Whether company law board can allow amendment of pleading?

The decision in the case of Major Retd. Keharsingh
(supra), in my view, cannot come to the aid of the appellants. In
that case, the question whether the authorities under the Goa,
Daman and Diu (Lease, Rent and Eviction) Control Act, 1968 have
jurisdiction to allow amendment of the applications / replies, filed
in the proceedings under the Act, was referred to the Division
Bench. In that case, it was held in paragraph 15 that it is
inconceivable that the Court of the first instance would have no
jurisdiction to allow amendment while the Appellate Court would
have such a jurisdiction. It is apparent that the said case arose in
the context of the provisions of the Rent Control Act. In the
present case, it cannot be said that the CLB has no jurisdiction to 
allow amendment. Regulation No.46 confers powers on the CLB
to entertain an application for amendment. Thus, the case of
Major Retired Keharsingh (supra), would be distinguishable on
facts. For the reasons aforesaid, point no.2 is answered in the
negative, with the rider that the CLB can, in appropriate case,
consider the effect of any delay and laches, while allowing a
prayer for amendment and would consider the same in the facts
and circumstances of each case. However, proviso to Rule 17 of
Order VI of C.P.C. or the principles underlying the same, cannot
apply with the same rigor to the proceedings before the CLB, as
they would apply to Courts governed by the Civil Procedure Code.
IN THE HIGH COURT OF BOMBAY AT GOA
COMPANY APPEAL NOS. 1 to 7 of 2015
 COMPANY APPEAL No. 1/2015
Anju Timblo, 
Versus
Dilip Timblo, 

CORAM :- C. V. BHADANG, J.

Pronounced on : 6thAugust, 2015
Citation: 2016(2) ALLMR 302



5. These appeals under Section 10F of Companies Act,
1956 (the Act, for short) arise out of the order dated 18/05/2015,
passed by the Company Law Board (CLB), New Delhi on C.A.
No.5/C.1/2013 and C.A. No.58/C.1/2013 in C.P. No. 87/2006. All
the appeals involve common and connected questions of law and
as such, they are being disposed of by this common judgment.
6. The facts, necessary for the disposal of the appeals,
may be stated thus :
Sociedade de Fomento Industrial Private Ltd. (SFIPL)
is a Company incorporated under the Act. The said Company was
promoted by late Shri Modu Timblo (MT) in the year 1956. The
Company is engaged in the business of mining in Goa and is
considered as one of the best mining Corporations. The Company
is said to be flagship of Fomento Group of Companies. It is
holding shares and is in direct and indirect control of other group
Companies. MT left behind his widow Sushila Timblo (ST) and 3
sons, namely Dilip Timblo (DT), Auduth Timblo (AT) and Prashant COA1-7/2015
19
Timblo (PT). According to the first respondent Dilip Timblo (the
original petitioner), under a family arrangement and settlement
entered into by the family members on 18/11/1994, AT (original
respondent no.2) was appointed as the Managing Director, while
PT (original respondent no.3) was appointed as Joint Managing
Director of the Company. Further, according to the first
respondent (the original petitioner), due to his ill health, he did
not insist for a place on the Board of Directors and in good faith,
allowed AT and PT to manage the affairs of the Company. He was
assured that all the transactions would be carried out fairly and
transparently, without prejudice to his interest and other
shareholders. The first respondent was for some time working as
the Special Economic Adviser to the Company.
7. The authorised share capital of the Company is Rs.1
Crore shares divided into 50,000/- equity shares of Rs.100/- each
and 50,000/- unclassified shares of Rs.100/- each. The paid up
share capital of the Company is Rs.25 Lakhs. The first respondent
holds 5000 equity shares of the Company constituting 20 % of the
paid up share capital. AT holds 10000 equity shares, which
includes 5000 equity shares purchased from PT, thus constituting
40 % of the paid up share capital of the Company.  COA1-7/2015
20
8. In or about November, 2003, PT had offered to sell his
entire shareholdings of 6667 shares (comprising of 5000 shares
owned and 1667 shares inherited) in the Company to the first
respondent at a consideration of Rs.42.09 Crores, which offer was
accepted. On 22/12/2003, an agreement was entered into
between the first respondent and PT, against which the first
respondent had paid an advance of Rs.13.80 Crores to PT, which
was duly acknowledged. The sale transaction was to be completed
by 21 June, 2005. However, during the subsistence of the said
agreement, AT prevailed upon PT and bought all the said shares
for an undisclosed consideration. This, according to the first
respondent, was a clear attempt by AT to consolidate his position
and to acquire monopoly in the Company. Subsequently, disputes
also arose between AT and PT, which led PT to file a Company
Petition being C.P. No.3/2005 before the CLB. That petition was
filed alleging oppression and mismanagement under Section 397
and 398 of the Act. According to the first respondent, there was
an unequivocal understanding by the family members that no
outside members, except professionals, would be inducted on the
Board of Directors of the Company. However, in total disregard of
the same, AT appointed Francisco Lume Pereira (original
respondent no.4) and Y. S. Reddy (original respondent no.5) as
Directors of the Company. It is contended that these respondents COA1-7/2015
21
are the employees and trusted hands of AT. This was again an
attempt to take the control of the Company and to gain absolute
majority on the Board of Directors.
9. Mr. M. A. Hajare (original respondent no.6) is the
Chief Accountant and Financial Controller of the Company, while
Aparanji and Company, which is a Partnership Firm of Chartered
Accountants (original respondent no.7), is the statutory Auditor of
the Company. Prime Minerals Private Ltd (PMPL) (original
respondent no.8) and Infrastructural Logistics Private Ltd (ILPL)
(original respondent no.9) are said to be the Companies, managed
by Ambar Timblo (original respondent no.10), who is the son of AT
and Anju Timblo, the proposed respondent no.12 and the appellant
in Company Appeal No.1/2015. In short, according to the first
respondent, AT in collusion with the respondent nos.4 and 5, is
acting against the interest of the Company, with a view to promote
the interest of his son Ambar Timblo and his Companies i.e. PMPL
and ILPL, controlled by the respondent no.10. The details of the
same are set out in paragraph 16 onwards of the petition, filed
before the CLB. It was, in these circumstances, that the first
respondent had approached the CLB, with a petition under
Sections 397 and 398 of the Act, with the following reliefs : COA1-7/2015
22
“(a) All appropriate orders be passed as this
Hon'ble Bench thinks fit and proper to put an end to
the oppression of the rights and interests of
Petitioner No.1 Company in respondent No.1
Company.
(b) Respondent Nos. 2, 4 and 5 be removed from
the Board of Directors of the Company.
(c) An administrator or independent Directors be
appointed to conduct the business and affairs of the
Company.
(d) Independent Auditors be appointed to make an
investigation into the affairs of the Company and
make a report to this Hon'ble Bench.
(e) Respondent nos. 1, 2, 4 and 5 be restrained
from giving or transferring any business or any other
benefits of the Company to respondent nos. 8 and 9
or any other associate company of respondent nos.2
and 10, in any manner whatsoever.
(f) Respondent nos.1, 2, 4 and 5 be restrained
from advancing loans to any of his or respondent
no.10's companies, relatives and associates.
(g) Respondent No.2 be ordered and directed to
reimburse to the Company the loss which is so far
disclosed and which might be disclosed as a result of
investigation.”
10. PT and the other respondents contested the petition
before the CLB. It is undisputed that the matter was finally heard
before the Chairman, CLB. However, on account of the retirement COA1-7/2015
23
of the Chairman, the same could not be decided. It is further
undisputed that the matter was also finally heard by the present
incumbent. It is, at this stage, that the first respondent filed two
applications being CA.No.5/2013, which is an application for
amendment, under order VI, rule 17 of C.P.C., read with
Regulations 44 and 46 of the Company Law Board Regulations
(Regulations, for short) and Company Application No.58/2013 for
impleading the following as party respondents :
Respondent No. Party Name
Respondent
No.11
Fomento Resorts & Hotels Ltd., (FRHL) a
company incorporated under the provisions of
Companies Act, 1956 and having its registered
office at Cidade De Goa, Vainguinim Beach,
Goa-403004.
Respondent
No.12
Anju Timblo, Managing Director of Fomento
Resorts & Hotels Ltd having her office at
Hotel Cidade De Goa, Vainguinim Beach, Goa-
403 004.
Respondent
No.13
Fomento Resources Pvt. Ltd.(FRPL) Casa Del
Sol, Casa 3-325, Next to Goa Marriott,
Miramar, Panaji, Goa-403001.
Respondent
No.14
Sushila Modu Timblo, W/o Late Mr. Modu
Ganesh Timblo, Residing at “Zaiwanti”, Fr.
Agnelo Road, Behind Chowgule College
Cupangal, Gogol, P.O. Fatorda, Margao, Goa-
403602.
11. The applications were opposed on behalf of the
appellants herein, on various grounds. It appears that during the
course of hearing of these applications, amendments as proposed COA1-7/2015
24
in paragraph 24T and paragraph 6 of the application, were not
pressed. Similarly in so far as C.A. No.58/2013 is concerned, the
prayer as regards impleadment of Sushila Timblo (proposed
respondent no.14) was also given up.
12. The first respondent sought amendment of the petition
on the following counts:
“(a) Amendments arising out of new information
obtained/ relating to subsequent events.
(b) Amendments arising out of the withdrawal of
Company Petition No.3/2005.
(c) Amendments arising out of clerical /
typographical error/ addition of new parties.
(d) Amendments to the prayer clause.”
Out of this, the appellants had no objection in so far as
the amendments arising out of the clerical/ typographical errors
are concerned. The CLB, by an order dated 18/05/2015, had
allowed the amendment as also the impleadment of the
respondent nos.11 to 13. The respondent nos.11 to 13 were
directed to file response within four weeks from filing of the
amended petition. Feeling aggrieved, these appeals are filed. COA1-7/2015
25
Company Appeal No.1/2015 is filed by Anju Timblo (proposed
respondent no.12). FRHL (proposed respondent no.11), of which
Anju Timblo is the Managing Director, has filed Company Appeal
No.2/2015, while FRPL (proposed respondent no.13) has filed
Company Appeal No.5/2015. The original respondent nos.2, 3, 9
and 10 have respectively filed Company Appeal Nos.3/15, 6/15,
4/15 and 7/15.
13. I have heard the learned Counsel for the parties. With
the assistance of the learned Counsel for the parties, I have
perused the record and the impugned order.
14. It is submitted by Shri Rafiq Dada, the learned Senior
Counsel for the appellants in Company Appeal Nos.1, 2 and 3 of
2015 that the amendments on account of alleged subsequent
events and withdrawal of Company Petition No.3/2005 could not
have been allowed, moreso, at a belated stage, when the matter
was being finally heard. It is submitted that the provisions of
Order VI, Rule 17 of C.P.C. or principles akin thereto, would
always apply to a Company Petition. The learned Senior Counsel
has referred to proviso to Rule 17 of Order VI of C.P.C., in order to
submit that an element of the concerned party acting with due
diligence, has necessarily to be imported. Thus, the finding by the COA1-7/2015
26
CLB that proviso to Rule 17 of Order VI of C.P.C. is not attracted,
is not correct. It is submitted that the Regulations do not exclude
the application of the provisions of the C.P.C. The learned Senior
Counsel has placed reliance on the decision of the Hon'ble
Supreme Court in the case of Public Service Commission Vs.
Mamta Bisht, reported in (2010)12 SCC 204, in which the
Hon'ble Supreme Court had applied C.P.C. to Writ Petition
although Section 141 in terms states that the Code shall not apply
to petitions under Article 226 of the Constitution of India. It is
submitted that while the Regulations do not provide for
application of C.P.C. to the proceedings before CLB, the same
applies in terms of Rule 6 of the The Company (Court) Rules, 1959
to the proceedings before the 'Court'. It is submitted that in such
a case, an anomalous situation would be created, namely while the
proceedings before the Tribunal, would not be governed by the
Code, but the Court having appellate jurisdiction, would be
governed by the Code. Reliance is placed on an unreported
decision of this Court in Major Retired Keharsingh Vs.
Velentino Xavier Pereira, (W.P.No.302&300/2010, 3, 409 and
435 of 2011, order dated 11/09/2012), in this regard. Reliance is
placed on the following observations in paragraph 15 of the said
order : COA1-7/2015
27
“15. There is thus, no doubt that the power of
amendment has been expressly conferred on the
authorities which are empowered to decide the
appeals under the Rent Control Act. It was rightly
submitted on behalf of the applicants that it would be
indeed anomalous if the law permitted the
amendment of pleadings at the appellate stage but
not at the original stage. We find that this is also one
of the reasons given by the learned Single Judge for
disagreeing with the view in Panduronga Timblo
Industries case (supra). This contention deserves to
be upheld. Indeed, it cannot be countenanced that
the parties have no right to apply for amendment of
their pleadings when their matter is being tried by
the authorities in the first instance, but they have
such a right of applying for amendment before the
Appellate
Authority before whom normally evidence is not led.
It would be extremely anomalous if this position is
upheld, since the parties would be obliged to wait till
the matter goes in appeal before applying for
amendment and then seek remand to the original
authorities to lead evidence. We are, therefore, of
the view that both the authorities original and
appellate, under the Rent Control Act, have the power
to permit amendments of the pleadings.”
15. It is next submitted that the transfer of shares of the
Company to FRHL cannot be said to be transfer of business as COA1-7/2015
28
such. The learned Senior Counsel submitted that under the
Depositories Act, 1996 (under the new regime), the shares are
held in a dematerialised (demat form). It is submitted that, it is
only in the form of a fungible security. The learned Senior
Counsel would submit that it is the depository, which is the
registered owner of the shares. As such, it cannot be said that the
shares were transferred to the appellant Anju Timblo.
16. It is submitted that the first respondent was all along
aware of the transfer of the shares right from 2004 and as such,
the amendment cannot be said to be based on any subsequent
events. It is submitted that any amendment takes effect from the
date of the filing of the main petition unless otherwise stipulated.
In the present case, the amendment would relate back to the year
2006, when the petition was filed. This, on one hand, would
tantamount to allowing a claim on time barred cause of action and
on the other hand, would prejudice the appellants as they would
be handicapped in raising the defence of the amendment being
time barred as it relates back to the date of filing of the petition.
17. In so far as the amendment based on withdrawal of
Company Petition No.3/2005 is concerned, it is submitted that the
petitioner had picked up four grounds out of the said Company COA1-7/2015
29
Petition and incorporated them in the amendment. It is submitted
that the first respondent had opposed the withdrawal of Company
Petition No.3/2005. After the withdrawal was allowed, the same
was challenged before this Court in Company Appeal No.11/2012,
which was dismissed on 11/10/2013. The first respondent filed a
review petition no.19/2013, which was also dismissed on
13/12/2013. It is submitted that once the first respondent has
unsuccessfully objected to the withdrawal of the Company Petition
No.3/2005, now he cannot be permitted to incorporate the same
on the grounds raised in the said company Petition, by way of an
amendment.
18. It is submitted that the proposed respondents would be
neither necessary nor proper parties to the petition. Thus, the
impugned order, allowing the amendment as well as the
impleadment, is clearly illegal, requiring interference. Shri Rafiq
Dada, the learned Senior Counsel for the appellants in Company
Appeal Nos.1, 2 and 3 of 2015, has placed reliance on the
following decisions :
(i) Sampat Kumar Vs. Ayyakannu and another,
reported in (2002)7 SCC 559.
(ii) C. G. Holdings P. Ltd and another Vs.
Cheran Enterprises P. Ltd and others, reported in COA1-7/2015
30
(2007)138 Comp Cas 454 (CLB).
(iii) M/s. Gharda Chemicals Limilted Vs. Jer
Rutton Kavasmanek alias Jer Jawahar Thadani,
(Company Appeal(L) No.45 of 2012 in CLB Company
Application No.73 of 2012).
(iv) Major Retired Keharsingh Vs. Velentino
Xavier Pereira, (W.P.No.302&300/2010, 3, 409 and
435 of 2011)
19. Shri Pereira, the learned Senior Counsel for the
appellants in Company Appeal Nos.4, 5, 6 and 7 of 2015, has
adopted the submissions of Shri Rafiq Dada, the learned Senior
Counsel for the appellants in Company Appeal Nos.1, 2 and 3 of
2015.
20. On the contrary, it is submitted by Shri Kodian Thara,
the learned Senior Counsel for the first respondent that the appeal
as framed and filed, is not maintainable. The learned Senior
Counsel has placed reliance on the decision of Dirak Dieter
Ramsauer Konstruktion-selemente Gmbh and another Vs. S.
D. Chakravarthy and another (No.2), reported in 2010 SCC
OnLine Kar 5028, in order to submit that an appeal under Section
10F of the Act would lie only against the final order and not COA1-7/2015
31
against an interim order. It is submitted that even otherwise, the
appeal does not involve any question of law, which is a sine qua
non for entertaining the appeal. It is submitted that the provisions
of C.P.C. or principles akin thereto, cannot be imported in a
Company Petition before the CLB. It is submitted that the learned
Chairman of CLB has rightly held that proviso to Rule 17 of Order
VI of C.P.C. or principles akin thereto, would not be attracted in
this case.
21. The learned Senior Counsel has submitted that the
amendment was necessitated as the first respondent became
aware of certain facts, in pursuance of an application filed under
RTI as also from the website of the Ministry of Company Affairs
(MCA) and also of Bombay Stock Exchange. It is submitted that
the documents in support of the said subsequent developments are
produced before the CLB. It is submitted that the CLB has rightly
held that it is not necessary to look into the merits of the
amendment at this stage.
22. The learned Senior Counsel has referred to the
judgment of this Court in Company Appeal No.11/2012, confirming
the order of permitting withdrawal of C.P. No.3/2005, in order to
submit that one of the reasons on account of which the challenge COA1-7/2015
32
to the withdrawal was negatived, was that the application for
amendment filed by the first respondent was pending before the
CLB. It is submitted that thus, this Court was conscious that the
possible prejudice to the first respondent on account of permitting
withdrawal of C.P. No.3/2005, can be adequately taken care of by
the amendment in the Company Petition. It is submitted that in
the petition filed by the first respondent, there was a reference to
the C.P. No.3/2005 and thus, the contents of C.P. No.3/2005 were
part and parcel of the petition filed by the first respondent. It is
submitted that C.P.No.3/2005 was withdrawn on 16/05/2012.
Thus, till that date, the respondent no.1 had no reason to
separately incorporate the challenges, which was necessitated
only on withdrawal of the said petition. It is submitted that the
CLB has rightly come to the conclusion that the amendment does
not change the nature of the petition and would be necessary to
decide the real controversy in question and to do complete justice.
It is submitted that thus, the amendment as also the impleadment
is rightly allowed. The learned Senior Counsel specifically
submitted that no reliefs are claimed against the respondent
nos.11 to 13, which are only proper parties. It is submitted that
the presence of the respondent nos.11 to 13 is necessary, in order
to show the diversion of the funds of the Company. He, therefore,
submitted that the appeal be dismissed.  COA1-7/2015
33
23. Shri Kodian Thara, the learned Senior Counsel for the
first respondent has also placed reliance on the following
decisions :
(i) Mumbai International Airport Private
Limited Vs. Regency Convention Centre and
Hotels Private Limited, reported in (2010)7 SCC
417.
(ii) Central Bank of India Ltd., Vs. Gokal
Chand, reported in (1967)1 SCR 310.
(iii) M/s. Gharda Chemicals Limited and others
Vs. Jer Rutton Kavasmanek @ Jer jawahar
Thadani and others, (Judgment dated 20/12/2012 in
Company Appeal no.45/2012)
(iv) Gurpartap Singh V. Vista Hospitality Pvt.
Ltd., reported in 2013 SCC OnLine Del 3537.
(v) Union of India Vs.R. Gandhi, President
Madras Bar Association, reported in (2010)11 SCC
1.
24. In view of the rival circumstances and the submissions
made, the following points arise for my determination in this
appeal. I have recorded my findings against the same for reasons COA1-7/2015
34
which follow :
“1. Whether an appeal under Section 10F of the
Act would lie against an interim order ?
2. Whether the provisions of the Code of Civil
Procedure and in particular, proviso to Rule 17 of
Order VI would be applicable to the proceedings
before the CLB.? If not, whether the principles
analogous to proviso to Rule 17 of Order VI of C.P.C.
can apply to such proceedings?
3. Whether the impugned order, allowing
amendment/ impleadment needs interference in
exercise of jurisdiction available under Section 10F
of the Act
4. What order ? ”
25. At the outset, it may be mentioned that the
amendments, which were in the nature of correction of clerical/
typographical errors, are not opposed. Similarly, the first
respondent had not pressed for the amendments in paragraph 24T
and 6 of the applications and of the impleadment of Sushila
Timblo. Thus, dispute, which survives is as under : COA1-7/2015
35
Amendments arising out of new
information obtained, relating to
subsequent events
Paragraphs 24A to 24M
Amendments arising out of
withdrawal of C.P. No.3/2005
Paragraph 24N to 24S
(excluding Paragraph 24T).
Amendment to prayer clause Impleadment of FRHL
(respondent no.11), Anju Timblo
(respondent no.12) and FRPL
(respondent no.13)
26. The perusal of the impugned order would show that
the amendment/ impleadment has been allowed mainly on the
following grounds :
(i) Merits of the amendment is not to be gone into at the
stage while considering whether the amendment is to be
allowed or not.
(ii) The proposed amendments were not divorced from the
allegations of siphoning off funds and diversion of business
opportunities. Thus, by the proposed amendment, no new
case was sought to be introduced.
(iii) Sections 397 and 398 envisage a continuing cause
while seeking relief in respect of oppression and
mismanagement. Thus, the subsequent events would be
relevant.
(iv) The remedy under Section 397 of the Act is in the COA1-7/2015
36
nature of an alternative relief to winding up. In a proceeding
under Sections 397 and 398 of the Act, a primary duty is cast
on the CLB to make such orders as it thinks fit to bring to an
end the matters complained of. This would include not only
the matters, which were initially forming part of the
Company Petition, but would also include, such continuing
cause of siphoning off funds and diversion of business.
(v) A Company is a corporate personality, formed normally
to foster economic growth of the country. The provisions of
Sections 397 and 398 are a step towards ensuring that the
Companies formed for this purpose do not get derailed on
account of lack of probity, etc.
(vi) Due diligence clause, introduced by proviso to Order
VI, Rule 17 of C.P.C. cannot be imported while dealing with a
Company Petition. Regulation no.46 of the Company
Regulations provides that all such amendments, as are
necessary to decide the real controversy, can always be
allowed.
(vii) The opposition of the first respondent to withdrawal of
Company Petition No.3/2005 was overruled and, therefore,
permission to bring on record the events therein is necessary
and lastly,
(viii) The amendment/ impleadment (of proper parties) is COA1-7/2015
37
necessary to do complete justice.
27. POINT NO.1 :-
It hardly needs to be stressed that an appeal under
Section 10F of the Act lies only on a question of law. In order to
appreciate the rival submissions, it would be necessary to
reproduce Section 10F of the Act which reads as under :
“10F. Appeals against the orders of the Company
Law 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 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 a further period not
exceeding sixty days.”
It can, thus, be seen that the Section does not speak of
final order alone, which can be challenged by way of an appeal.  COA1-7/2015
38
The Section speaks of any decision or order of the CLB,
without qualifying that such decision or order has to be a final
order, so as to be amenable to challenge. In view of the plain
language of Section 10F, it is difficult to hold that it is only the
final order, which can be challenged by way of an appeal.
Reliance, in this regard, is placed on the Division Bench decision
of Karnataka High Court in Dirak Dieter Ramasauer
Konstrucktionselemente Gmbh (supra). The order, which was
subject matter of challenge therein was one passed on an
application filed under Section 403 of the companies Act by the
respondent Company in the main petition, seeking vacating of the
earlier ex-parte interim order that had been passed by the CLB. In
that case, an office objection was raised as to the maintainability
of such an appeal under Section 10F of the Act. The Division
Bench held thus in paragraphs 10 and 11 of the judgment :
“10. Though this office objection is sought to be
explained away by Mr. Nandish, learned counsel
appearing for the appellant, by explaining that a
question regarding maintainability arose only in a
connected appeal that had been filed by the very
appellant in O.S.A. No. 15 of 2009, which was directed
against an order passed by the Company Law Board,
on an application filed by the appellants under section
8 of the Arbitration and Conciliation Act, 1996 and in COA1-7/2015
39
fact, the present appellant had succeeded in that
appeal in terms of the orders passed by this court on
December 18, 2009 (Dirak Dieter Ramsauer
Konstrucktionselemente GmbH v. S.D. Chakravarthy
(No. 1), [2010] 154 Comp Cas 332) and the matter was
remanded to the Company Law Board for reexamination
of the application under section 8, etc.,
and such a situation as to whether Appeal No. 15 of
2009, was one filed under section 37 or an appeal
under section 10F of the Act, does not arise in this
appeal, but, it was peculiar to the facts and
circumstances of Company Appeal No. 15 of 2009 and
the maintainability of the present appeal does not
admit any ambiguity or doubt, we are, prima facie, of
the view that the appeal under section 10F of the
Companies Act can only be against the main order
passed by the Company Law Board on a petition and
not against all or any order passed on every
application filed in a pending petition before the
Company Law Board.
11. Be that as it may, we are inclined to examine the
merits of this appeal keeping open the question as to
whether an appeal of the present nature under section
10F of the Act is tenable as against the orders passed
by the Company Law Board on an interim application
and during the pendency of the main application which
can be examined in a case where it is directly in issue
and parties make it an issue and particularly if the
respondent who is put on notice, were to join issue on
the maintainability of the appeal.” COA1-7/2015
40
(Emphasis supplied)
Thus, while observations in paragraph 10 would show
that what was expressed was a prima facie view, paragraph 11
would make it explicit that the question was kept open while the
Court examined the appeal on merit. Thus, the judgment would be
of no assistance to the first respondent. Thus, it cannot be said
that the appeal under Section 10F of the Act can be confined only
to final orders and not to any other orders, that may be passed by
the CLB in a Company Petition. The point is accordingly answered
in the affirmative.
28. POINT NOS. 2 AND 3 :-
The main thrust of the challenge to the impugned
order is based on the ground that amendment / impleadment
sought was at a very belated stage. Reliance in this regard is
placed on the proviso to Rule 17 of Order VI of C.P.C. The said
proviso was introduced by Act No.22 of 2002 with effect from
01/07/2002 and reads as thus :
“17. Amendment of Pleadings.- the Court may at
any stage at the proceedings allow either party to
alter or amend his pleadings in such manner and on
such terms as may be just, and all such amendments COA1-7/2015
41
shall be made as may be necessary for the purpose of
determining the real questions in controversy between
the parties:
Provided that no application for amendment
shall be allowed after the trial has commenced, unless
the court comes to the conclusion that in spite of due
diligence, the party could not have raised the matter
before the commencement of trial.”
29. It is the alternate submission that even if the
provisions of the Code would not be strictly applicable to the
proceedings before the CLB, the principles underlying and
analogous to the Code would always apply. In order to examine
the question, it would be necessary to notice subsection (4C), (4D),
(5) and (6) of Section 10(E) of the Act as under :
“10E. Constitution of Board of Company Law
Administration. -
4(C) Every Bench referred to in sub- section (4B) shall
have powers which are vested in a Court under the
Code of Civil Procedure, 1908 , (5 of 1908 ), while
trying a suit, in respect of the following matters,
namely:-
(a) discovery and inspection of documents or
other material objects producible as evidence;
(b) enforcing the attendance of witnesses and
requiring the deposit of their expenses;  COA1-7/2015
42
(c) compelling the production of documents or
other material objects producible as evidence and
impounding the same;
(d) examining witnesses on oath;
(e) granting adjournments;
(f) reception of evidence on affidavits.
4(D) Every Bench shall be deemed to be a civil court
for the purposes of section 195 and 1 Chapter XXVI of
the Code of Criminal Procedure, 1973 ], (2 of 1974 ).
and every proceeding before the Bench shall be
deemed to be a judicial proceeding within the meaning
of section 193 and 228 of the Indian Penal Code and
for the purpose of section 196 of that Code.] (45 of
1860 ).
(5) Without prejudice to the provisions of subsections
(4C) and (4D), the Company Law Board shall
in the exercise of its powers and the discharge of its
functions under this Act or any other law be guided by
the principles of natural justice and shall act in its
discretion.
(6) Subject to the foregoing provisions of this
section, the Company Law Board shall have power to
regulate its own procedure"
30. The CLB, in exercise of the powers under subsection 6
of Section 10E of the Act, has framed the regulations. The
Regulation No.46 reads as under :  COA1-7/2015
43
“46. General power to amend - A Bench may, at
any time, and on such terms as to costs or otherwise
as it may think fit, amend any defect or error in any
proceeding before it; and all necessary amendments
shall be made for the purpose of determining the
real question or issue raised by or depending on
such proceeding.”
31. It can thus, be seen that under Section 4(C) of Section
10E of the Act, the CLB is vested with powers of the Code under
C.P.C. while trying a suit in respect of the matters, which are
specifically enumerated in clauses (a) to (f) thereof. Subsection 5
of Section 10E of the Act would show that the CLB shall exercise
its powers and discharge its functions and while doing so, shall be
guided by the principles of natural justice and shall act in its
discretion. Under subsection 6 of Section 10E of the Act, the CLB
can regulate its own procedure, which is done by framing the
Regulations.
32. A conjoint reading of Section 4(C), 5 and 6 of Section
10E of the Act would show that the CLB is principally to be guided
by the principles of natural justice and can act in its discretion.
Albeit, it would be a judicial discretion. Every power is conceded
to the CLB to regulate its own procedure. Subject to this,
subsection 4(C) of Section 10E only enumerates the various COA1-7/2015
44
powers, which the CLB can exercise, which are available to a
Court while trying a suit and which powers are enumerated in
clauses (a) to (f) of subsection 4(C) of Section 10E. Thus, the
legislative intent is clear that a certain free play is given to the
CLB in the matter of regulating its own procedure and generally,
the CLB has to be guided by the principles of natural justice and
shall act in its discretion. It is, thus, clear that the provisions of
the Code would not be stricto sensu applicable to the proceedings
before the CLB. Had the legislature intended it to be so, nothing
prevented it from saying that the proceedings before the CLB shall
be governed by the Code of Civil Procedure. Thus, while
enumerating specific enabling provisions under subsection 4(C) of
Section 10E of the Act, subsections 5 and 6 leave no manner of
doubt that the CLB can regulate its own procedure and has done
so by framing the regulations.
33. Coming to the Regulation No.46, a comparison of the
same with Order VI, Rule 17 of C.P.C. would show that, two
ingredients, which are common, are that (i) amendment can be
allowed at any stage of the proceeding and (ii) all such
amendments, which are necessary for purpose of determining the
real question/ controversy, have to be allowed. The proviso to
Rule 17 of Order VI of C.P.C., has to be read in the context of the COA1-7/2015
45
substantive provisions contained in Rule 17 of Order VI of C.P.C.
The embargo placed by the said proviso in entertaining any
application for amendment after the trial has commenced, is also
not absolute. Thus, in a case, where the Court comes to the
conclusion that in spite of due diligence, the party could not raise
the matter before the commencement of trial, such amendment
can always be allowed and the proviso would not come in the way.
34. Even before the proviso was introduced in the year
2002, the considerations of delay and laches in filing the
application for amendment and possible prejudice to the opposite
party, entered into the consideration of the Court, while deciding
an application for amendment. In appropriate cases, imposition of
costs was also considered by the Courts. Thus, the proviso cannot
be said to be an entirely new addition as to the considerations,
which are relevant, while deciding the application for amendment.
The considerations, in this regard, have now been codified in the
form of the proviso. In view of Section 10E of the Act, the CLB has
to be guided by the principles of natural justice and that CLB shall
act in its discretion and further having regard to the fact that the
CLB can regulate its own procedure and has done so by framing
regulations, it is difficult to hold that proviso to Rule 17 of Order
VI of C.P.C., would be applicable to the proceedings before the COA1-7/2015
46
CLB. In an appropriate case, depending upon the fact and
circumstances, the CLB can apply principles analogous to proviso
to Rule 17 of Order 6 of C.P.C. I would hasten to add that while
doing so, the essential difference between a petition alleging
oppression and mismanagement under the Companies Act and a
suit, which can be entertained by a Civil Court, has to be kept in
mind. In the later case, the Court is essentially concerned with an
adversarial litigation, unlike in a petition under Section 397 of the
Act, where there is a duty cast on the CLB to act in the interest of
the minority shareholders and the Company as a whole.
35. The decision in the case of Major Retd. Keharsingh
(supra), in my view, cannot come to the aid of the appellants. In
that case, the question whether the authorities under the Goa,
Daman and Diu (Lease, Rent and Eviction) Control Act, 1968 have
jurisdiction to allow amendment of the applications / replies, filed
in the proceedings under the Act, was referred to the Division
Bench. In that case, it was held in paragraph 15 that it is
inconceivable that the Court of the first instance would have no
jurisdiction to allow amendment while the Appellate Court would
have such a jurisdiction. It is apparent that the said case arose in
the context of the provisions of the Rent Control Act. In the
present case, it cannot be said that the CLB has no jurisdiction to 
allow amendment. Regulation No.46 confers powers on the CLB
to entertain an application for amendment. Thus, the case of
Major Retired Keharsingh (supra), would be distinguishable on
facts. For the reasons aforesaid, point no.2 is answered in the
negative, with the rider that the CLB can, in appropriate case,
consider the effect of any delay and laches, while allowing a
prayer for amendment and would consider the same in the facts
and circumstances of each case. However, proviso to Rule 17 of
Order VI of C.P.C. or the principles underlying the same, cannot
apply with the same rigor to the proceedings before the CLB, as
they would apply to Courts governed by the Civil Procedure Code.
36. I now propose to briefly deal with various other
submissions advanced on behalf of the appellants, while assailing
the impugned order.
In the case of Sampat Kumar (supra), the Hon'ble
Supreme Court inter alia held that the doctrine of relation back,
would apply to the amendment of pleading under Order VI, Rule
17 of C.P.C. Thus, the amendment, after its incorporation, relates
back to the date of the suit. However, the Court can direct
otherwise. In the present case, the CLB has not stipulated
anything to indicate that the amendment would not relate back to 
the date of its incorporation. As noticed earlier, the substantive
amendments (except the prayer clause) are essentially on two
counts, namely, the amendments arising out of information
obtained relating to subsequent events and the amendments
arising out of withdrawal of Company Petition No.3/2005. The
CLB has found that the amendments are not divorced from the
allegations of siphoning of funds and diversion of business
opportunities and no new case was sought to be introduced. It has
also been found that Section 397 and Section 398 of the Act
envisage continuing cause and subsequent events would be
relevant. It has also been found that the amendment is necessary
to decide the real controversy in question and has thus to be
allowed. It was argued on behalf of the appellants that the
respondent was aware of certain events right from the year 2005
as he was also party in C.P.No.3/2005. However, the fact remains
that C.P. No.3/2005 was allowed to be withdrawn in the year 2012
after overruling the objection by the first respondent to the
withdrawal. The first respondent had challenged the same before
this Court unsuccessfully when the review petition was dismissed
on 13/12/2013. A perusal of paragraph 6 of the judgment dated
11/10/2013 in Company Appeal No.11/2012 would show that this
Court had found that the first respondent (appellant in Company
Appeal No.11/2012) can agitate the substantial issues raised by 
him in Company Petition No.3/2005 in Company Petition
No.87/2006, (out of which the present appeals arise.) Both these
petitions, namely C.P.Nos.3/2005 and 87/2006 were tagged
together. It has been held that the first respondent (appellant in
Company Appeal No.11/2012) would not be prejudiced or suffer
any harm or damage as he would be entitled to agitate the issues
in Company Petition No.87/2006. Thus, the submission, in this
regard, on behalf of the appellants has to be negatived.
37. Even so far as the submissions based on prejudice on
account of the fact that the amendment would be effective
retrospectively is concerned, this can be appropriately considered
by the CLB at the time of final disposal of the Company Petition.
However, it needs to be mentioned here that in the specific
submission, on behalf of the first respondent, the proposed
respondent nos.11 to 13 are only proper parties and no relief, as
such, is claimed against them. The amendment is effected only to
substantiate the allegations of diversion of funds and business
opportunities to the original respondent nos.8,9 and 10. Even in
the case of Sampat Kumar (supra), it has been held that the
question of prejudice to the opposite party (on account of any
amendment at a belated stage), shall have to be answered with
reference to the fact and circumstances of each individual case 
and no strait-jacket formula can be laid down. It has further been
held that mere delay cannot be a ground for refusing a prayer for
amendment.
38. This takes me to the submissions based on the
provisions of Depositories Act, 1996. At the outset, it needs to be
mentioned, that at this stage, the CLB was concerned with the
merits of the amendments. The submission is that it is the
depository, which is the registered owner of the shares, which are
in dematerialised (Demat form). Such shares are essentially in the
nature of a fungible security and thus, it cannot be said that there
is any transfer of shares in favour of the appellant Anju Timblo. In
my considered view, the contention although attractive, cannot be
accepted for more reasons than one. In the first instance, the
submission based on Depositories Act was not advanced before the
CLB, which is done for the first time before this Court. Secondly,
CLB was not concerned with the merits of the amendment at this
stage. Thirdly, Section 10(1) of the Depositories Act would show
that a depository shall be deemed to be a registered owner only
for the purposes of effecting transfer of ownership of security on
behalf of the beneficial owner. Thus, it is the beneficial owner in
whom the ownership of shares vests. It would be, further, clear
from the fact that, under Section 10(2), the depository as a
registered owner does not have any voting rights or any other
rights in respect of the securities held by it. Under subsection (3)
of Section 10, it is the beneficial owner, who is entitled to all
rights and benefits and subject to all the liabilities in respect of his
securities, held by depository. Fourthly, the shares / securities are
in fungible form only as long as they are held in dematerialised
form in a depository. Section 14 of the Depositories Act gives an
option to the beneficial owner to opt out in respect of any security.
If the beneficial owner decides to opt out in respect of any such
security, the issuer has to issue the share certificate/s to the
beneficial owner or the transferee as the case may be in physical
form, subject to conditions contained in Section 14(3) of the
Depositories Act. For these reasons, the submissions based on the
provisions of Depositories Act cannot be accepted.
39. The CLB in its discretion has allowed the
amendments and impleadment of the parties, which in my
considered view, does not call for any interference under Section
10F of the Act. In the result, the appeals are without any merit
and are hereby dismissed, with no order as to costs.
 C. V. BHADANG, J.