2008)3 SCC 363
B 4. Dale & Carrington lnvt. (P) Ltd. and Another vs.
P. K. Prathapan and Others (2005) 1 SCC 212.
5. Pankaj Bhargava and Another Vs. Mohinder Nath
and Another (1991) 1 SCC 556.
C 34. In their short reply, the learned senior counsel for the
appellants maintained that not only the issue of demerger is
subjudice in a different proceeding before the High Court under
the Act, and thus could not have been taken note of qua the
allegation of oppression and mis-management, there being
D neither any prayer for cancellation of the appointment of Mr.
G. V. Rao nor any necessity for the replacement of the Board
of Directors, the impugned judgment warrants interference,
pending disposal of the proceeding before the CLB on merits.
The learned senior counsel for the respondent No. 1 has not
E controverted the pendeny of the demerger proceeding
independently before the High Court.
35. We have extended our anxious consideration to the
weighty and dialectical assertions exhaustively touching upon
F the aspects of the debate, both legal and factual.
Understandably, as the impugned judgment stems from an
appeal under Section 1OF of the Act, great emphasis has
been laid, both in favour and against the maintainability thereof
as well as the manner and extent of scrutiny of the materials
G available on record, judged from the point of view of the
nascent stage of the proceedings before the CLB, at which
the appeal had been carried to the High Court. Admittedly,
the appeal preferred by the respondent No. 1 under Section
H 10F of the Act has been against an order dated 6.8.2014 of
PURNIMA MANTHENA v. DR. RENUKA DATLA 245
[AMITAVAROY, J.]
the CLB, declining to grant the interim relief in entirety while A
securing the office of the respohdent No. 1 as the Executive
Director of the company and noting the pendency of the
demerger proceeding as well as the undertaking on behalf of
the contesting Board of Directors that the properties of the
company except as would be required by way of demerger, B
would not be alienated. To reiterate, by order dated 6.8.2014,
the CLB deferred the consideration of the prayer for further
interim relief and granted time to the contesting respondents
therein to file their pleadings. ltis a matter of record that till the
stage offiling of the appeal under Section 1OF of the Act before C
the High Court, the contesting Board of Directors in the
proceeding before the CLB had not filed their pleadings.
36. In the above prefatory, yet presiding backdrop and
having regard to the decisive bearing of a finding on the D
maintainability or otherwise of the appeal before the High Court
or the permissibility of the ambit of scrutiny undertaken by it,
expedient it would be to assay at the threshold, these cardinal
aspects in the proper legal perspective.
E
37. Section 10F of the Act, which provides for appeal
against the order of the Company Law Board, for ready
reference is extracted hereunder:
"1 OF: Appeals against the order of the Company Law F
Board. Any person aggrieved by any decision or order
of the Company Law Board [made before the
commencement of the companies (Second Amendment)
Act, 2002] may file an appeal to the High Court within
sixty days from the date of communication of the decision G
or order of the Company Law Board to him on any
question of law arising out of such order:
Provided that the High Court may, if it is satisfied that the
appellant was prevented by sufficient cause from filing
the appeal within the said period, allow it to be filed within H
246 SUPREME COURT REPORTS [2015] 11 S.C.R.
A a further period not exceeding sixty days."
38. As the quoted provision would reveal, a person
aggrieved by a decision or order of the CLB, may file an appeal
before the High Court within 60 days from the date of
B communication of the decision or order to him on any question
of law arising out of such order. The period of limitation
prescribed, however, is extendable by the High Court by
another 60 days on its satisfaction that the appellant had been
prevented by sufficient cause in doing so.
c 39. The expression "decision or order" and "any question
of law arising out of such order" persuasively command for an
inquest, to appropriately address the issue in hand. The right
to appeal under Section 1OF of the Act unambiguously being
0 one conferred by a statute, the aspect of circumscription, if
any, of the contours of the enquiry by the appellate forum,
would be of formidable significance. The precedential
guidelines available offer the direction.
E 40. In Scindia Steam Navigation Co. Ltd. (supra), a
Constitution Bench of this Court while dilating on the
contingencies on which a question of law would arise out of an
order of the Appellate Tribunal, as envisaged in Section 66(1)
of the Income Tax Act, 1922 had ruled that when a question of
F law is neither raised nor considered by it, it would not be a
question arising out of its order notwithstanding that it may
arise on the findings given by it. It was propounded that it was
only a question that had been raised before or decided by the
Tribunal that could be held to arise out of its order.
G
41. In Dale & Carrington lnvt. (P} Ltd. (supra), this
Court had an occasion to dwell upon the scope of Section
1OF of the Act qua an appeal preferred against the decision
of the Company Law Board after a full-fledged adjudication
H before the High Court. While negating the argument, that the
PURNIMA MANTHENA v. DR. RENUKADATLA 247
[AMITAVAROY, J.]
High Court could not have disturbed the findings arrived at by A
the Company Law Board and record its own findings on certain
issues which it could not go into, this Court held that if a finding
of fact is perverse and is based on no evidence, it can be set-
aside in an appeal even though the appeal is permissible only
· on the question of law. It was clarified that, perversity of a B
finding itself, becomes a question of law. Reverting to the facts
of that case, this Court observed that the CLB had rendered
its decision in a very cursory and cavalier manner without going
into the real issues which were germane for the determination
of the controversy involved, and thus approved the exercise C
of the High Court in elaborately dealing with the matter.
42. While reiterating in V.S. Krishnan and others
(supra), that the CLB is the final authority on facts and that no
question of law arises unless its findings are perverse, based D
on no evidence or are otherwise arbitrary, this Court reiterated
thatin an appeal under Section 10F "on a question of law", the
jurisdiction of the appellate court is restricted to the question
as to whether on the facts as noticed by the Company Law
Board and as placed before it, its conclusion was against law E
or was founded on a consideration of irrelevant material or
was as a result of omission to consider the relevant material.
43. Adverting to the right of appeal, as a creature of
statute, as provided by Section 35 of the Foreign Exchange F
Management Act, 1999, this Court in Raj Kumar Shivhare
(supra) held that the expression "any decision or order" did
mean "all decision or order". While extending this interpretation
to the expression "any decision or order" applied in Section
35 as above, to dismiss the plea that such an appeal is G
contemplated only from a final order, this Court distinguished
a right of appeal as a creature of statute from an inherent right
. of filing a suit, unless barred by law. It was underlined that
while conferring such a right of appeal, a statute may impose H
restriction or condition in law, limiting the area of appeal, to
248 SUPREME COURT REPORTS [2015] 11 S.C.R.
A question of law or sometime to a substantial question of law
and ruled that whenever such limitations are imposed, those
are to be strictly adhered to.
44. This Court in Wander Ltd. (supra), while dealing with
B appeals against orders granting or refusing a prayer for
interlocutory injunction, did reiterate that the same, being in
exercise of judicial discretion, the appellate court ought not
interfere therewith and substitute its own discretion except
where such discretion is shown to have been exercised
C arbitrarily or capriciously or perversely or where the Court
whose order has been appealed from, had ignored the settled
principles of law, regulating grant or refusal of interlocutory
injunctions. It was enunciated, that appeal against exercise
of discretion is an appeal on principle and the appellate court
D would not reassess the materials and seek to reach a
conclusion different from the one reached by the court below,
if it was reasonably possible on the materials available. It was
held as well, that the appellate Court in such a situation would
normally not be justified in interfering with the exercise of
E discretion of the Court below, if made reasonably and in a
judicial manner, solely on the ground that if it had considered
the matter at the trial stage; it would have come to a contrary
conclusion. It was proclaimed that an interlocutory remedy is
F intended to preserve in status quo, the rights of the parties
which may appear on a prima facie examination of a case. It
was held that the prayer for grant of interlocutory injunction,
being at a stage when the existence of the legal right asserted
by the plaintiff and its alleged violation are both contested and
G uncertain and remain uncertain till they are established at the
trial on evidence, it is required to act on certain well-settled
principles of administration of such interlocutory remedy which
is both temporary and discretionary. Referring to the
fundamental object of interlocutory injunction, this Court noted
H with approval that the need for such protection of the plaintiff
PURNIMA MANTHENA v. DR. RENUKADATLA 249
[AMITAVAROY, J.]
against injury by violation of his rights must be weighed against A
the corresponding need of the defendant to be protected
against any injury resulting from the restraint on the exercise
• of his rights, as sought for, which he could not be adequately
compensated. The need of one, thus was required to be
compared against the other, to determine the balance of B
convenience to ensure an appropriate exercise of discretion
for an interim remedy as suited to a particular fact situation.
45. The unequivocal legal propositions as judicially
ordained, to ascertain the emergence and existence of a C
question of law, the scope of examination thereof by a court of
appellate jurisdiction and the balancing of the competing
factors in the grant of interlocutory remedy, hallowed by time,
indeed are well settled. A question of law, as is comprehended
in Section 1OF of the Act, would arise indubitably, if a decision D
which is the foundation thereof, suffers from perversity, following
a patent error on a fundamental principle of law or disregard
to relevant materials or cognizance of irrelevant or non-
germane determinants. A decision however, on the issues
raised, is a sine qua non for a question of law to exist. A E
decision logically per-supposes an adjudication on the facets
of the controversy involved and mere deferment thereof to a
future point of time till the completion of the essential legal
formalities would not ipso facto fructify into a verdict to generate F
a question of law to be appealed from. However, an omission
to record a finding even on a conscious scrutiny of the
materials bearing on the issues involved in a given case,
may be termed to be one. Be that as it may, in any view of the
matter, the appellate forum though exercising a jurisdiction G
which otherwise may be co-ordinate with that of the lower
forum, ought to confine its judicial audit within the layout of the
adjudgment undertaken by the forum of lower tier. This is
imperative, more particularly in the exercise of the appellate
jurisdiction qua a decision on discretion rendered at an H
250 SUPREME COURT REPORTS [2015] 11 S.C.R.
A introductory stage of any proceeding, otherwise awaiting final
adjudication on merits following a full contest. It is settled that
no adjudication at the preliminary stage of a proceeding in a
court of law ought to have the attributes of a final verdict so as
to prejudge the issues at that stage, thereby rendering the
B principal determination otiose or redundant. This is more so,
if the pleadings of the parties are incomplete at the threshold
stage and the lower forum concerned seeks only to ensure a
working arrangement vis-a-vis the dissension and postpone
fuller and consummate appreciation of the rival assertions and
C the recorded facts and the documents at a later stage.
46. Section 1OF of the Act engrafts the requirement of
the existence of a question of law arising from the decision of
the CLB as an essential pre-condition for the maintainability
D of an appeal thereunder. While the language applied therein
evinces that all orders, whether final or interlocutory, can be
the subject-matter of appeal, if it occasions a question of law,
in our comprehension, the Section per se defines the
perimeters of inquisition by the appellate forum conditioned
E by the type of the order under scrutiny. The nature and purport
of the order i.e., interlocutory or final, would thus logically
present varying canvases to traverse and analyse. These too
would define the limits of adjudication qua the appellate forum.
F Whereas in an appeal under Section 1OF from an order
granting or refusing interim relief, being essentially in the
exercise of judicial discretion and based on equity is an appeal
on principle and no interference is merited unless the same
suffers from the vice of perversity and arbitrariness, such
G constrictions may not necessarily regulate and/or restrict the
domain of examination in a regular appeal on facts and law.
Section 1OF, thus, statutorily demarcates the contours of the
jurisdictional exercise by an appellate forum depending on the
nature of the order impugned i.e. interlocutory or final and both
H cannot be equated, lest the pending proceeding before the
PURNIMA MANTHENA v. DR RENUKA DATLA 251
[AMITAVAROY, J.]
lower forum, if the order impugned is purely of interlocutory A
nature, and does not decide ariy issue on a consideration of
the rival assertions on merits, stands aborted and is rendered
superfluous for all intents and purposes.
47. Reverting to the presentfacts, noticeably the parties B
are contentiously locked on several issues, legal and factual,
a brief outline whereof has been set-out hereinabove. While
seeking the intervention of the CLB on the key accusation of
oppression and mis-management as conceptualised in
Sections 397 and 399 of the Act, the respondent No. 1 had C
retraced the march of events from 9.4.2013, the date on which,
according to her, when the meeting of the Board of Directors,
invalid in law, was convened and conducted by Mr. G.V. Rao ,
who allegedly had no authority to do so, he having resigned
from the company. She had asserted her express and implicit D
reservation in this rega[d and her disapproval not only of the
constitution of the Board of Directors since then but also of the
decisions taken from time to time. Without recapitulating the
stream of developments that had occurred, suffice it to
mention, that after a series of intervening legal proceedings, E
she finally did submit a petition before the CLB amongst other
under Sections 397, 398,402/403/404 and 406 of the Act
alleging oppression and mis-management and highlighting in
that regard, the imminent possibility of alienation of the vital F
assets of the company through a purported scheme of
demerger to the undue benefit of other Directors of the Board
·of the company. In contradiction, the appellants and the
contesting Directors have not only endorsed the validity of the
meetings on or from 9.4.2013 contending that respondent No. G
1 though intimated thereof, had opted out therefrom and on
the basis of the record, have sought to demonstrate her
participation in the meetings, amongst others on 24.5.2013,
22.8.2013 and the Annual General Meeting held on 18.12.2013
as permitted by the CLB, they have also emphatically adverted H
252 SUPREME COURT REPORTS [2015] 11 S.C.R.
A to the letter dated 15.4.2013 addressed by the respondent
No. 1 seemingly acknowledging the lawful induction of the
appellant (Ms. Mahima Dalla) as the Managing Director and
her two sisters as the Directors in the Board. The appellants
and other contesting respondents have also endeavoured to
B underline that the respondent No. 1 has accepted the
distribution of the shares held by Dr. Vijay Kumar Dalla in the
HUF as decided in the meeting dated 24.5.2013 and also the
enhancement in her remuneration as the Executive Director
as minuted in theAnnual General Meeting dated 18.12.2013.
C There is no denial by her as well as of the pendency of the
demerger proceeding before the High Court.
48. In the above overwhelming factual premise, the High
Court, as the impugned decision would demonstrate, being
D fully conscious that the proceeding before the CLB was
pending for final adjudication, proceeded to undertake an
in-depth exercise to fathom and analyse the facts and the law
involved and has recorded its decision on merits in total
substitution of the order of the CLB. This to reiterate, is in
E absence of any pleadings by the appellants, the contesting
Directors before the CLB. This assumes importance as the
High Court did resort to a full-fledged scrutiny of the factual
and legal aspects, to test the legality and/or validity of the order
F dated 6.8.2014 of the CLB atthe stage of mentioning. Having
regard to the fact that the appeal before the High Court under
Section 1OF of the Act was one from an interim order passed
in exercise of judicial discretion at the stage of mentioning, in
our view, bearing in mind the permissible parameters of
G exercise of appellate jurisdiction in such matters, the elaborate
pursuit so undertaken by it, is neither contemplated nor
permissible. The High Court, in any view of the matter, was not
dealing with a regular appeal under Section 1OF of the Act on
a question of law from a decision rendered by the CLB on
H merits, after a complete adjudication. The appeal before it,
PURNIMA MANTHENA v. DR. RENUKADATLA 253
[AMITAVA ROY, J_J
being one on principle and from an order rendered by the A
CLB in the exercise of its discretion at the preliminary stage
awaiting the pleadings of the respondents therein, we are of
unhesitant opinion that the scrutiny in the appeal ought to have
been essentially confined to the aspects of which the CLB
had taken cognizance, to pass its order at that stage, and not B
beyond.
49. As it is, though a colossus of facts with the
accompanying contentious issues are involved, having regard_
to the stage at which the order of the CLB had been passed, C
no exhaustive examination of the factual and legal aspects
ought to have been undertaken by the High Court to record its
conclusive deductions on the basis thereof. Keeping in view
the stage wise delineation of the jurisdictional frontiers of the
forums in the institutional hierarchy as codified by law, the D
High Court's quest to unravel the entire gamut of law and
facts involved at the preliminary stage of the proceeding before
the CLB and to record its findings on all issues involved on
merits did amount to prejudging those, thereby rendering the
petition before the CLB redundant for all intents and purposes. E
50. In the instant case, though the CLB, as a matter of
fact, did not record any view on the merits of the case while
deferring the consideration of the interim relief, being satisfied
with the undertakings offered on behalf of the appellants and F
other contesting Directors, the High Court has, by the
impugned decision, decisively furnished its views and
conclusions on all vital issues, as a consequence, leaving little
or none for the CLB to decide. This is not the role of the
appellate forum as is contemplated under Section 1OF of the G
Act qua the stage from which the appeal had been preferred
from the order of the CLB.
51. Noticeably in the face of the undertaking given by
the appellants and the pendency of the demerger proceeding H
254 SUPREME COURT REPORTS [2015] 11 S.C.R.
A separately before the High Court, in our view, there did not
exist any searing urgency to substitute the existing Board of
Directors as done and to continue with it till the disposal of the
suit and at the same time to keep the proceeding of the CLB
pending till then. This is more so, as can be culled from the
B order dated 6.8.2014 of the CLB, the status of the respondent
No.1 as Executive Director of the Company has been secured
and further alienation of the assets of the company, otherwise
has been restrained. Assuredly, these are based on
undertakings before the CLB as given by the appellants, the
C contesting Directors and the CLB having taken note thereof,
the same are as good as binding directions on the parties.
The aspect of demerger as adverted to hereinabove, is the
subject matter of adjudication in a separate proceeding on
D which, at this stage, no observation is called for. Suffice it to
state however, that the aspect of demerger for the present
cannot ipso facto be an impelling factor to conclude in favour
of allegation of oppression and mis-management as made by
the respondent No. 1.
E 52. In the wake up of above, we feel persuaded to
interfere with the impugned decision of the High Court, without
observing any final opinion on the merit of the contrasting
assertions. In our comprehension, having regard to the relief
F provided by the CLB by its order dated 6.8.2014 to the parties,
it ought to be left to decide the petition on merits after affording
them a reasonable opportunity of furnishing their pleadings.
As in the course of hearing, some grievance was expressed
on behalf of respondent No. 1 that her status as the Executive
G Director of the company, stands undermined due to uncalled
for surveillance imposed at the instance of the existing Board
of Directors, we make it clear, as has been assured before
us, that she ought to be allowed to function in the aforesaid
capacity being provided with all facilities and privileges
H attached to the office as permissible in law, so much so that
PURNIMA MANTHENA v. DR. RENUKADATLA 255
[AMITAVAROY, J.]
she does not have any occasion to complain in this regard. A
This indeed ought to be in accord with the letter and spirit of
the undertaking offered by the Board of Directors to the CLB.
The respondent No. 1 too would cooperate in the day to day
management of the affairs of the company in her said capacity.
The existing Board of Directors would also abide by the B
undertaking as recorded in the order dated 6.8.2014 of the
CLBqua the alienation of the assets of the company. The set-
up of the Board of Directors and the arrangement vis-a-vis the
administration of the affairs of the company, a;> was existing
on the date on which the order dated 6.8.2014 was passed by c
the CLB, would continue until further orders by it. The CLB is,
however, directed to dispose of the proceeding before it as
expeditiously as possible. As the suit filed by the respondent
'No. 1, as noted hereinabove, is also pending, we hereby direct ·D
the Civil Court before which it is pending, to deal with the
same with expedition as well, so as to provide a quietus to
the lingering family discord in the overall well-being of the
company and its constituents.
53. Before parting, we need to take note of the E
submission of Mr. P. P. Rao, learned senior counsel appearing
for Mr. G.V. Rao that the averments made in sub-paragraph 2
of the counter-affidavit filed by the respondent No. 1 at page
720 thereof besides being utterly incorrect and defamatory F
are liable to be effaced from the records. We are of the
considered view that this assertion needs to be sustained. We
thus, expunge these averments being wholly inessential for
deciding the issues involved.
54. The appeals are, thus, allowed in the above terms. G
The CLB and the Civil Court would decide the proceedings
before them on their own merits, without being in any way
influenced by any observation made herein. No costs.
Devika Gujral Appeals allowed. H
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