Choudhury and Others v Bhattar and Others
| Jurisdiction | England & Wales |
| Judge | Sir John Chadwick,Lord Justice Stanley Burnton,Lord Justice Ward |
| Judgment Date | 11 November 2009 |
| Neutral Citation | [2009] EWCA Civ 1176 |
| Docket Number | Case No:A3/2009/0423 |
| Court | Court of Appeal (Civil Division) |
| Date | 11 November 2009 |
[2009] EWCA Civ 1176
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISON
(Mr David Donaldson QC)
Before : Lord Justice Ward
Lord Justice Stanley Burnton and
Sir John Chadwick
Case No:A3/2009/0423
HC09C00275
Mr David Chivers QC (instructed by Morgan Walker Solicitors LLP, 115A Chancery Lane, London WC2A 1PR) for the Appellants
Mr Christopher Pymont QC and Mr Jonathan Russen (instructed byx Barker Gillette LLP, 11–12 Wigmore Place, London W1U 2LU) for the Respondents
Hearing dates: 19 and 20 May 2009
Sir John Chadwick :
This is an appeal from an order made on 11 February 2009 by Mr David Donaldson QC, sitting as a Deputy Judge of the High Court, in proceedings brought by Mr Chatain Choudhary and others in relation to the affairs of the Barnagore Jute Factory Plc (“the Company”).
The Company was incorporated in England on 22 July 1872 under the Companies Act 1862 for the purpose of carrying on the business of jute manufacturers at Barnagore, near Calcutta, in what is now the Republic of India. That remains the sole business of the Company. It is common ground that the Company has, now, no connection with England; save that it was incorporated here, maintains its registered office in London and is required to make annual returns to Companies House.
The first issue raised in this appeal is whether the judge was correct to hold that, in the light of article 22 of Council Regulation (EC) No 44/2001 (“the Judgments Regulation”) and the decision of the Court of Justice in Owusu v Jackson [2005] QB 801, he was bound to accept jurisdiction. The second issue is whether, if so, he erred in deciding, in the exercise of his discretion, that the claimants should have interim relief in the terms of the injunction which he granted, or at all.
The background to the dispute
The background to the present dispute is set out by the judge at paragraphs 2 to 8 of his judgment, [2009] EWHC 314 (Ch). Those paragraphs may be summarised as follows:
(1) In the 1980s the Company encountered financial difficulties. On 28 October 1987 the Indian Companies Court ordered that the Company should be wound up, and the Official Liquidator was directed to take possession of the Company and its assets.
(2) In September 1988, in the context of applications to the Indian Companies Court for a scheme to be ordered by the court for the revival of the Company and the stay of the winding-up in the meantime, the Indian Court appointed a Committee of Management for the purpose of re-opening the jute mill and running it in accordance with the scheme. The winding-up was stayed for a period of six months. The Court directed the Official Liquidator to continue in possession of the jute factory; but not to interfere with the management by the Committee of Management.
(3) That position continued for several years: with the stay of the winding up extended and changes made to the composition of the Committee of Management from time to time. On 18 November 2004, or thereabouts, the Committee of Management was replaced by the first and second claimants in these proceedings —Mr Choudhary and Mr Rakecha —who (it seems) were then the sole directors of the company and had assumed the management of the business. They were appointed as the Committee of Management, initially for a period of six months, in the context of a scheme for the management of the Company with a view to its eventual exit from winding-up. The interim stay was further extended from time to time for successive periods of six months; and, from 31 March 2006, for an indefinite period until further order.
(4) The Company approached the Board for Industrial and Financial Reconstruction (“BIFR”). On 7 June 2006 BIFR declared the Company to be a sick industrial company for the purposes of Sick Industrial Companies Act (“SICA”); and commissioned a report.
(5) In September 2007 Mr Choudhary and Mr Rakecha, as the only directors of the company, appointed Mr Damodar Bhatter, the first defendant to these proceedings, as a co-director. It is said that their intention was that Mr Bhatter, who lives at the workers' colony adjacent to the factory, would assist them with the day-to-day management of the business in conjunction with the general manager, the commercial manager, and the in-house accountant; and would report to them in their capacity as the Committee of Management. In practice, it seems, Mr Bhatter was left to oversee the day-to-day management of the Company on his own: Mr Choudhary and Mr Rakecha rarely, if ever, visiting the factory.
(6) On 2 December 2008 BIFR proposed a Draft Rehabilitation Scheme (“the DRS”); and directed publication of those proposals. Objections to those proposals were to be considered by the Court at a hearing on 19 February 2009.
(7) The proposals in the DRS were for relief from central and state governments, the sale of surplus land, and the provision of 50 million rupees (about £700,000) by way of equity and unsecured loans (and further funds if required) from two existing minority shareholders, Yashdeep Trexim Pvt Ltd (“Yashdeep”) and Namokar Vinimay Pvt Ltd (“Namokar”). Yashdeep and Nakomar are, respectively, the Fourth Claimant and the Second Defendant to these proceedings.
The report to BIFR had disclosed that the combined shareholding of those two shareholders, along with their associates, amounted to 29% of the total share capital; and that the balance was held by public financial institutions (5.16%), by banks (0.02%), and by the general public (66.15%). Of a total issued share capital of 175,000 ordinary shares, Yashdeep and Namokar had acquired, respectively, 10,839 and 16,000 ordinary shares some years earlier; but it is said by Mr Bhatter and Nakomar (but disputed by Mr Choudhary, Mr Rakecha and Yashdeep) that Yashdeep subsequently reduced its holding down to 2,950 shares. Mr Krishna Tapuriah, the third claimant in these proceedings, was registered as the holder of 120,000 shares; but those shares are shown as partly paid, with a balance of 577,366 Pounds outstanding. The register of members as at 31 December 2008 shows that there were a very large number of small holdings, not infrequently in single figures, by individual members of the general public. Mr Choudhary and Mr Rakecha each hold 200 shares. Mr Tapuriah, Yashdeep and Namokar also hold preference shares. Mr Bhatter is not a shareholder.
The events leading to these proceedings
These proceedings arise out of events which are said (by Mr Bhatter and Namokar) to have taken place following the release of the DRS on 2 December 2008. Those events are described by the judge at paragraph 10 of his judgment:
“10 … (1) At an EGM purportedly held in Kolkata on 5 December 2008 it was resolved that
a. the auditors and the company secretary should be replaced;
b. the registered office be moved from the existing company secretary to the offices of Morgan Walker, solicitors, in Chancery Lane;
c. Mr Tapuriah's shareholding be forfeited for non-payment of an alleged call on 28 March 2008.
(2) At a Board Meeting purportedly held in Kolkata on 5 December 2008 it was resolved that there be no further change in the registered office, the company secretary, or the authorised capital of the company without the signed approval of all directors.
(3) At a Board Meeting purportedly held in Kolkata on 17 December 2008 it was resolved that Mr Toshniwal, Mr Roshanlal Pugalia, Mr Jhanwar, Mr Vyas and Mr Vijay Pugalia be appointed as new directors, the quorum for any Board meeting be increased to five, and all further resolutions and decisions must be approved by at least five directors.
(4) By letters purportedly signed by the First and Second Claimants on 18 December 2008 each resigned as director of the company.”
Mr Choudhary and Mr Rakecha assert that they had no part in any of these events. As the judge explained:
“11. … (1) They dispute that the EGM of [5] December 2008 was properly called or took place, saying that their signatures upon an alleged notice dated 4 November 2008 purporting to convene that meeting were forged, as were their signatures on the alleged minutes of the meeting. They further deny that any call had been made on Mr Tapuriah which would enable the company to forfeit the shares under its Articles, saying that their signatures on (a) a letter dated 28 March 2008 (purporting to repeat a call said to have been previously made) and (b) a letter dated 6 June 2008 (purporting to give notice of an intended forfeiture) are forged. Mr Tapuriah also says that he never received any such letters.
(2) They say that they were not present at the alleged Board meeting of 5 December 2008, that Mr Bhatter on his own would not have constituted the minimum quorum of two, and that their signatures on a copy of the alleged resolution have been forged.
(3) The same applies to the alleged Board Meeting on 17 December 2008, and to the apparent signature of the First Claimant on the purported resolution to appoint the five new directors (and on two of the forms 288a sent to Companies House recording the appointments).
(4) Neither the First nor the Second Claimant agreed or intended to resign as a director and their signatures on the purported letters of 18 December 2008 were forged.”
The meetings which are said to have taken place on 5 and 17 December 2008, and the letters of resignation dated 18 December 2008, must be set in the context of the...
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