Choudhury and Others v Bhattar and Others
| Jurisdiction | England & Wales |
| Judgment Date | 11 February 2009 |
| Neutral Citation | [2009] EWHC 314 (Ch) |
| Docket Number | HC09C00275 |
| Court | Chancery Division |
| Date | 11 February 2009 |
[2009] EWHC 314 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Before:
David Donaldson Q.c. Sitting As A Deputy High Court Judge
HC09C00275
I direct that pursuant to CPR PD 39A para. 6.1 no official shorthand note shall be taken of this judgment and that copies of this version as handed down may be treated as authentic.
History and background
This case concerns the affairs of the Barnagore Jute Factory Company PLC ((the company(). It was incorporated in 1872 under the Companies Act of 1862 to carry on the business of manufacturing jute at a mill in Barnagore near Calcutta in what is now the Indian state of West Bengal. The factory is still in existence, employing over 3,500 workers, and is the sole business of the company. Notwithstanding the advent of Indian independence in 1947 the company has remained an English company, though its sole connection with England is its registered office in London, the members register which —in accordance with statutory requirement —is also kept in England, and the returns which it is required to make to Companies House. It is thus a barely surviving relict of past empire.
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. As appears from a later judgment of the Indian High Court, this order only applied to the company(s business within India, the power being apparently similar, if not identical, to the power exercisable by an English court to wind up a foreign company. Subsequently, an application was made by an interested party 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. On 15 September 1988 the court appointed an Ad Hoc Committee of Management for the purpose of re-opening the jute mill and running it in accordance with the Scheme. It further directed the Official Liquidator to continue in possession of the mill but not to interfere with the management by the Committee of Management appointed by the court. On 22 September 1988 following a rival application it replaced the Ad Hoc Committee by another Committee of Management, including representatives from the State Bank of India and another bank, representatives of the workers, a jute technologist and a chartered accountant. The winding-up was stayed for a period of six months.
Over the following years that stay was regularly extended by court orders, sometimes with changes in the composition of the Committee of Management, as recounted in some detail by the High Court at Calcutta in a lengthy judgment on appeal on 18 November 2004. It appears that by that date the Committee of Management had been failing to carry out their responsibilities and the directors of the company, Mr Chatdan Choudhury and Mr Ridh Karan Rakecha, who are the First and Second Claimants in the present proceedings, had assumed de facto management. The court observed that, though their assumption of control of the mill was legally unwarranted, their motives had been good and they had met with success in resurrecting the jute mill. It further noted that the de facto management enjoyed the support of both the workers and the statutory creditors. It therefore ordered that (the present set of Directors(should function as a Committee of Management for a period of six months on the same terms and conditions as applied to the earlier Committees of Management, with leave to apply for further orders. The result of this order was that the First and Second Claimants, who were the sole directors of the company, were appointed as the Committee of Management in the context of a Scheme for the management of the company with a view to its rehabilitation and eventual exit from winding-up, subject to the supervision of Joint Special Officers (two lawyers) appointed by the High Court at Calcutta.
The interim stay was further extended on a number of occasions for successive periods of six months until on 31 March 2006 the court ordered that the interim stay should be extended (until further orders(. There have been no such orders.
Also in 2004 the company approached the Board for Industrial and Financial Reconstruction ((BIFR(). Operating under the Sick Industrial Companies Act ((SICA() the BIFR is tasked with determining appropriate measures for revival and rehabilitation of potentially viable sick industrial companies. On 7 June 2006 it declared the company to be a sick industrial company for the purposes of SICA and designated IDBI as its agent to examine the viability of the company and to produce a rehabilitation scheme, if feasible, for the consideration of BIFR. That report was submitted on 30 June 2008. Having considered it, BIFR formulated a Draft Rehabilitation Scheme ((the DRS() on 2 December 2008. It ordered particulars of the draft proposals to be published in two local dailies, in English and the vernacular, inviting objections or suggestions within 60 days, which it intimated would be considered at a hearing on 19 February 2009.
The DRS proposed 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 (the Promoters(. The Promoters referred to in the DRS were two existing minority shareholders, Yashdeep Trexim P Ltd ((Yashdeep() and Namokar Vinimay P. Ltd ((Namokar(), respectively the Fourth Claimant and the Second Defendant.
The report of the BIFR stated that the combined shareholding of these two shareholders, along with their associates was 29% of the total share capital, with public financial institutions holding a further 5.16%, banks 0.02%, and 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. There is a dispute as to whether Yashdeep has in the meantime reduced its holding down to 2,950 shares. The Third Claimant, Mr Tapuriah, was registered as the holder of 120,000 shares, though they were only partly paid, with a balance of (577,366 outstanding. A print-out of the members register as at 31 December 2008 shows that in addition to some holdings by banks and financial institution there were a very large number of small holdings by individual members of the general public, not infrequently in single figures. The First and Second Claimants each hold 200 shares. (The Third and Fourth Claimants and the Second Defendants also hold preference shares.)
In September 2007 the First and Second Claimants, still the only directors of the company, appointed the First Defendant, Mr Bhattar, as a co-director. According to the Claimants he was recruited and appointed to assist the First and Second Claimants with the day-to-day management of the company in conjunction with the General Manager, the Commercial Manager, and the in-house accountant and to report to them in their capacity as the Committee of Management. Mr Bhattar lives at the workers colony adjacent to the factory. In practice, according to the Defendants Mr Bhattar has been left largely free to oversee the day-to-day management himself, with Mr Choudhury and Mr Rakecha rarely if ever coming to the factory.
The genesis and basis of the dispute
I turn now to the disputed events following the release of the DRS on 2 December 2008 which have given rise to these proceedings.
The Defendants maintain, and the Claimants dispute, that the following events affecting the company took place in December 2008, with the knowledge and participation of the First and Second Claimants.
(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 Toshniwai, Mr Roshaniai 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.
The First and Second Claimants say that they had no knowledge of, or participation, in any of these events.
(1) They dispute that the EGM of 4 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...
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