Jer Rutton Kavasmanek & Anr vs Gharda Chemicals Ltd

34] Further, it is alleged that by a letter dated 26th August 2004, the second appellant requested the first respondent to furnish Comp.Appeal No.24-10 details with regard to the proposed charitable Trust/ activities to/ for which the donation of Rs.5 Crores was proposed to be given. In the explanatory statement it was evasively stated that the amount was to be donated for the purpose of setting up and conducting an educational institute in Ratnagiri for the underprivileged. However, no details or particulars were made available. No details regarding the availability or cost of land/ building, the budgetary estimates/ cash flow requirements for setting up and running the alleged institute, the nature of the courses, the availability of teachers, the affiliations with recognised university etc. have been disclosed thereby once again denying the appellants the right to take any informed decision.

35] By a letter dated 4th September 2004, addressed by the appellants to the Chairman in respect of the said 38th AGM, the appellants protested to the proposed Ordinary Resolution empowering the first respondent to pay an amount of Rs.5 Crores to the Trusts/ entities owned and/or controlled by the second respondent in the name of charity. It was pointed out that the proposed resol

34] Further, it is alleged that by a letter dated 26th August 2004, the second appellant requested the first respondent to furnish Comp.Appeal No.24-10 details with regard to the proposed charitable Trust/ activities to/ for which the donation of Rs.5 Crores was proposed to be given. In the explanatory statement it was evasively stated that the amount was to be donated for the purpose of setting up and conducting an educational institute in Ratnagiri for the underprivileged. However, no details or particulars were made available. No details regarding the availability or cost of land/ building, the budgetary estimates/ cash flow requirements for setting up and running the alleged institute, the nature of the courses, the availability of teachers, the affiliations with recognised university etc. have been disclosed thereby once again denying the appellants the right to take any informed decision.

35] By a letter dated 4th September 2004, addressed by the appellants to the Chairman in respect of the said 38th AGM, the appellants protested to the proposed Ordinary Resolution empowering the first respondent to pay an amount of Rs.5 Crores to the Trusts/ entities owned and/or controlled by the second respondent in the name of charity. It was pointed out that the proposed resolution directly affected the reserves and net worth of Comp.Appeal No.24-10 the first respondent, diminishes the value of the minority shareholders' investment and is a further act of oppression. In spite of these protests and or objections, the resolution for giving a contribution of Rs. 5 Crores was alleged to be passed by the use of second respondent's brute majority. It is significant that no details of any nature whatsoever with regard to the proposed educational institution was given even at the time of the meeting. After the said meeting and after the resolution was already passed, by its letter dated 7th September 2004, the first respondent replied to the second appellant's letter dated 26th August, 2004 in an attempt to reply to the various queries contained in the second appellant's letter dated 26th August 2004. This letter further demonstrates that first and/or second respondents' intention was to keep the appellants in dark and deny them any information.

36] The second appellant also addressed a letter dated 30th August, 2004 to the second respondent. By the said letter it was pointed out by the second appellant that notwithstanding the encouraging performance of the first respondent, the company at the behest of second respondent was continuing with its policy of Comp.Appeal No.24-10 unfairly and/or inadequate distribution of its wealth especially to the minority shareholders. It was pointed out that whilst the minority is deprived from sharing the profits through dividend, the majority shareholders who were controlling the first respondent sought to take away huge and disproportionate sums of money in the form of remuneration, perquisites, commission and charity to institutions owned and/or controlled by themselves. By the said letter, the second appellant further suggested to the second respondent that if he genuinely desired to do charity he could declare a higher dividend to all the shareholders and from the dividends so received by him he could do such charity as he thought fit. It was further stated that if the second respondent decided to accept the minority shareholders aforesaid suggestion, it would go a long way in improving the strained relationship between the minority and the majority. Neither the second respondent nor the first respondent company replied to the above letter or considered the suggestions made on behalf of appellants.

37] By a separate letter dated 4th September 2004, addressed by the appellants to the Chairman of the said AGM, the appellants Comp.Appeal No.24-10 recorded some of the aforesaid facts and informed the Chairman of the meeting about their objections to the declaration of miniscule dividend and the fact that the same was a part of the dividend squeeze policy continually adopted by the second respondent.

Along with aforesaid notice dated 27th July 2004, the first respondent also circulated an abstract dated 28th July 2004 in purported compliance of section 302 of the Companies Act, 1956. By the said abstract, the minority ig shareholders were informed that a supplemental agreement dated 27th July 2004 had been entered into between the first respondent and the second respondent by which the commission payable to the second respondent was revised from 1% to 5%. This meant that the first respondent was now being made to pay to the second respondent, in addition to his remuneration and perquisites, a further amount as and by way of commission upto 5% calculated with reference to the net profits of the first respondent in a particular financial year.

38] By letter dated 27th August 2004 addressed to the first respondent, the second appellant pointed out that the decision to pay the huge commission of upto 5% of the net profits to the second Comp.Appeal No.24-10 respondent was clearly reflective of the discriminate policy of the majority shareholders of self aggrandizement at the cost of the minority shareholders. The second appellant also requested the first respondent to, inter alia, furnish a copy of the minutes of the Board meeting held on 27th June 2004 at which it was decided to enhance the payment of compensation. The appellants by their letter dated 4th September 2004 addressed to the Chairman for the 38th AGM, once again objected to the payment of such huge commission and recorded that the same was clearly reflective of the discriminate policy of the majority shareholders and in particular the second respondent of self aggrandizement at the cost of minority shareholders and the company. It was further pointed out that this self aggrandizement constituted to a further act of oppression. By its letter dated 7th September 2004 the first respondent declined to furnish copies of the minutes of the said Board meeting on the ground that shareholders are not entitled to the same.

39] It is stated that the decision to enhance payment of commission to the second respondent is retrospective inasmuch as the first respondent has in its letter dated 7th September 2004 Comp.Appeal No.24-10 clarified that the remuneration paid to the second respondent for the year ended March 2004 is Rs.410 lakhs comprising of commission of Rs.398 lakhs @ 4% of the net profits for the said year. The aforesaid figures demonstrate that the total amount paid by the first respondent to the second respondent towards remuneration excluding perquisites but including commission is Rs.410 lakhs whilst the total dividend paid to all the share holders including the second respondent is Rs.193 lakhs. Out of the said amount of Rs.

193 lakhs, an amount in excess of Rs.125 lakhs is in turn received by the second respondent as dividend. The amount which the second respondent seeks to pay himself was clearly excessive, more so, when compared with the dividend outlay. Besides, the alteration in the terms of remuneration was also illegal and contrary to the provisions of the Companies Act, 1956.

40] It is further alleged that not being satisfied with the excessive remuneration being paid to the second respondent, the first respondent/ second respondent devised yet another subterfuge to divert a further amount of Rs.3.92 Crores from the company and pay over the same to the second respondent. The 38th Annual Comp.Appeal No.24-10 report of the first respondent reflects that a sum of Rs.3.92 Crores has been paid to the second respondent apparently as "tenancy compensation.". The enquiries made by the petitioners revealed that the aforesaid amount was paid allegedly in lieu of alternate accommodation to the second respondent for allegedly surrendering an alleged tenancy in favour of the first respondent. It is significant that the existence of the alleged tenancy was hitherto fore never disclosed in any statutory or other records of the first respondent.

There was no alleged tenancy created or subsisting in favour of the second respondent. The appellants submit that with a view to give some semblance of sanctity to this illegal payment, the first and/or second respondents have attempted to take shelter under an alleged award dated 4th February 2004. The second appellant by his letter dated 11th March 2005 requested first respondent to furnish copies of the alleged tenancy agreement between the first/ second respondent and a copy of the alleged award dated 4th February 2004.

41] Thereafter the allegations pertain to Godrej Industries Ltd., with whom the appellants had pledged some of its shares and how Comp.Appeal No.24-10 these shares were lodged for transfer with the Godrej Industries Ltd are made in the company petition. The events under which the appellants were allegedly kept in dark and particularly while refusing the request to register the shares (3119 equity shares) in favour of Godrej Industries are also set out. There is also a reference to the correspondence in that behalf. It is alleged that the first respondent addressed a letter dated 16th March 2005 to the appellants and to the other members of the Kavasmaneck family and the Rebello family purportedly under Article 59(c) of the Articles of Association of the first respondent. By the said notice, the first respondent sought to contend that the appellants, inter alia, had been found to be working and or doing activities against the interest of the first respondent and accordingly the appellants were called upon to serve a Transfer Notice under Article 57 of the Articles of Association of the first respondent. One of the reasons cited by the first respondent as an act against the interest of the first respondent was quoted as under:-

"You have attempted to induct persons in allied fields knowing that the research of the company is a precious and invaluable asset and the involvement of Comp.Appeal No.24-10 outsiders/ persons from associated fields will affect the confidentiality and value of the company's research and adversely affect the company."
42] In the meanwhile, on 17th March 2005, the first/ second respondents filed Suit No.1170 of 2005 in this Court, inter alia, against the appellants invoking the said Article 59(c) of the first respondent's Articles of Association. By the said suit, the first/ second respondents have sought a direction that the appellants should be directed to sell their shares in the first respondent to the first/ second respondent's nominees at the price prevailing in 1990 viz., at Rs.6599.48 per share. The relevant prayer of the said suit is as under:-

"(a) That this Hon'ble Court be pleased to declare that the Memorandum of Understanding dated 3rd June 1992 between the first defendant and defendant Nos. 2 to 8 is void ab initio, non est and of no effect whatsoever."
43] One of the reasons cited by the first/ second respondents for seeking the aforesaid relief is that fact that the appellant had sought to sell some of their shares to the said Godrej Industries Ltd., who in the opinion of the first/ second respondents was the competitor of Comp.Appeal No.24-10 first respondent. The Appellants are informed that on 15 th April 2005, the said Godrej Industries Limited filed a petition before the Company Law Board on being aggrieved by the first respondent's refusal to transfer the said 3119 equity shares that were lodged by them on 11th January 2005.

In the petition, the first respondent sought to justify its refusal, inter alia, on the ground that para 10.4 ground (d) of letter dated 10th March 2005 of GCL as under:-

"....... you Godrej Industries Ltd., being engaged in the allied field of activity, such transfer of shares, in the circumstances would be prejudicial to the economic interest and the well being of GCL .. .... With reference to para 10.4 of the said petition, I reiterate all that is stated hereinabove and deny all that is contrary thereto and inconsistent therewith in the said para 10.4. I submit the Godrej Group of Companies is into allied business.
The said Godrej Group entered into allied business at approximately the same time as the time when it executed the MOU dated 3rd June 1992."
The appellants have stated that by an order dated 31st July 2008, the Company Law Board has dismissed the petition filed by the said Godrej Industries Ltd. Against the aforesaid dismissal, the said Godrej Industries Ltd., have preferred an appeal in this court under section 10F of the Companies Act and the said appeal is admitted Comp.Appeal No.24-10 and pending.

44] The appellants are also informed that on 18th May 2005 the said Godrej Industries Limited filed a petition before the CLB being aggrieved by the first respondent's refusal to split the said 100 equity shares that were lodged by them on 17th January 2005. In the petition, the first respondent sought to justify its refusal, inter alia, on the ground that:-

"paragraph 10.4 Ground (d) of letter dated 10th March 2005 of GCL .... you Godrej Industries Ltd. Being engaged in the allied field of activity, such application for splitting the share certificates of GCL to thereafter get these shares transferred to its name in the circumstances would be prejudicial to the economic interest and the well being of GCL ...... With reference to para 10.4 of the said petition, I reiterate all that is stated hereinabove and deny all that is contrary thereto and inconsistent therewith in the said para 10.4. I submit that the Godrej Group of companies is into allied business."
45] It is further stated that by an order dated 31st July 2008, the CLB has dismissed the petition filed by Godrej Industries Ltd.

Against the aforesaid dismissal, the said Godrej Industries Ltd., have preferred an appeal in this Court under section 10F of the Comp.Appeal No.24-10 Companies Act, 1956. The aforesaid appeal is admitted and pending.

46] The appellants along with their supporters were diiligently pursuing the said company petition. However the continued litigation of over a decade and a half had already taken its toll on the appellants, particularly, the first appellant, who was then approaching 80 years of age. Additionally, the said litigation had also caused a considerable financial drain on the appellants. The respondents, it is significant, were litigating at the cost of first respondent, whilst the appellants had to use their own personal resources to pursue the said litigation.

47] The first appellant as the head of Kavasmaneck family persuaded the second appellant to approach the second respondent and explore avenues where the family ties could be once again restored and the long drawn litigation could be ended. The second appellant accordingly approached the second respondent for amicably resolving matters, if possible. After discussions, the second respondent suggested that if the appellants were agreeable Comp.Appeal No.24-10 to withdraw the company petition then he would ensure that for the future years, he will declare adequate dividend of atleast Rs.400 per share, subject to legal requirement. The second respondent also assured that should he choose to sell his shares in the first respondent to an outsider, he would give to the appellants a right of first refusal in terms of Article 57. He also stated that he expected the appellants to also reciprocate in the same way. Further the second respondent also suggested to gradually involve the second appellant in the business of first respondent to the extent possible.

The second respondent suggested that this, in his view would adequately take care of the minority shareholders' interest and at the same time ensure non-interference from the minority shareholders.

50] Discussions were accordingly held within the minority shareholders. The appellants, the said Oomrigar and the members of the Rebello family were agreeable to the second respondent's aforesaid suggestion. However, Dr.Percy Kavasmaneck and his wife, Aban Kavasmaneck were not agreeable and were desirous of continuing the litigation with the second respondent. When this was Comp.Appeal No.24-10 communicated to the second respondent he suggested that if Percy and his wife Aban wanted to continue to litigate with him, the second respondent would defend himself. The second respondent accordingly offered to the appellants that if the appellants desire to avail of second respondent's offer as above, they should withdraw from the pending litigation.

51] In these circumstances, the appellants relying and trusting the second respondent agreed to withdraw from the company petition.

Accordingly, the appellants made statement before this Court that they were not interested in prosecuting the company petition No.77 of 1990 and requested for withdrawal from the same. The said request was accepted by this Court. After withdrawing from company petition the relationship between the appellants and second respondent started improving. The appellants and the second respondent who were earlier litigating with one another started socialising and meeting often with the second respondent inviting the appellants and particularly appellant No.2 to his office.

The second respondent also as assured declared a dividend of Rs.

400/- for the year ended March 2005 and March 2006.

Comp.Appeal No.24-10 52] It is further stated that sometime in the year 2007 at a meeting held between the second respondent and second appellant, the second respondent confided in the second appellant that for the year ended March 2007 it may not be possible to declare any dividend as the performance of the first respondent company was not satisfactory. The second respondent at this juncture stated that this would work unfairly on the minority shareholders whose only means to sharing the growth of the first respondent was through dividends. Besides the first respondent had enormous accumulated reserves and hence one year's bad performance should not result in withholding of dividends. The second respondent accordingly agreed to declare a dividend of Rs.300 per share as against the agreed amount of Rs.400 per share for the year and assured that for the future years if the first respondent's performance is better higher dividend would be declared.

53] There is a detailed reference to the proposal for settlement and the agreement reached and that is to be found in paragraphs 6.82 and 6.83. It is stated that the relations between the appellants Comp.Appeal No.24-10 and the second respondent improved but an important event took place In terms of the agreement that was reached, viz the Company Petition No.77 of 1990 was dismissed by an order dated 14th November 2008. It is stated that the appellants were not parties to the proceedings when this order was passed and therefore this decision would operate only against the parties thereto and would not bind the appellants or operate against them. The appellants then narrate the events leading to circulation of the notice of 42nd Annual General Meeting of GCL proposed to be held on 24th February 2008 and the declaration of dividend not at Rs.500 per share but at Rs.

400 per share. The second appellant requested the second respondent to abide by his commitment to declare dividend at Rs.

500 per share. The inability of the second appellant to attend the meeting was also conveyed but the assured dividend of Rs.500 was not forthcoming. The second respondent ultimately assured the second appellant that interim dividend of Rs.250 per share would be declared. There are certain reminders issued on this point but the assurance has not been fulfilled.

52] In terms of the agreement that was reached between the Comp.Appeal No.24-10 minority shareholders and the second respondent as narrated above, the appellants refrained from questioning any act of the second respondent and allowed the second respondent to function without any objection whatsoever from the petitioners. It is stated that in acknowledgment of the appellants aforesaid cooperativeness, and in the course of the improved relationship between the parties, some time towards middle of 2008, the second respondent informed the second appellant that as assured, he wanted to involve the second appellant in the affairs of the 1st respondent.

53] It is also stated that the second respondent informed second appellant that in so far as the 1st respondent's factory at Dombivali was concerned, it had constructed in excess of the construction permissible under the MIDC Rules. The second respondent informed the second appellant that he wanted to involve the second appellant in the aforesaid matter and for that purpose the second appellant could not represent the 1st respondent, interact with the 1st respondent's staff and also interact with the 1st respondent's lawyers.

Comp.Appeal No.24-10 54] It is further stated that, accordingly, the second appellant started visiting the office of the 1st respondent. At the request of the second respondent, one Mr.V.Satheesh of the 1st respondent addressed an email dated 20th June 2008 to the second appellant giving out details of the factory and built up area, the excess construction etc. By the said email the 1st respondent also furnished details of the available plots around the premises of the 1st respondent.

55] It is transpired that the 1st respondent had entered into an MOU with one Mulgaonkar Engineering Works and Forgings Pvt Ltd. It is further transpired that the 1st respondent had already paid an amount of Rs.1.25 crores. It is also transpired that now the said Mulgaonkar Engineering Works and Forgings Pvt Ltd was facing certain problems and was not in a position to honour the terms of the MOU.

56] It is stated that the second respondent informed his staff that this problem may also be entrusted to the second appellant.

Comp.Appeal No.24-10 Accordingly, by their email dated 26th June 2008 the 1st respondent forwarded to the second appellant a file note on the said Mulgaonkar Engineering Works and Forgings Pvt Ltd plot purchase transaction.

57] The second appellant by his email dated 30th June 2008 requested the 1st respondent to address a letter to the said Mulgaonkar Engineering Works and Forgings Pvt Ltd seeking certain details as enlisted.

58] With regard to the aforesaid matter, the second appellant also started interacting with the advocates for the 1st respondent. The emails and documents exchanged between the second appellant and the advocates for the 1st respondent are testimony of the aforesaid.

59] At around the same time, the second respondent informed the second appellant that the performance of the company had been much better than the earlier year and that he was considering declaring a dividend of Rs.500/- per share. The second respondent Comp.Appeal No.24-10 also mentioned that this would help generate funds for his foundation also. It is stated that the second appellant informed the second respondent that the minority shareholders would certainly appreciate the aforesaid gesture, especially when in the earlier year, the second respondent had declared a dividend of only Rs.300/- per share.

60] Whilst the relationship between the appellant and the second respondent had started improving manifold with the second respondent also gradually involving the second appellant in the affairs of the 1st respondent, the above referred important event took place.

61] It is further stated that around the same time, the appellants received the Annual Report and the notice for the 42nd AGM of the 1st respondent proposed to be held on 24th November 2008.

Contrary to the assurance of the second respondent to declare a dividend of Rs.500/- per share, it was noticed that the 1st respondent had proposed the dividend of Rs.400/- per share. The second appellant by his letter dated 10th November 2008 recorded some of Comp.Appeal No.24-10 the aforesaid facts and requested the second respondent that in all fairness they shall abide by his assurance of declaring a dividend of Rs.500/- per share. It is stated that there is no reply to the said letter dated 10th November 2008.

62] It stated that by a further letter dated 24th November 2008 the second appellant informed the second respondent that he and the said Dr.Rebello would be unable to attend the proposed AGM.

There were a few questions on the accounts which, the second appellant requested the second respondent to answer. The second appellant also informed the second respondent that he would meet the second respondent latter in the day and if convenient to the second respondent have lunch with him as usual.

63] The second appellant thereafter met the second respondent on several occasions and reminded the second respondent of having failed to declare the assured dividend of at Rs.500/- per share. The second respondent ultimately assured the second appellant that on or before 21st March 2009, which was the prospective New Year, the second respondent would declare interim Comp.Appeal No.24-10 dividend of at least Rs.250/- per share. It is stated that second appellant by his letter dated 2nd March 2008 recorded some of the aforesaid facts and reminded the second respondent of his aforesaid assurance to declare interim dividend of at least Rs.250/-

per share on or before 21st March 2009. It is further stated that once again the assurance was only made in breach.

64] It is stated that in or around 5th May 2009 the petitioners were shocked to hear news reports carried on NDTV profit whereby it was stated that the second respondent was offering to sell 75.1% of the Company's equity shares for a value of Rs.1600 crores. Accordingly, by his letter dated 7th May 2009, the second appellant recorded some of the aforesaid facts. The second appellant further recorded that the appellants had in good faith believed and reposed trust in the second respondent and had acted in a manner as indicated by the second respondent and had co-operated with the second respondent in all respects. By the said letter the second appellant requested the second respondent to furnish information regarding the aforesaid proposal and also put on record the fact that the minority shareholders must be given the option to exit with the Comp.Appeal No.24-10 second respondent or to permit the third party outsider to control the 1st respondent.

65] By his letter dated 13th May 2009 the second respondent equally expressed surprise and shock at the news report that was carried out and categorically denied that he was attempting to transfer his own shares clandestinely. By the said letter the second respondent acknowledged and expressed his happiness that the appellants had reposed trust in him and had acted in a manner as indicated by him from time to time. By the said letter the second respondent further acknowledged that any exit option would have to be "within the framework of the Articles of Association of the Company and applicable laws."

66] It is further stated that after categorically denying that the second respondent intended to transfer his shares, the appellants were again shocked at the newspaper articles that appeared in towards the end of July/August 2009 in which the second respondent has now evinced his desire openly to sell his shares in the 1st respondent. The intended transferees were stated to be Comp.Appeal No.24-10 either United Phosphorous or the Blackstone Group or Makhteshim Agam. It is significant that United Phosphorous and Makhteshim Agam are direct competitors of the 1st respondent. The Blackstone Group is only a venture capitalist/private equity investor who would ultimately sell the company to another competitor of the 1st respondent.

67] It is also stated that after publication of the aforesaid news reports, the second respondent has turned a complete blind eye to the appellants. The second appellant has made several attempts to contact the second respondent to seek a dialogue with him, but the appellants efforts have been unsuccessful. The intentions of the second respondent became quite clear, when the appellants (who believed to have improved their relation with the second respondent) were not even invited for the 80th birthday celebration of the second respondent on 26th September 2009.

68] It is stated that report of the second respondent selling his share privately have also appeared in Business India December 2009 Edition. The appellants now understand that the second Comp.Appeal No.24-10 respondent is at a very advanced stage of divesting his shareholding in the 1st respondent contrary to the agreements with the Kavasmaneck family, contrary to the assurances made to the appellants and contrary to the Articles of the 1st respondent and in breach of the preemptive rights of the appellants.

69] On these allegations that the aforementioned company petition was filed in the CLB and interim orders were sought therein.

70] Annexures to the said petition are right from certificate of incorporation to the detailed correspondence. The prayers are to be found in paragraph 8.11 of the memo of the company petition.

71] On being served with the proceedings in the company petition, a reply affidavit was filed by the company secretary of respondent No.1 in which several contentions have been raised. The preliminary objections about maintainability have been set out in para 6 and that are particularly that the first respondent is a public limited company and that the appellants seek to restrain transfer of shares in a public limited company. However, in law there cannot be any restriction for Comp.Appeal No.24-10 transferability of these shares. That is evident because of the following:

i. On and from 13th December 2000 (the date of coming into effect of the Companies Amendment Act, 53 of 2000) section 3(1)(iii) of the Companies Act, 1956 ("the said Act") which defines a private limited company stood amendmed. By the said amendment as well section 43 A of the said Act being also deleted the concept of a Deemed public limited company was done away with. (The company was initially incorporated as a Private Limited Company and subsequently on 17th August 1988 had become a deemed public limited company by virtue of the provisions of the erstwhile section 43A of the said Act.);

ii. Accordingly, a notice of an extraordinary general meeting dated 2nd April 2001 was circulated seeking to amend article 3 of the Articles of Association (AOA) of Respondent No.1 by incorporating a clause restricting the acceptance of deposits from members of the public and to change its name from "Gharda Chemicals Limited" to "Gharda Chemicals Comp.Appeal No.24-10 Private Limited" and thereby revert to being a private limited company. At the extraordinary general meeting held on 5th May 2001 pursuant to the said notice, the appellants and other members of the Kavasmanek/Rebello group collectively holding 32% of the shareholding of Respondent No.1 defeated the said resolutions;

iii. Consequently on and from 5th May 2001 respondent No. 1 has become and continued to be a public limited company.

Thus, for all practical purposes respondent No.1 functions as and the affairs of respondent No.1 are conducted as a public company. All the statutory filings of respondent No.1 are also made on the basis of the fact that it is a public company.

Respondent No.1 has more than 50 members. Respondent No.1 has more than three directors as mandated by the said Act. Respondent No.1 has accepted deposits in the form of fixed deposits from public and hence cannot be a private limited company. The appointment of the Managing Director of respondent No.2 was after following the provisions of section 269 of the Act as applicable to public limited companies. The approval of the Central Government has also been sought and Comp.Appeal No.24-10 obtained. Such approvals are not required for private limited companies. The appointment of the directors of respondent No.1 has also been in consonance with section 257 of the said Act, which is not applicable to private companies. It is pertinent to note that even appellant No.2 has followed the provisions of section 257 of the said Act whilst nominating himself for being appointed as a director of respondent No.1 on several occasions since the year 2001. The Board of Directors of respondent No.1 comprises of well reputed independent directors like Mrs.Almitra Patel who is a member of the Supreme Court committee for Solid Waste Management;

iv. It is pertinent to mention here that, by a judgment and order dated 14th November 2008 (hereinafter the 'said judgment and order') passed in Company Petition No.77 of 1990 (earlier filed by the appellants herein as set out hereinbelow), the Hon'ble High Court has affirmed and held that respondent No.1 has acquired the status of a public limited company and its share are freely transferable;

v. Further, the restriction on the right to transfer the shares Comp.Appeal No.24-10 applicable to a private limited company would naturally get diluted upon the company becoming a public limited company;

vi. Accordingly, it is now beyond the pale of any doubt that respondent no.1 is a public limited company. In the circumstances, there can be no fetter and/or restriction on the free transferability of shares in a public limited company.

Accordingly, the said petition insofar as it seeks to restrain respondent Nos.2 and 3 from transferring and/or alienating the shares of respondent No.1 ought to be dismissed in limine;

vii. The appellants are well aware of the fact that respondent No.1 is a public limited company and that article 57 of the articles of Association has become void after the defeat of the aforesaid resolution and is contrary to the said Act. This is further evident from the fact that:

(a) When the company received two transfer notices dated 17th May 2001 and 28th May 2001 respectively from its membmers Mr.B.E.Daruwalla and Mr.S.C.Gandhi, which were circulated amongst all its members under Article 57 of the AoA Comp.Appeal No.24-10 of respondent No.1 (this was after the aforesaid resolution dated 5th May 2001 was defeated), appellant No.2 by his letter dated 6th June 2001 (being Exhibit 1-3 to the petition) stated that he was "unable to understand as to how the company continues to circulate Transfer Notices under Article 57 especially in view of the recent turn of events" (being the non-

passing of Special Resolution for amendment of articles).

Appellant No.2 has recorded his objection and stated that he would be ignoring the transfer notices, if any, circulated by respondent No.1 under Article 57 of the Articles of Association.

(b) In view of what is stated above, the Appellants are estopped from denying that respondent No.1 is a public limited company and from contending that Article 57 has any effect or is binding as alleged;

(c) Further and in any event, it was submitted that as

93] Further it is submitted that section 43, under the heading "Private Companies" (which has only three sections viz sections 43, 43A and 44) provides that if the Articles of a company include the provisions required by section 3(1)(iii), and if default is made in complying with the provisions, the company shall "cease to enjoy the privileges of and exemptions conferred on private companies by or under this Act, and this Act shall apply to the company as if it were not a private company". The result is that it becomes a public company. Similarly, under section 44 if a private company alters its Articles in such a manner that they no longer include the provisions required by section 3(1)(iii), such private company would equally become a public company.

Comp.Appeal No.24-10 94] It is further submitted that a fortiori, where a company does not have in its articles the provisions required by section 3(1)(iii), there is no question of complying with non-existent articles, and the company forthwith ceases to be a private company and becomes a public company.

95] Section 43A inserted with effect from 28.12.1960 provides private companies becoming public companies in certain cases. A third class of companies was thus introduced: "private companies which have become public companies by virtue of section 43A, but which retain the three characteristics of a private company." The basic requirement, or foundation or substratum, for the operation of the legal fiction in the section is that the company in question be a private company as defined by section 3(1)(iii). If at any time the company ceases to be a private company, it cannot continue as a public company under section 43A at all, because the legal fiction ceases to operate.

96] It is submitted that sub-section (1-A) was inserted in section Comp.Appeal No.24-10 43A with effect from 1.2.1975 which provided that a private company having a certain turnover (Rs.1 crore was provided), will become a public company. The proviso allowed such a deemed public company to retain its articles as a private company as provided in section 3(1)(iii). This type of public company was not a truly public company for all purposes; it retained characteristics of a private company and did not fall under section 3(1)(iv). The respondent company became a deemed public company when its turnover exceeded Rs.1 crore. It applied to the Registrar of Companies who issued a certificate of incorporation with effect from 17.8.1988 which deleted the word "private" in the company's name as required by sub-section (2).

97] It is submitted that by the amendment of 2000, with effect from 13.12.2000, sub-section (2-A) was inserted alongwith sub-section (11), sub-section 2A contemplates if such a public company 'becomes a private company on or after the commencement of the Companies (Amendment) Act, 2000, the company shall inform the Registrar and he shall substitute the words 'private company' for the words 'public company'. Sub-section (11) made inapplicable the Comp. Appeal No.24-10 entirety of section 43A except sub-section (2-A) 'on and after the commencement of the Companies (Amendment) Act, 2000'. Thus, the third 'hybrid' category of deemed public companies under section 43A ceased to exist after 13.12.2000. Sub-section (2A) was retained to allow the public companies to revert to being private companies. This is because a new requirement was added in 2000 for being a private company: clause (d) was added to section 3(1)

(iii). From 13.12.2000, the position was restored to only two legally recognized categories of companies under section 3(iii) and 3(iv) i.e private company and public company.

98] It is further submitted that the most important addition to section 3(1)(iii) was made by the amendment of 2000 by addition of clause (d) which required a private company to have an article prohibiting deposits from the public. Clause (b) was always there which required the membership of the company not to exceed 50.

99] It is submitted that a company is a private company only if it satisfies the requirements of section 3(1)(iii)(a) to (d). If it does not satisfy the requirements it is not a private company. By reason of Comp.Appeal No.24-10 section 3(iv)(a) it becomes a 'public company'. Therefore, even during the time that Section 43A operated from 1960 to 2000, to become a deemed public company, the company first had to be a private company. Unless the company was a private company, Section 43A was not attracted at all. Assuming that a private company became a deemed public company under section 43A, if for any reason, the company ceased to be a private company the very substratum was removed and the edifice of Section 43A could not be sustained and Section 43A would become inapplicable automatically even while section 43A was in force. A fortiori, after section 43A became inapplicable as a result of the Amendment Act of 2000, if the hitherto deemed public company does not become a private company under sub-section (2-A) of Section 43A by bringing its Articles in conformity with the requirements of Section 3(1)(iii)(d) introduced by the same Amendment, it would have ceased to be a private company, it could become only a full fledged public company within the meaning of section 3(iv) since the third "hybrid" category of deemed public company had ceased to exist.

100] Mr.Bobde relies on following decisions in support of his Comp.Appeal No.24-10 submissions:

1. (2009) 8 S.C.C. 709 (Ram Purshotam Mittal & Anr. Vs. Hillcrest Realty SDN. BHD. & Ors)

2. A.I.R. 1992 S.C. 453 (V.B.Rangaraj Vs. V.B.Gopalkrishnan and Ors.)

3. 11 Ind. App. 37 (pc) (Ram Kirpal Shukul Vs. Mussumat Rup Kuari)

4. (1973) 43 Company Cases 235 (Mad) (Jacob Cherian Vs. K.N.Cherian & Ors.);

5. (2006) 131 Comp. Cases 42 (Delhi) (Smt. Pushpa Katoch Vs. Manu Maharani Hotels Ltd. & Ors)

6. (1992) Vol. 74 Company Cases 82 (CLB WB) Kinetic Engineering Ltd. Vs. Sadhana Gadia & Ors.)

7. Halsbury's Laws of England, 4th Edn. Reissue, Vol. 16(2) pp. 426-27

8. (1991) 72 Comp. Cases 211 (Kar) (Srikanta Datta Narsimhraja Wadiyar Vs. Sri Vekateswara Real Estate Enterprises (Pvt) Ltd. & Ors.

9. A.I.R. 1959 Punjab 610 (Parma Nand Vs. Kalyan Dass and Anr.) 101] Mr.Subramaniam, learned Senior Counsel appearing for respondent No.3 while adopting the submissions of Mr.Bobde, learned Senior Counsel, relied upon the Security Contracts Regulation Act, 1956 and omission of Section 22A therefrom. He submits that the appellants should not be permitted to canvass the abovenoted submissions because the appellants have not advanced any argument on mismanagement except to urge that Comp.Appeal No.24-10 respondent No.2 allegedly unjustly enriched himself. He submits that there is no act of oppression inasmuch as reliance is placed on newspaper reports and that cannot be termed as proof of act of oppression. He submits that the petition has been filed only to advance the cause of M/s.Godrej Ltd., and not that of the original petitioners - appellants. There is suppression of material facts by the appellants. There appeal, therefore, should be dismissed.

Mr.Subramaniam has also invited my attention to certain provisions of the Transfer of Property Act and the Sale of Goods Act to submit that shares are freely transferable and Article in question has no applicability to respondent No.1. For all these reasons, the appeal may be dismissed.

102] Mr.Sen appearing on behalf of respondent Nos. 1, 4 and 5 adopted the arguments of the learned Senior Counsel for other respondents and submitted that what the appellants are arguing is that the first respondent is a deemed public company. He submits that there is either a public company or a private company. But, there is nothing like deemed public company. If the law postulates that something should be presumed to be existing although it is not Comp.Appeal No.24-10 so, then, it would have expressly said the same. However, in the absence thereof and by implication it will not be possible to hold that any third category of company exists. If the third category does not exist and there is no restriction on transferability of shares, then, all the more this appeal should be dismissed.

103] Thus, these are the only submissions canvassed. With the assistance of learned Senior Counsel appearing for parties, I have perused the rather bulky records which include memo of company petition filed before CLB, affidavits of parties and some of the relevant documents. With their assistance I have carefully perused the legal provisions brought to my notice, so also the decisions and rulings of the Supreme Court, this Court and other High Courts.

104] For properly appreciating the rival contentions, it would be necessary to refer to some basic facts:

The appellants contended in their petition that the 1st respondent was incorporated as a private company. On 17th August 1988 it became a deemed public company by virtue of section 43A Comp.Appeal No.24-10 of the Companies Act. It is contended that it continued to retain its basic and fundamental characteristic of a private company. At the meeting of the members of the 1st respondent held on 5th May 2001 a special resolution was proposed, inter alia, to insert an additional clause viz clause (d) in its Articles of Association pursuant to the Companies Amendment Act of 2000. This resolution was not passed. This however would not alter GCL's basic and fundamental characteristic on the basis ig of which it was formed. Further, the amendment states that section 43A will apply "on and after" the year 2000. Therefore, it was submitted that the companies that had acquired such status prior thereto would continue to retain the same.

105] Assuming that this amendment is considered as repeal of section 43A, yet in the light of section 6 of General Clauses Act, 1897, such repeal would not disturb essential private character of the 1st respondent. Thus, the thrust of the submissions of the appellants is that the company incorporated as private company, if, by fiction of law is treated as public company it does not lose its character/fabric of a private company. In such circumstances the Comp.Appeal No.24-10 right of preemption provided by the Articles of Association of the 1 st respondent would continue to hold the field. Once it continues to hold the field and there is no free transferability of shares of the 1st respondent, then, the attempt to defeat the preemptive rights by issuing notice dated 16th October 2010 cannot be countenanced in law. Therefore, such an Act should be construed as an oppression of the minority by the majority and the CLB should prevent the same by granting the reliefs claimed.

106] On the other hand, it was the contention of 1st respondent that the statutory provisions referred to by the appellants cannot be construed in this manner and after 13th December 2000, in law, there is no third category namely a deemed public company. In law there are only two categories viz private company and public company. This broad classification and categorisation does not permit invocation of any third category and the attempt to introduce the same is contrary to law. It is this controversy which will be dealt with in this judgment.

107] To deal with the same some basic statutory provisions will Comp.Appeal No.24-10 have to be noticed. The Companies Act, 1956 is an Act to consolidate and amend the law relating to companies and certain other associations. The definitions are to be found in section 2 but, the definitions that are material of the term "Articles" [Section 2(2)].

That definition is exhaustive. The term means the Articles of Association of the Company as originally framed or as altered from time to time in pursuance of any previous companies law or the present Companies Act. The model regulations are also construed as Articles. The further definition to which reference has been made is in section 2(23A) viz, of the term, "listed public companies". While it may be true that a public company which has any of its securities listed in any recognised stock exchange is referred to as listed public company, yet, the controversy in this case is not about listing of securities of GCL. Whether the securities are listed or not, the term "Public Company" and the distinction between a "private company" and "public company" is alone relevant and material.

However, the section contains some other terms definitions, which are also relevant. The term private company is defined in section 2(35) to mean a private company as defined in section 3. Similarly, the term "Public Company" is defined in section 2(37) to Comp.Appeal No.24-10 mean a public company as defined in section 3. Section 3(1) in so far as it is relevant reads thus:

"3(1) In this Act, unless the context otherwise requires, the expression "company", "existing company", "private company" and "public company", shall subject to the provisions of sub-section (2), have the meanings specified below:-
(i) .....
(ii) .....
(iii) "Private company" means a company which has a mnimum paid up capital of one lakh rupees or such higher paid up capital as may be prescribed, and by its articles, --
(a) restricts the right to transfer its shares, if any,
(b) limits the number of its members to fifty not including -
(i) persons who are in the employment of the company; and
(ii) persons who, having been formerly in the employment of the company, were members of the company while in that employment and have continued to be members after the employment ceased;" and
(c) prohibits any invitations to the public to subscribe for any shares in, or debentures of, the company;
(d) prohibits any invitation or acceptance of deposits from to persons other than its members, directors or their relatives;
Comp.Appeal No.24-10 Provided that where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this definition, be treated as a single member;
(iv) "Public Company" means a company which --
(a) is not a private company;
(b) has a minimum paid up capital of five lakh rupees or such higher paid up capital, as may be prescribed;
(c) is a private company which is a subsidiary of a company which is not a private company;
(2) .....
(3) .....
(4) .....
(5) .....
(6) .....
108] Both sides also made a reference to section 9 to point out that the Companies Act, 1956 would over ride the memorandum and Articles of Association even if there is anything contrary contained in the same. Thus, the argument is that by sub-clause (b) of section 9 any provision contained in the memorandum/Articles/agreement or resolution to the extent to which it is repugnant to the provisions of this Act become void as the case may be.

Comp.Appeal No.24-10 109] Then comes section 43 and 43A which read thus:

"43. Where the articles of a company include the provisions which, under clause (iii) of sub-section (1) of section 3 are required to be included in the Articles of a Company in order to constitute it a private company, but default is made in complying with any of those provisions, the company shall cease to be entitled to the privileges and exemptions conferred on private companies by or under this Act, and this Act shall apply to the company as if it were not a private company:"
Provided that the Central Government on being satisfied that the failure to comply with the conditions was accidental or due to inadvertence or to some other sufficient cause, or that on other grounds it is just and equitable to grant relief, may, on the application of the company or any other person interested and on such terms and conditions as seems to the Central Government just and expedient, order that the company be relieved from such consequences as aforesaid."
"43A. (1) Save as otherwise provided in this section, where not less than twenty five per cent of the paid up share capital of a private company having a share capital, is held by one or more bodies corporate, the private company shall -
(a) on and from the date on which the aforesaid percentage is first held by such body or bodies corporate, or
(b) where the aforesaid percentage has been first so held before the commencement of the Companies (Amendment) Act, 1960 on and from the expiry of the period of three months from the date of such commencement unless within that period the aforesaid Comp.Appeal No.24-10 percentage is reduced below twenty five percent of the paid up share capital of the private company, become by virtue of this section a public company,"
Provided that .....
Provided further that .....
(a) ....
(i) ...

(ii) ....

(iii) ....

(b)
ig ....

(i) ...

(ii) ....

(iii) ....

Explanation:- .....

(1A) ......

Provided that .....

(1B) ......
(a) .....
(b) ......

Provided that ....

(1C) Where, after the commencement of the
Companies (Amendment) Act, 1988 a private company accepts, after an invitation is made by an advertisement, or renews, deposits from the public, other than its Comp.Appeal No.24-10 members, directors or their relatives, such private company shall, on and from the date on which such acceptance or renewal as the case may be, is first made after such commencement, become a public company and thereupon all the provisions of this section shall apply thereto;
Provided that even after the private company has so become a public company, its articles of association may include provisions relating to the matters specified in clause (iii) of sub-section (1) of section 3 and the number of its members may be, or may at any time be, reduced below seven;
Within three months from the date on which a private company becomes a public company by virtue of this section, the company shall inform the Registrar that it has become a public company as aforesaid, and thereupon the Registrar shall delete the word "Private" before the word "Limited" in the name of the company upon the register and shall also make the necessary alterations in the certificate of incorporation issued to the company and in its memorandum of association.

(2A) Where a public company referred to in sub- section (2) becomes a private company on or after the commencement of the Companies (Amendment) Act, 2000, such company shall inform the Registrar that it has become a private company and thereupon the Registrar shall substitute the word "private company" for the word "public company" in the name of the company upon the register and shall also make the necessary alterations in the certificate of incorrporation issued to the company and in its memorandum of association within four weeks from the date of application made by the company"

(3) ....
(4) ....
(5) ....

Comp.Appeal No.24-10

(6)& (7) omitted by Act 31 of 1988
(8) ....

(a) ....
(b) .....

(c) .....
(d) .....
(9) .......
(a) ......

(i) .....
(ii) ......
(iii) .......
(b) ........
(c) ........

(10) .......

(11) Nothing contained in this section, except sub- section (2A), shall apply on and after the commencement of the Companies (Amendment) Act, 2000."
110] A perusal of these sections would indicate that they deal with private companies and they appear in Part II of the Companies Act.

Prior thereto is Sec.26 which appears below the sub-heading "Articles of Association." A perusal of Sec.26 would indicate that there may, in the case of a public company limited by shares, and there shall in the case of an unlimited company or a company limited by Guarantee or a private company limited by shares, be registered with the Memorandum,Articles of Association signed by the subscribers of the Memorandum, prescribing Regulations for the Comp.Appeal No.24-10 company. Thus, the registration of Articles of Association with the Memorandum of Association is mandatory for a private limited company by shares whereas there is no such mandate in the case of a public company limited by shares. After providing for Articles of Association and Membership of Company and their registration, sections 43 and 43A appear in the Statute book and it is clear from a reading of the same that whenever there is any provision which under clause (iii) of section 3(1) is required to be included in the Articles of Company in order to constitute it as a private company, then, that is a private company. However, in default of compliance with the same, the company would lose the privileges and exemption conferred on private companies by or under the Companies Act but the Act continues to apply to it and it will be then treated as if it is not a private company.

111] Section 43A provides for a private company to become public company in certain cases. This provision was inserted by Act 65 of 1960 with effect from 28th December 1960. Thereafter, there have been certain amendments inasmuch as by Act 91 of 1974 change was effected from 1st February 1975 and sub-section 1(A) was Comp.Appeal No.24-10 inserted in Section 43A. Thereafter, an explanation below sub-

section 1 of 43A came to be inserted and at the same time sub-

section 1A which was inserted in 1974 had to be amended.

112] By 1988 Act so also prior thereto by 1974 Act, sub-sections 1B and 1C were inserted in section 43A and in 2000 by Act 53 of 2000, with effect from 13th December 2000 sub-section 2A was inserted.

That dealt with the situation of a public company becoming a private company. In other words, this section permitted a private company to become a public company in certain cases and once the word private is deleted it becomes a public company. However, there was nothing which permitted such public company to again become private company and that is achieved by insertion of section 43(2A).

Sub-section 43A(11) which also was inserted by Act 53 of 2000 from 13th December 2000, clarified that nothing contained in section 43A, save and except sub-section 2A shall apply on and after the commencement of Companies (Amendment) Act 2000. In other words, whole of section 43A except for one sub-section viz., sub-

section 2A ceases to apply after the commencement of Companies (Amendment) Act, 2000. The reason for this is obvious because the Comp.Appeal No.24-10 Parliamentary Standing Committee submitted a report which is known as 64th report on Companies Second Amendment Bill 1999.

It recommended that entire section 43A must be deleted. The recommendation was that some part and particularly section 43A(4) may be retained so that deemed public companies may submit certificate of incorporation to Registrar of Companies for correction by adding the word "Private" before the word "Limited", in the name as indicated in the certificate of incorporation. However, when that bill became an Act, new sub-section 2A came to be inserted in the aforesaid terms. Thus, section 43A itself became inapplicable by virtue of sub-section 11. The effect of all this is that the concept of deemed public company under section 43A and introduced by the Companies (Amendment) Act has now been abolished based on the recommendation of the working group the Companies Act, 1956.

113] In my view, the legal consequences of the amendments, which have been termed as of far reaching importance and substantial by none other than Mr.A.Rammaiyya in his work "Guide to the Companies Act", cannot be ignored. If these amendments are placed in the forefront, then, there is much substance in the Comp.Appeal No.24-10 contentions of Mr.Bobde, learned Senior Counsel appearing on behalf of respondent No.2.

114] Mr.Bobde is right in his contention that after these amendments are noted only two broad categories of companies viz., public company and private company remain and there is no scope for introduction of any third type or category. The amendment was made with obvious purpose. If a private company is to become public company in certain cases, then, all attributes and characteristics of a public company get attached to it. Thereafter, there should be no scope left for it to revert back to the status of a private company. If while amending section 43A care was taken to introduce sub-clause (d) in section 3(1)(iii) of the Companies Act, 1956 and at the same time substitute section 3 (1)(iv)of the Companies Act, 1956, then, there is no warrant for creation of third category or permitting reversal of status from a public company to a private company. In other words if sub-clause (d) was inserted to provide for a prohibition against inviting or accepting deposits from persons other than the members of a private company, its Directors or their relatives in addition to the prohibition from inviting the public Comp.Appeal No.24-10 to subscribe for any shares or debentures of a private company, then, the demarcation and distinction ought to be clear and specific.

If the broad definition of the term "public company" is that it means a company which is not a private company and further requires minimum paid up capital, but importantly the term "public company"

also means a company which is a private company but is a subsidiary of company which is not a private company, then, this only shows that the Legislature wanted to include within the term "public company" a private company which is a subsidiary of a company which is not private. If the holding company is not a private company but its subsidiary is a private company such subsidiary also becomes a public company now. If all this is read together and seen as a whole, it becomes at once clear that the Legislature did not desire to continue any concept of deemed public company which was in force on account of the amendment made in the year 1974 to the Companies Act. The effect and implication of 1974 amendment is to be wiped out completely and that has been done by the 2000 Act to the extent it made the whole of section 43A except sub-section 2A inapplicable and from ineffective from 13th December 2000.

Comp.Appeal No.24-10 115] It is clear from the factual position that the attempt to amend the Memorandum and Articles of Association of the first respondent was unsuccessful. The said resolution proposed in the meeting held on 5th May 2001 was not carried but in fact defeated. Once it was defeated, then, the first respondent which had become a public company on 17th August 1988 continued with that status. It would be of relevance to note that the resolution was moved in the meeting held on 5th May 2001. That resolution was defeated on that day. However, the Companies Amendment Act 2000 had come into effect already and to be precise from 13th December 2000. On 13th December 2000, GCL was not a deemed public company but a public company. Once it was a public company, then, the argument of the appellants that it continued to retain its fundamental and basic character as a private company cannot be accepted. The status is conferred by law. The status was sought to be changed or amended by moving an amendment to the Articles of Association.

Once that amendment to insert an additional clause (d) was defeated, then, there is no scope to alter the status of the respondent No.1 company by either terming it as a deemed public Comp.Appeal No.24-10 company or a public company retaining the fundamental and basic character of a private company. Both these concepts are unknown to law. Once they are contrary to the statutory mandate flowing from the terms as defined in the Companies Act, 1956, read together with section 43A and particularly sub-section 11 thereof, then, all the more the arguments of Mr.Samdani cannot be accepted. Mr.Samdani's attempt was to show that sub-section 11 of section 43A is not attracted in the facts of this case. Mr.Samdani argued that the principles of partnership which govern the administration and management of first respondent through out hold good in any event. His first contention was that section 43A(11) ceases to make section 43A inapplicable after 13th December 2000.

Alternatively and even if the amendment is taken as a repeal, that repeal of section 43A will not affect the underlying character of the first respondent as a family concern or glorified partnership.

116] Mr.Samdani is not right on both counts. The amendment to Section 43A was brought into effect on 13th December 2000. The amendment to the Articles of Association was proposed and it was to be considered at a meeting held on 5 th May 2001. That Comp.Appeal No.24-10 amendment was to alter the status of the company by insertion of sub-clause (d) in the Articles of Association. That amendment was not carried. Therefore, sub-section 11 of section 43A and the entire amendment of 2000 as far as section 43A is concerned, is operative and is applicable to respondent No.1. The appellants and others proposed the change in the status of GCL after the amendment had come into force. In such circumstances, emphasis on the words "on and after" as appearing in Section 43A(11) will not be of any assistance to the appellants.

117] In any event, as far as the principles of statutory interpretation are concerned, long back in a decision reported in A.I.R. 1988 S.C. 740 Bhagatram Sharma Vs. Union of India, the Supreme Court held that it is a matter of legislative practice to provide, while enacting and amending a law, that an existing provision would be deleted and a new provision substituted. Such deletion has effect of repeal of the existing provision. Such a law may also provide for introduction of new provision. There is no real distinction between "repeal" and "amendment". The Supreme Court holds that amendment is in fact a wider term and it includes abrogation or Comp.Appeal No.24-10 deletion of a provision in a existing statute. If the amendment of existing law is small the act professes to amend the Act. If it is wide, it repeals a law and re-enacts it. (see paras 16 to 18 pgs.745-6).

117] Therefore, in my view, once the first respondent is a public company as evidenced by the certificate referred to above, with effect from 17th August 1988, then, the amendment made in 2000 would be applicable and section 43A ceases to apply to it. That the words "On and After", are used makes no difference as far as present case is concerned. In the present case, the status of the first respondent as a public company remains and it is now academic to find out whether it was a deemed public company earlier as contended. Once the law makes only a broad categorisation as noticed above, then, it is not necessary to deal with this contention any more.